APPENDIX
Recent Statements on Freight Policy

The committee reviewed recommendations and policy statements of three past TRB committees and the National Commission on Intermodal Transportation (NCIT), proposals published by the Brookings Institution and the Reason Foundation (two policy research organizations), and the 1998 white paper of the U.K. government, A New Deal For Transport. These are each summarized below. An overview of the recommendations from these sources appears in Chapter 2.

TRB STUDIES

The TRB Committee on Landside Access to Ports was charged with examining the problem of improving landside access to general cargo and bulk terminals at U.S. seaports (TRB 1993). Its work was sponsored by the Maritime Administration of DOT. Port access has been a focus of discussions of needs for freight transportation policy reform because of the multimodal nature of the problem, the national economic significance of the major ports, and the complexities of infrastructure development in large cities.

The committee identified sources of access problems, which it classified into four groups: road and infrastructure congestion; land prices and land use restrictions near ports; environmental regulations; and various institutional frictions, including divergence of goals among different units of government and ineffective communication among governments and with the private sector. Among the recommendations of the com-



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Freight Capacity for the 21st Century: Special Report 271 APPENDIX Recent Statements on Freight Policy The committee reviewed recommendations and policy statements of three past TRB committees and the National Commission on Intermodal Transportation (NCIT), proposals published by the Brookings Institution and the Reason Foundation (two policy research organizations), and the 1998 white paper of the U.K. government, A New Deal For Transport. These are each summarized below. An overview of the recommendations from these sources appears in Chapter 2. TRB STUDIES The TRB Committee on Landside Access to Ports was charged with examining the problem of improving landside access to general cargo and bulk terminals at U.S. seaports (TRB 1993). Its work was sponsored by the Maritime Administration of DOT. Port access has been a focus of discussions of needs for freight transportation policy reform because of the multimodal nature of the problem, the national economic significance of the major ports, and the complexities of infrastructure development in large cities. The committee identified sources of access problems, which it classified into four groups: road and infrastructure congestion; land prices and land use restrictions near ports; environmental regulations; and various institutional frictions, including divergence of goals among different units of government and ineffective communication among governments and with the private sector. Among the recommendations of the com-

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Freight Capacity for the 21st Century: Special Report 271 mittee’s 1993 report, the following would significantly affect the capacity of port landside connections and the national network of which they are components: State and local governments should give more detailed consideration to freight transportation needs in setting infrastructure investment priorities. Metropolitan planning organizations (MPOs) should provide for reservation of right-of-way and waterfront in long-range plans. The rules applied by the Federal Highway Administration (FHWA) in determining roads eligible for federal highway aid should consider importance for commerce and the benefits of improvements. FHWA should approve state use of federal highway aid for improvements in support of nontraditional projects (including freight access corridors, inland terminal development, and facilities for coastal shipping) to the extent federal law allows. DOT should study the concept of a federal landside access trust fund that would receive revenues from fees on port use. Legislation should be enacted allowing the Department of Defense to pay the local share of federal-aid projects that are military priorities. The Corps of Engineers should streamline its environmental review and permitting of port projects. States should consider establishing multimodal trust funds to fund port access projects. Operators and users should improve port operating efficiency by extending hours of operation and scheduling activities to manage peak demands. The federal government’s role should be to provide incentives to state and local governments to ensure that interstate and international commerce and military requirements are adequately considered when transportation funding priorities are set. In 1998, TRB’s Committee for Study of Policy Options to Address Intermodal Freight Transportation, in a study funded by FHWA and the Federal Railroad Administration, continued the review of intermodal freight transportation policy begun in the 1993 study (TRB 1998). The committee was charged with identifying changes in public policy that could promote intermodal freight transportation efficiency. It gave special attention to the problems governments are facing as they find themselves called upon to alter traditional public-sector roles and priorities in provision of services supporting freight transportation (e.g., involvement in public–private joint projects, rail access projects, or terminal development). Most of the committee’s recommendations deal with principles to guide government involvement in freight: Governments ought to define criteria for deciding whether public-sector involvement in particular freight ventures is appropriate.

