Special 2-part information to boldly take you where no truckers have gone before

By Advance Business Capital  

This week Truckonomics and Between the Ditches are devoted to a special two-part series about the Obama Administration’s Export Initiative and its potential impact on American trucking. This is Part 1. You’ll find Part 2 in Between the Ditches.

The other week we came across an article in Transport Topics intriguingly titled, “Stars Are Aligning” for Trade Deal, Exec Says. Now Transport Topics is just about the best general trucking publication around: factual, objective and comprehensive. We read it every week and when it takes note of an issue, so do we. So we read the piece with interest. Here, in brief, is the story, which TT picked up from Bloomberg News Service.

This spring the U.S. Department of Commerce launched an Export Initiative, aimed at doubling U.S. exports in five years. If it succeeds, that’s good news for both the country and the trucking industry. It won’t be easy though. There are serious obstacles: the reflexive suspicion of U.S. manufacturing unions, the labor advantages of import giants like China and Brazil, and the protectionism of developing countries

Getting Serious About Exports

The trade initiative is the product of the Obama Administration and while not everyone is on board, Bill Lane, a senior executive at Caterpillar Inc., definitely is. Lane was recently part of a delegation of major corporate executives (FedEx, AT&T, Phillip Morris) who met with officials at the Swiss-based World Trade Organization to discuss a new round of global trade talks.

“For the last year and a half, the U.S. took a proverbial timeout on trade,” Lane told Bloomberg News in a burst of metaphorical enthusiasm. “But 2011 will be different. Things are starting to move. The train is leaving the station and the stars are in alignment.”

Not knowing the particular train Lane had in mind, we were unable to check its timetable, but we did consult a knowledgeable astrologer who was able to shed some light on just how the stars bode for WTO talks.

More on that later. First some background on how global exports impact trucking.

“Made in the U.S.A.”

Officially America is in the recovery phase of our recent recession, but unemployment is stubbornly stuck at 9.6%, even as unemployment benefits begin to run out. The Treasury can’t raid the piggy bank again and Americans, sensibly, are saving rather than spending, so we can’t count on government stimulus or domestic consumption to get us out of this mess. That leaves the rest of the world—particularly developing countries, who are recovering faster—to import our goods and create jobs. 

The Obama administration, distracted (rightly or wrongly) by other matters, has had export policy on the back burner. In fact, it was off the stove and getting cold until the president’s January State of the Union speech. Experts agree pumping up exports is much needed. They can make an enormous difference in the country’s economy.

Pop quiz. What percent of U.S. companies export some of their goods?

a) 52%

b) 29%

c) 01% 

We got the answer wrong too, fellow dummies. It’s one percent! Now obviously that fraction includes giants like 3M, Dell and RJR Nabisco, so the figure is somewhat misleading. The exports made by that 1% represent a lot of income, 13% of the GNP.

Still, it means that 87% of the U.S. economy is driven solely by us, the U.S. This is a remarkable figure, representing what a recent report by the prestigious Brookings Institute calls “our vast internal market and cultural insularity.” The “vast internal market” part is a positive; the “cultural insularity” is a big fat negative. In other words, we can do a lot better.

More Exports, More Loads

End of boring economic lecture. What does this have to do with your trucking business? You already know the answer: more exports mean more loads. How to get there? We don’t know, but the Brookings Institute does: a national freight strategy to complement the president’s National Export Initiative. Says the report, “The U.S. freight system is currently undermined by aging infrastructure and congested transport networks.” (If you’re a trucker, you already know that too.)

Of course the needed infrastructure upgrading also includes ports, waterways and rail but it especially affects trucking. As you’d expect, most of America’s exporting centers are coastal cities. (Exceptions like Chicago and Detroit are serviced by the Great Lakes.) Big freight—like coal—travels exclusively by barge or rail. However, there is a second tier of inland towns (to name three: Wichita, Toledo, Greensboro) that depend surprisingly heavily on exports. For them, roads are their only arteries to air or rail hubs.

Hauling Wheat to Egypt

Even a modest increase in exports will create a substantial increase in demand for capacity. For instance, drought and wildfires have devastated the Russian wheat market, so American wheat exports have risen sharply. But only 5% of wheat is transported by truck (short haul from wheat elevators not serviced by rail spurs). Higher wheat exports are a boon for rail but a wash for trucking, right?

Wrong. They’re not exactly a boom but they’re definitely a benefit. Consider for instance, Egypt, which imports almost all its wheat, usually from Russia. This year it will import 550,000 tons of American wheat (a modest amount compared to what it’s buying from Europe). Most wheat trucks are semi-trailers that carry 27 tons of grain. That means the 5% of American wheat carried by American trucks is 1,000 loads up from last year. A very small gain in a very small trucking sector translates into a sizeable gain in jobs. And this is only wheat bound for Egypt. Other countries are buying more.

Hauling Hides to Japan

Wheat is a Midwest product but greater exports would benefit trucking in every part of the country, even an unlikely state like Colorado, where beef exports have risen 27% and cattle hides are up an astounding 91%. Says Tim Larsen of the Colorado Department of Agriculture, “Nobody stockpiles hides. This demand is generated by immediate need, foreign companies manufacturing shoes, furniture, what-have-you.” Larsen speculates it represents an early sign of global economic pickup. Colorado has rail but no waterways, so this fall a lot more trucks are making their way through the Rockies to the Pacific.

Other states besides Colorado depend on exports. Who’s heard of Camden, New Jersey? Raise your hands. Okay, so maybe it’s not as well known as Houston or L.A. but according to the Brookings Institute, last year it exported $27 billion of goods (mostly chemicals), making it #8 in the Brookings’ Top Ten Export Metros and, as Casey Kasem used to say, moving up with a bullet.

The beat goes on. According to the state of Washington’s two senators, Maria Cantwell and Patty Murray, one third of the Evergreen State’s jobs are world trade related. In The Hill, a blog whose contributors are restricted to members of Congress, the two quote the American Association of State Highway Transportation Officials, or AASHTO (which sounds more like a sneeze than an acronym). In only ten years, AASHTO (bless you) predicts that 3 billion more tons of freight will be on the road, requiring an additional 1.8 million trucks.

Billions of Tons, Millions of Trucks

That’s good news for truckers, but our deteriorating transport infrastructure won’t be able to handle it. The money to rebuild will have to be backed by bonds backed by the surety of a freight increase driven by more than domestic demand, i.e., exports. This is why the first step in the president’s initiative is so important, the upcoming new round of talks in the World Trade Organization.

“New round of talks.” What exactly does that mean? We need action, not talk. And just what is this “World Trade Organization”?

For answers to these and related questions (not to mention those aligning stars), just return to your Blog4Truckers home page and click on Between the Ditches.

Among the sources for this article are: Transport Topics, Aug 9, 2010, Reuters Online, Guest Post by Bruce Katz, Brookings Institute, RTT: Global Finance Newswire, Aug 19, 2010, Bloomberg News, Aug 20, 2010, Associated Press, Aug 25, 2010, Upper Great Plain Transportation Institute, The Hill, July 29, 2010 and BND.com, Aug 17, 2010 

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