FOCUSING ON FREIGHT
Remarks of
Jeffrey N. Shane
Under Secretary for Policy
15th Annual Breakbulk Conference & Exhibition
New Orleans, LA
October 28, 2004
Thank you for the opportunity to speak before this 15th Annual Breakbulk
Conference and Exhibition hosted by the Journal of Commerce and the Port of New
Orleans. I appreciate the invitation, and am grateful for the opportunity to
join you here today on behalf of President Bush and Secretary of Transportation
Norm Mineta. My remarks today will focus on some of the things we at the
Department have done over the last few years to put trade and logistics issues
at the heart of our agenda, but perhaps more importantly on what we can do
together in the years ahead.
Transportation in a Global Economy
The global economy in which we now find ourselves profoundly impacts each and
every one of us, often in ways that we do not even realize. Few Americans, for
example understand how much we really are a maritime nation – relying on
maritime transportation for so much that we consume and for so much that we sell
to the rest of the world. This ineluctable transition to a globally driven
economy presents special challenges, particularly when it comes to having the
port, highway and rail capacity necessary to keep these goods moving.
It is important to understand what drives the need for more robust
transportation infrastructure and services. Global trade liberalization has been
a major pursuit of President Bush and this Administration. Over the last three
years, the Bush Administration has negotiated a dozen new free trade agreements,
opening markets for a wide range of American exports and giving consumers access
to a wider range of competitive options that engender significant economic
benefits all across the country. We have also breathed new life into the World
Trade Organization’s Doha Round of multilateral negotiations and pursued
regional trade agreements in places closer to home like Central America.
While our successful trade agenda will bring enormous economic benefits to
consumers and economies both here and abroad, it forces us, especially those of
us at the Department of Transportation, to remain focused on the need for
transportation infrastructure sufficient to handle the increased flow of
commerce that these agreements will bring about.
I do not have to sell this group, of course, on the benefits of moving towards a
global economy. Every day, you help drive world commodity markets. Your
operations are highly complex, moving steel, rubber, forest products,
foodstuffs, rolling stock…all breakbulk commodities that represent the
fundamental building blocks of the world’s economy and the backbone of America’s
economic future.
Make no mistake: The breakbulk community represented here today is at the
forefront in serving our nation’s economy, which is evolving rapidly and growing
ever more interconnected. Each day you are called upon to adapt to rapidly
changing patterns in global logistics, light-speed advances in information
technology, double-digit annual trade growth, and transformational changes in
overseas markets. All these factors have altered forever the way in which you do
business.
Perhaps most importantly from the Department of Transportation’s perspective,
our economy relies increasingly on seamless connections between all modes of
transportation. Port facilities and the highway and rail networks that serve
them are critical elements in that system. Unfortunately, in many cases they are
being stretched to their limits as they deal with steadily mounting cargo
volumes, larger ships, and increased land side congestion. Those of us in
government with responsibility for national transportation policy have to be
cognizant of your requirements and creative in our approaches to developing
increased capacity throughout the system. Increasing capacity or improving
operational flows in one mode won’t help much if we don’t address bottlenecks in
another.
Just to give you a sense for what I’m talking about, let me highlight a couple
of statistics. In 1970 overseas trade accounted for only 13 percent of U.S. GDP;
today it accounts for nearly 30 percent and will rise still further as our trade
agreements begin to deliver the more robust commerce they were designed to
engender. Our transportation system now carries more than 15 billion tons of
freight annually, valued at over 9 trillion dollars, and even the most
conservative forecasts suggest that overall freight volumes will grow by another
60 percent by 2020. That is why we are so focused on ensuring that we have the
tools we need to ensure that transportation continues to serve as this economy’s
engine of growth.
“SEA-21”: Strengthening our Maritime Transportation System
This explosion of global sourcing and distribution places tremendous pressure on
our ports, and will require a great deal of investment from both the public and
the private sectors. President Bush understands this perfectly. As he said just
a few weeks ago: “To compete in the global economy of the 21st century, the
United States needs a maritime policy tailored to 21st century needs.” Right
here in New Orleans we have a perfect illustration. New Orleans is one of
America’s leading general cargo ports, handling some 17 million tons of cargo
per year. An efficient private breakbulk industry has produced impressive
results here, making this port among the largest in the country for shipments of
steel, natural rubber, plywood and coffee. In the last 10 years, the Port of New
Orleans has invested more than $400 million in new state-of-the-art facilities.