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Freight Capacity for the 21st Century: Special Report 271 Quantitative methods should be defined for testing whether a proposal meets the criteria. Possible criteria are outlined in the report. Government subsidy of a freight project (that is, support of a project that does not fully pay its way from the revenues it generates) ought to be justified by estimates of external benefits (i.e., benefits that users could not be charged for). Standardized methods for evaluating public infrastructure investment proposals should be developed. The performance of completed projects should be evaluated systematically. Evaluations should concentrate on quantifying and valuing projects’ direct transportation benefits. When the predominant benefits of a project in which the government participates accrue to users, as will be the case with most transportation projects, the project should be financed by user fees and private-sector contributions. Government should promote applications of information technology by ensuring that its information systems in customs, enforcement, and military logistics are interoperable with industry systems. DOT should examine how economic regulation of ocean and coastal shipping affects freight transportation and the efficiency of use of U.S. ports. The 1996 report of the TRB Committee for the Study of Public Policy for Surface Freight Transportation examined a question that is fundamental to government freight transportation policy: comparison of market prices with social marginal costs for freight services in several case study markets as an indicator of potential inefficiencies (TRB 1996). The committee’s key recommendation was that federal and state government agencies that operate highway and water transportation facilities should “routinely consider the effects of the structure of road and waterway user fees on freight transportation efficiency and consumer welfare and search for user fee schedules that improve economic efficiency” whenever they consider alternative fee schedules and capacity expansion investments (TRB 1996, 126). That is, the committee urged public agencies managing freight facilities to place greater reliance on the market mechanism to manage capacity. The committee observed that private-sector transportation companies routinely use pricing to regulate use of facilities most in demand and base their investment decisions on revenue-generating potential, and that greater use of such practices in the public sector would have a positive impact on operations and investment returns. NATIONAL COMMISSION ON INTERMODAL TRANSPORTATION NCIT was created by ISTEA, the 1991 surface transportation act. It was charged with “investigating the intermodal transportation system in the

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Freight Capacity for the 21st Century: Special Report 271 U.S.,” both passenger and freight, and recommending policies to achieve an efficient intermodal transportation system. Specific matters Congress directed it to address included standards, infrastructure needs, regulatory impediments, finance (including the desirability of increased flexibility in the use of the federal transportation trust funds), technology, and research (P.L. 102-240, Section 5005). ISTEA was presented as a new federal approach to surface transportation and has particular significance for federal involvement in freight transportation. Title V of the act, “Intermodal Transportation,” declared, “It is the policy of the United States Government to encourage and promote development of a national intermodal transportation system in the United States to move people and goods in an energy efficient manner, provide the foundation for improved productivity growth, strengthen the Nation’s ability to compete in the global economy, and attain the optimum yield from the Nation’s transportation resources.” Congress presumably meant “intermodal” not just in the narrow sense of a particular set of technologies (e.g., containers on flatcars) but broadly, as a reference to the national transportation system as an integrated whole. The other sections of Title V created the Office of Intermodalism within DOT, provided funding for grants to states for intermodal planning, called for a study of reorganization of DOT along intermodal lines, and created NCIT. The commission grouped its 12 recommendations into three areas: “policies needed to capture the synergistic potential of this Nation’s transportation system,” investment issues, and institutional reform. The recommendations most relevant to long-run freight capacity are the following (NCIT 1994): Federal policy should foster development of the private-sector freight intermodal system and reduce barriers to freight flow, especially at ports and border crossings. Federal transportation infrastructure programs should be fully funded at authorized levels. Expanded use should be made of innovative finance methods. The federal government should allow greater flexibility in the use of federal aid for intermodal projects. Special federal funding should be provided for projects of national significance. DOT should be reorganized to better support intermodal transportation. Transportation infrastructure planning and project delivery should be expedited. Legislation should require DOT concurrence in actions of other federal agencies that affect intermodal transportation.

