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U.S. Economy Depends on Freight Transportation 3 Table 1. Growth of freight dependent sectors of the U.S. economy. (Value in $Billions, Compound Average Annual Growth Rate 19972007) Agriculture Manufacturing Mining Retail Wholesale Construction Total 1997 $86.6 $1,205.4 $124.3 $569.9 $506.8 $406.6 $2,899.6 2007 $122.1 $1,618.6 $111.4 $887.5 $698.0 $356.4 $3,834.4 CAGR % 3.5% 3.0% -1.1% 4.5% 3.3% -1.3% 2.8% Source: IHS Global Insight, Bureau of Economic Analysis. Users and Beneficiaries of Freight Transportation Freight transportation is so important to the U.S. economy because any industry that pro- duces or sells transportable goods relies on the freight transportation and logistics sector. Together, the industries that rely on freight transportation to function make up a significant por- tion of the U.S. economy. These industries account for over one-third of value-added and over three-quarters of the revenue generated in the U.S. economy1. A non-exhaustive list of sectors in Table 1 shows that the industries that rely on freight transportation have grown an average of 2.8% per year for the last 10 years. These sectors generate more than 3.8 trillion dollars of economic value and all except mining and construction are growing. Trends Behind Fast Growth in Freight Transportation 1. Freight volumes increase with the increased consumption accompanying economic and population growth 2. Manufacturing output continues to grow, despite a decline in manufacturing employment 3. Freight activity increases with the efficiency of America's just-in-time inventory and supply strategies 4. International trade stimulates growing import and export volumes Globalization, Growth in Trade, and Increases in the Volume of Goods Shipped on U.S. Freight Infrastructure U.S. freight infrastructure is expected to face many challenges as the volume of goods trans- ported on it increases due to both domestic growth and growth in international trade. Long-term freight demand growth is a reflection of a healthy, expanding economy. Because goods-related economic activity in agriculture, manufacturing, construction, oil and gas drilling, mining, and wholesale and retail trade is so significant to the economy, accommodating the increased traffic demand is in the national interest. Both the public and private sectors should work together to ensure that U.S. infrastructure and transportation policy will be able to efficiently transport the predicted increase in volumes. 1Value-added is the contribution of each sector to the total revenue it is paid for what it sells. Total revenue across sectors double counts the net contributions of each sector as products move from being a collection of raw material inputs through manufacturing/assembly to wholesale distribution and ultimately to final retail sale. Value-added is the measure preferred by economists. These calculations are based on U.S. GDP in 2007.

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4 Public and Private Sector Interdependence in Freight Transportation Markets Trucks per Day 2035 500-5,000 5,000-10,000 10,000-20,000 20,000-40,000 40,000-60,000 60,000-110,000 Source: IHS Global Insight TRANSEARCH Insight Truck Traffic Forecast 2008. Figure 1. Growth in freight demand nationwide--forecast of daily truck traffic 2035. Freight Volumes Are Forecast to Continue to Increase Population, economic growth, and increasing trade will result in additional freight shipments. Freight volumes are projected to nearly double from current levels by 2035. As U.S. supply chains become more global and service-sensitive in scope, the overall demand for U.S. freight trans- portation will increase 90% between 2004 and 2035. This growth represents the research team's forecast for U.S. freight transportation (i.e., U.S. domestic freight transport and the U.S. portion National Freight of imports and exports) increasing from 15 billion tons in 2004 to 29 billion tons in 20352. Mea- Truck Traffic Demand sured in ton-miles, growth is even greater, from 6.1 trillion ton-miles in 2004 to 11.7 trillion ton- Doubles by 2035 miles in 2035, or a 92% increase. The growth in freight traffic will affect all modes of transportation. As Figures 1 and 2 show, the amount of freight transported by rail will likewise increase, although not to the same extent as by truck. The following graph (Figure 3) shows the projected increase in the volume of goods moved by water. Waterborne shipments of goods moving along domestic waterways including coasts, lakes, and rivers, are projected to increase from about 870 million short-tons in 2007 to about 1,080 million short-tons by 2035, or by 24%. Shipments of petroleum products and other liquids through the U.S. pipeline network are projected to increase as well, although slowly 2 Forecast of Global Insight's TRANSEARCH freight flow database. This database includes most movements of raw materials and finished goods to, from, and within the United States. The database excludes small packages, some bulk commodities, and municipal wastes, as well as products transiting the United States. At the total level, there is also some double counting of tons (but not ton miles) of goods that use multiple modes of transport or are reshipped.

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U.S. Economy Depends on Freight Transportation 5 Source: IHS Global Insight TRANSEARCH Insight 2035 Rail Traffic Forecast. Figure 2. Growth in freight demand nationwide--forecast of daily rail traffic 2035. 1,200 1,100 Short-Tons (millions) 1,000 900 800 700 2007 2010 2015 2020 2025 2030 2035 Year Note: Includes all domestic and foreign cargo shipped on domestic waterways including inland waterways, lakewise, and coastwise. Excludes foreign cargo entering or exiting ports but transported to/from ports by modes other than water. Source: IHS Global Insight TRANSEARCH database. Figure 3. Growth in freight demand nationwide--total waterborne traffic 20072035.

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6 Public and Private Sector Interdependence in Freight Transportation Markets because pipeline capacity is difficult to add given right-of-way acquisition challenges and requirements for advance regulatory approval processes. The growth in the movement of goods will be felt throughout the country. Even rural regions of the country with slow population and economic growth will see substantial freight traffic increases where there are highway, rail, or waterway routes that connect faster growing regions elsewhere. Rapid Growth in International Trade Over the past 25 years, international trade volumes have increased even more rapidly than the volumes of domestic freight. As a result, the share of imports and exports out of the total amount of goods being transported over U.S. infrastructure has doubled (see Figure 4). Trade-related freight is projected to continue to increase in the long term as a share of all freight and in its rel- ative importance to the economy. Shipping domestic goods within the country usually involves moving goods a shorter distance than when goods move across the border or through ports to overseas destinations. Conse- quently, increases in trade-related freight transportation mean that the distances goods are shipped are increasing as well. Longer shipping distances imply the use of a greater proportion of the transportation network for each product moved. This added use of the system is an extra demand, adding to the pressure on freight system capacity. The nation's top 10 freight gateways for imported and exported goods--measured by value of trade--are spread around the country's borders and serve several different modes of trans- portation (see Figure 5). Among the top 10 are 3 airports (JFK, LAX, and Chicago), reflecting the high value of air cargo in international trade; 3 NAFTA border crossings (Detroit, Michigan; Laredo, Texas; and Buffalo- Niagara Falls, New York); and 4 marine ports (Los Angeles, Long Beach, New York/New Jersey, and Houston). These gateways do not all serve imports and exports equally. The seaports handle much more import value than export value, while the airports and most land border crossings are more equally split between imports and exports. Much of the imported cargo that arrives at ports is then transported around the country in containers or as bulk cargo by rail and by truck. 18 16 14 12 10 8 6 4 1970 1975 1980 1985 1990 1995 2000 2005 2010 Exports Imports Note: Share of U.S. real GDP in percent; forecasts after 2007 Source: IHS Global Insight, Inc. Figure 4. International trade accounts for an increasing share of U.S. GDP.