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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.
