Infrastructure determines economy’s structure

   Problems with aging and potentially failing U.S. infrastructure are being increasingly publicized and debated. The debates have been prolonged partly because estimates of expenditures needed to bring infrastructure back to a state of good repair are in the neighborhood of 10 percent to 33 percent of GDP. As the debate continues, the infrastructure continues to crumble and delays in taking action have had consequences. There are already visible signs that under-investment in some types of freight transport infrastructure is changing the use of real estate in some parts of the United States and thus affecting the structure of regional economies.
   U.S. agricultural exports have grown in the last 10 years and have an important role in reducing the trade deficit and, therefore, economic growth. Agricultural products are heavy and waterways are well suited for their transport. Grain and oilseeds (soy) are primarily produced in the Midwest along the Mississippi River and its tributaries and then barged to the Gulf Coast for transshipment to bulk vessels.
   Over the past 10 years, U.S. Census data shows ports in the New Orleans Customs District have lost share of grain and oilseed exports, dropping from 60 percent in 2003 to 50 percent in the last few years. West Coast ports, particularly in the Pacific Northwest, have gained the most share. This reflects growing demand for these commodities in Asia, where West Coast ports are natural gateways for this trade flow, but freight infrastructure issues may have also mattered.
   In December 2011, the United Soybean Board published its report, America’s Locks & Dams: A Ticking Time Bomb for Agriculture, which was commissioned by the Texas Transportation Institute. The report described the age profile of the inland waterway system, noting 54 percent of the Inland Marine Transportation System’s structures are more than 50 years old and 36 percent are over 70 years old. The report also stated:

• “The age of these facilities is reflected in lock outage statistics. On the Ohio River, for example, navigation outages have increased more than 3-fold since 2000, going from approximately 25,000 hours to 80,000 hours…
• “A high percentage of these commodities pass through one or more locks on their way to market. Should a waterway be closed due to one or more lock failures, the resultant increase in costs that would be incurred in utilizing truck or rail transportation would decrease or even eliminate the cost advantage of U.S. Midwestern producers…
• “The economic service life for navigation structures is typically 50 years and is usually extended through major rehabilitation to 75 years.”

   The accompanying map shows areas where grain and oilseed production has increased and decreased between 1997 and 2012, with the inland waterway and Class I rail network overlaid on it. It seems likely that degradation of the inland waterway infrastructure, combined with sustained levels of large investments by railroads and faster growing demand from Asia, has drawn exports towards the West Coast ports. Furthermore, grain and oilseed production has increased in areas served by improving rail capacity, while it has declined in areas served by aging freight transport infrastructure.
   Beyond the notion that the aging inland Mississippi waterway infrastructure is negatively affecting the economies of the lower delta, there should be concern that it’s affecting the competitiveness of U.S. agricultural exports. Other major agricultural export countries, such as Brazil, have embarked on major freight movement investment programs. U.S. agricultural exports could soon be at a permanent competitive disadvantage.
   Kemmsies and Rezvani work for Moffatt & Nichol, an infrastructure engineering firm. They can be reached at (212) 768-7454 or email.

This article was published in the May 2015 issue of American Shipper.