These improved breakbulk and container terminals feature new multipurpose
cranes, expanded marshalling yards and a new roadway to handle truck traffic.
These are investments that are keeping the Port of New Orleans competitive and
responsive to its customer base.
Secretary Mineta would like to see that vision replicated in other parts of the
country. Unfortunately, you will look in vain for a maritime equivalent of our
federal aviation and highway infrastructure programs. In other words, one very
important piece of this puzzle has been missing up to now. As a result, our
maritime sector often gets overlooked as we focus our attention on our highway,
transit, and aviation programs. Secretary Mineta wants to change all that by
taking a comprehensive look at how we can put the maritime sector on the
national policy agenda more prominently than ever before.
The so-called “SEA-21” review that Secretary Mineta launched earlier this year
began with a comprehensive assessment of how our maritime transportation system
might move commercial goods more effectively. A number of outside groups,
including the Marine Transportation System National Advisory Committee, and the
National Academies’ Marine Board, have all called for action in this area and
urged DOT to take the lead in pursuing a more robust maritime policy. The U.S.
Commission on Ocean Policy, for example, has served up a powerful menu of
maritime policy recommendations for the Administration to consider.
As we envision it, a SEA-21 package would help pave the way for a far more
competitive and efficient maritime sector and improve connections between the
various modes. It would emphasize leadership and coordination across the federal
government, with DOT and its Maritime Administration playing a leadership role.
That is why we are exploring right now whether we can elevate an existing group
– the Interagency Committee on the Marine Transportation System – to create a
coordination mechanism that is much more robust than what we have at present. To
be successful, the participating agencies must be represented at a much higher
level in the bureaucratic pecking order to ensure that maritime issues receive
the sustained, meaningful attention that they deserve.
SEA-21 will also focus on how we can leverage funds from federal, state and
local governments, as well as the private sector, to address the capital needs
of the Maritime Transportation System. As our Maritime Administrator, Captain
Bill Schubert, knows all too well, we must invest in the future of our ports to
ensure that we can continue to compete effectively in the global market. That
means all ports, large and small, each of which contributes to the efficient
operation of our nation’s maritime transportation system.
Finally, earlier this year we carefully examined the tax burdens on our maritime
sector, with the goal of improving our fleets’ and crews’ ability to compete
internationally. In that connection, I am happy to report some very good news.
Some of the ideas we had been discussing as elements of the SEA-21 package were
in fact adopted by Congress and last week were signed into law by President Bush
in the American Job Creation Act of 2004. At DOT, we are very excited about this
landmark law, which will help level the playing field for U.S.–flag shipping,
strengthen our Merchant Marine by providing more American jobs, enhance our
national security through increased U.S. military sealift, expand the
competitiveness of U.S. flag carriers in the world market, and reduce ship
construction costs.
There are four key maritime elements in the new law:
* U.S. merchant marine operators will now have the option of being assessed a
tonnage tax rather than the traditional income tax on corporate profits. This
will make it much more attractive to flag U.S. and will remove a major
competitive disadvantage since most major trading nations, especially in Europe,
have already adopted a tonnage tax regime.
* Subpart F of the Internal Revenue Code has been amended to reinstate a key tax
option for U.S. investors in “controlled foreign corporations,” which will
encourage investors to remain U.S.-based companies, helping to ensure that the
U.S. has sealift available if there are not enough U.S.-flag vessels at hand.
* For the inland waterway fleet, the Act eliminated the 4.3 cents per gallon
excise tax, removing a tax burden from barge operators and allowing them to
translate that tax savings into more competitive prices for shippers.
* For U.S. shipyards with naval shipbuilding contracts, an accounting rule
change will allow shipyards to further reduce costs, thereby spurring more
competitive pricing for shipbuilding in US yards.