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Freight Capacity for the 21st Century: Special Report 271 The process established in ISTEA for greater local authority in planning transportation investments, through the MPOs, should be strengthened. Federal policy should be to support private-sector innovation and allow maximum flexibility for state and local government. In the debate leading up to enactment of ISTEA, proponents of intermodalism as a principle of federal policy had a vision of transforming the traditional highway program into a mode-neutral federal-aid program administered by a mode-neutral DOT. For passenger transportation, this goal was partially achieved, since states were given greater discretion to use federal aid for highway or transit projects as they chose. Similar flexibility for freight would imply that recipients could spend federal funds for port, rail, or terminal improvements that were not primarily highway projects. ISTEA disappointed the advocates of such multimodal freight funding. It created programs permitting small amounts of nonhighway freight spending, but the federal-aid program remained a highway and transit program and the modal organization of DOT was not changed. In the mid-1990s, DOT and others again proposed greater funding flexibility and freight emphasis for the next round of surface transportation legislation. DOT, the General Accounting Office (GAO 1992, 42–46), and the port authorities, as well as NCIT, argued the need for an expanded direct federal role in resolving certain nationally significant multimodal freight infrastructure bottlenecks, on the grounds that some problems are beyond the capacity of the private sector and because the benefits of improvements would be national rather than local. However, the NCIT report did not endorse significant relaxation of constraints on the use of federal-aid highway funds. The American Association of State Highway and Transportation Officials continued its support of the existing basic rules of the federal-aid program. The trucking industry opposed diversion of highway funds, and the railroads were wary of greater government involvement in their industry. The 1998 report of the TRB Committee for Study of Policy Options to Address Intermodal Freight Transportation, summarized above, expressed skepticism, noting that increased flexibility could promote uneconomic interstate rivalries in development of freight facilities and encourage private-sector transportation companies to demand more government funding for their infrastructure projects. In the next surface transportation act, the Transportation Equity Act for the 21st Century (TEA-21), enacted in 1998, Congress again chose not to greatly increase flexibility. One theme that appears in the NCIT report, that inadequate capacity investment reflects poor understanding among the public and government officials of the economic role of transportation, has received support

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Freight Capacity for the 21st Century: Special Report 271 in the freight industry. For example, a proposal to remedy the communication problem, from a state motor carriers association executive (Fulton 1999), calls for development of a national freight policy document jointly authored by government, shippers, and carriers; a federal requirement that freight be a component of all transportation plans of state and local governments and that plans incorporate input from industry; and founding of freight advisory councils in all metropolitan areas to serve as forums for government–industry communication. OTHER VIEWS The TRB committees and NCIT addressed freight transportation issues within the confines of U.S. federal transportation programs as they have historically been structured. It is useful also to look at freight policy proposals from sources that are less constrained by these particular institutional limits. Two analyses from private “think tanks” are examples of proposals that go much further in recommending market-based reforms than the TRB committees whose recommendations were outlined above. A study by a Brookings Institution fellow (Winston 1999) argues that there is great potential for increasing the efficiency of the U.S. transportation system—reducing unit costs and improving service quality—by greater reliance on the private sector. Policy proposals that would affect freight capacity include the following: Eliminating the restraints on competition contained in international aviation treaties and in the restrictions of the Jones Act on domestic waterborne freight. Implementing user fees better aligned with costs, including electronically assessed and collected tolls on congested highways, truck infrastructure charges based on mileage and weight, and airport takeoff and landing fees that include a congestion toll. Investing more in capacity-enhancing technology, airport capacity expansion, and heavier pavements for highways. These are among the areas where investment levels have been incorrect. Imposing pollution taxes on motor vehicle and stationary source pollutant emissions that encourage changes in consumption and equipment to reduce pollution. Pursuing privatization or commercialization. The study argues that it would be extremely difficult for government to implement the needed pricing and investment changes within existing organizational structures. Air traffic control and airports could be privatized. Highways could more readily be commercialized, that is, the government would hand operation of its roads to private companies that would be regulated as public utilities and would finance their operations through user fees.

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Freight Capacity for the 21st Century: Special Report 271 The second example of a proposal for fundamental changes, both institutional and technological, is a study (Samuel and Poole 1999) from the Reason Foundation, a nonprofit research organization that promotes market-based solutions to social problems. It argues that congestion on high-volume urban freeway systems can be eased, in spite of the difficulty that “pushing new freeways through dense and expensive urban landscapes will seldom be economically or politically feasible,” by making better use of existing right-of-way. A set of innovations is proposed that the authors argue would be feasible if implemented jointly. The study cites successful experience abroad with similar measures. The proposals are as follows: Separate operation of trucks from cars on high-volume urban expressways. Construct truck-only lanes with pavement and structure designs needed to carry bigger trucks. Adopt innovative highway redesign, including double-decking existing freeways and construction of urban tunnels for cars. These structures are cheaper to build if they do not have to be sized for trucks. Finance the new construction through tolls assessed electronically. In addition to providing adequate revenue, tolls would allow congestion pricing, which would reduce the peak capacity requirements, improving economic feasibility. Finally, one example of approaches to these problems outside the United States is the 1998 A New Deal for Transport: Better for Everyone: The Government’s White Paper on the Future of Transport, a statement and explanation of government transportation policy in the United Kingdom (Department for Transport, Local Government, and the Regions 1998). Although institutions differ greatly, the underlying challenges facing freight transportation development are similar in most of the developed economies: the industry is a mixed public–private enterprise that has been experiencing a period of growth and changing demand characteristics, including expansion of international trade and containerization. Freight requirements conflict with environmental values and competing land uses. The U.K. white paper devotes most attention to the goals of reducing car dependence and improving public transport, but also presents freight policies. The freight proposals include market-oriented reforms alongside policies to promote explicit goals for altering the market shares of the modes. Rail and general surface freight transportation proposals include the following: A set of actions is to be undertaken to promote the shifting of freight out of truck and onto rail, waterways, and coastal shipping. The goals of the private rail freight operators of achieving a doubling of