We were very happy to see these changes enacted as part of the Jobs act. The
maritime industry needs to take a close look at these important tax reforms and
ensure that the opportunities they create are exploited properly. The
legislation can be expected to put more people to work, make our economy more
efficient, and provide shippers with more effective options to move goods into
and out of the United States.
Developing an Intermodal Approach
The maritime sector, of course, is only one piece of what is a large,
interconnected puzzle we call the intermodal supply chain. Addressing our trade
and logistics challenges in an effective way requires that port stakeholder
communities and government agencies cooperate in new ways and develop new
approaches. Secretary Mineta has insisted that we examine this question not
through a series of mode-specific proposals, but rather with an eye towards
creating a comprehensive, intermodal freight distribution system. This is the
basic principle that has guided us in working to develop federal programs that
address the challenges at our ports, as well as the equally important landside
system.
One major opportunity to enhance the efficiency of freight movements is the
reauthorization of our surface transportation programs. Earlier this month we
marked the first anniversary of the expiration of the Transportation Equity Act
for the 21st Century – TEA-21 – which provides funding and authorization for the
whole array of federal highway, highway safety and transit programs. That
anniversary is no cause for celebration. Because Congress was not able to pass a
six year bill, DOT now has to work within the constraints of an 8-month
extension of the old programs that will last until May 2005.
It is highly regrettable that Congress hasn’t finished its work on that
legislation. There are important innovations in the Administration’s SAFETEA
proposal that we want to see passed, and we will continue to urge Congress to
adopt those changes in a six-year bill.
For example, we would focus more resources on the intermodal connections between
our roads, ports, railways, and airports. We have also proposed a number of new
financing tools to better support infrastructure investments, including making
highway and freight transfer facilities eligible for private activity bond
financing for the first time, and broadening TEA-21’s successful “TIFIA”
innovative financing program. Finally, we have proposed a requirement that each
state appoint a “Freight Coordinator” to help ensure that freight projects
receive the proper measure of attention in local and regional planning
processes. Realizing the considerable benefits of the Bush Administration’s
proposals can only come with final congressional action, however. It is
important, therefore, that Congress pass a six-year surface transportation
reauthorization as soon as possible.
A Near-Term Freight Action Agenda
In the meantime, rather than just waiting for Congress to act, we have worked
for the past several months to make sure that we have left no stone unturned --
using our existing statutory authority.
The result of that work is what we call our Freight Action Agenda. It
incorporates many recommendations from stakeholders, including the suggestion
that we work hard to identify and support nationally significant freight
projects at our major transportation gateways. To tackle such projects, the
Department is creating Intermodal Project Facilitation Teams to ensure a
sustained focus on large, complex, multimodal projects while providing more
coordination and leadership from the federal level.
Other items include the development of freight-focused performance measures for
our national transportation system; seminars and other programs that will
provide training to public sector professionals so they better understand why
efficient freight movement is so important to the future of our economy; and
finally, encouraging adoption of new technologies in areas like positive train
control to ensure safer, more efficient rail shipments throughout the country.
We will continue our work in improving coordination among our modes on freight
issues, and appreciate the support that our stakeholders across the modes have
provided thus far.
Conclusion
I referred earlier to the recently released Oceans Commission report. The
Commission recommended that we establish – in the words of a Journal of Commerce
headline a few weeks ago -- a “clearer voice” within the federal government on
maritime policy. Without detracting in any way from the important related
missions of our sister agencies, I want to leave you with an ironclad assurance
that the U.S. Department of Transportation and its Maritime Administration will
indeed provide that clearer voice. The Congress clearly charged the Department
with that responsibility, and Secretary Mineta is taking it very seriously.
Make no mistake: Freight and logistics issues have finally taken their rightful
place on the national policy agenda. Washington understands the impact of
congestion on the national economy, and understands the importance of efficient,
interconnected transport to the way business is done today. It is not too much
to say that America’s place in the global economy of the future will be
determined in large part by the efficiency of our transportation system. We are
determined to do all we can to enhance that efficiency.
Thank you for allowing me to share these thoughts with you today. I look forward
to a continuing dialogue with the Port on New Orleans and the breakbulk
community on these important issues.
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Briefing
Room