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Freight Capacity for the 21st Century: Special Report 271 freight ton-kilometers and a 50 percent increase in container traffic in 5 years are endorsed. A new Strategic Rail Authority is to be created, responsible for coordinating freight and passenger use of the rail infrastructure and promoting growth of rail freight by providing more capacity. New land use planning rules will require local authorities to protect opportunities for targeting industrial development in areas with good rail access. Grants will be provided to the private sector to encourage shifts in freight from road to rail. Proposals dealing specifically with trucks and highways include the following: The truck weight limit is to be raised from 38 to 41 metric tons. The limit is not to be raised to 44 tons, which is the common standard in Europe, to minimize shifts of freight from rail to road. Vehicle excise taxes are to be reviewed to ensure that rates reflect environmental and road costs of different truck types. Higher truck weight limits will be considered in conjunction with tax reform. Pilot schemes for collecting road user charges on trunk roads will be instigated. Dedicated income streams from new road user charges will be available for local transport improvements. “Quality partnerships for freight” involving truck operators, local authorities, and shippers will be formed to resolve local distribution issues. Peak-hour truck delivery restrictions will be encouraged. Port and waterborne commerce proposals include the following: The Strategic Rail Authority is to plan improved rail access to seaports, in conjunction with the private rail operators. The authority will have funds for subsidizing construction of rail connections. Port operators will be encouraged to increase capacity by improving efficiency of operations rather than by physical expansion, to avoid environmental degradation. Grants will be provided to promote use of domestic coastal shipping and inland waterways. Aviation proposals include the following: A new national airports policy will be developed that provides for growth in air freight. Air traffic control is to be partly privatized (with the government retaining 49 percent of shares) as a way of obtaining the capital needed for upgrading.

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Freight Capacity for the 21st Century: Special Report 271 Measures since 1998 have furthered some of these proposals. The Transport Act 2000 created the Strategic Rail Authority and authorized local governments to impose user charges on their roads. Several local governments, including that of London, are preparing to institute charges. Research is under way on motorway user charging schemes, and a proposal for reform of truck taxes has been published. In 2001, the government sold a controlling interest in National Air Traffic Services, the British air traffic control system, to a consortium of British airlines. REFERENCES Abbreviations GAO U.S. General Accounting Office NCIT National Commission on Intermodal Transportation TRB Transportation Research Board Department for Transport, Local Government, and the Regions. 1998. A New Deal for Transport: Better for Everyone: The Government’s White Paper on the Future of Transport. United Kingdom, July 20. www.dtlr.gov.uk/itwp/paper. GAO. 1992. Intermodal Freight Transportation: Combined Rail-Truck Service Offers Public Benefits, but Challenges Remain. Washington, D.C., Dec. Fulton, G. 1999. Opinion: Don’t Forget Freight. Transport Topics, July 26. NCIT. 1994. Toward a National Intermodal Transportation System: Final Report. Washington, D.C., Sept. Samuel, P., and R. Poole, Jr. 1999. How to “Build Our Way out of Congestion.” Reason Public Policy Institute Study 250, Jan. TRB. 1993. Special Report 238: Landside Access to U.S. Ports. National Research Council, Washington, D.C. TRB. 1996. Special Report 246: Paying Our Way: Estimating Marginal Social Costs of Freight Transportation. National Research Council, Washington, D.C. TRB. 1998. Special Report 252: Policy Options for Intermodal Freight Transportation. National Research Council, Washington, D.C. Winston, C. 1999. You Can’t Get There from Here: Government Failure in U.S. Transportation. Brookings Review, Summer.