American Shipper

Now What?

Now What?



A look at the incoming Obama administration's impact on trade, transportation and homeland security policies.


By Eric Kulisch


   Trying to pigeonhole and predict Barack Obama's policies early in his transition is a dubious exercise because the president-elect has shown since Nov. 4 that he intends to minimize ideology in favor of pragmatism when it comes to finding solutions for the nation's problems.

   That means campaign positions and rhetoric may not be the best guides to how his administration will lead.

   For businesses that rely on trade and transportation, the election created more questions than answers about how Obama will deal with trade agreements, cargo security, labor and a host of other issues. But one issue that seems certain to get attention for once is transportation infrastructure, which is seen by Congress and the new administration as a key piece in any economic rescue package.

   Government will certainly operate differently from the past eight years of the Bush administration. Obama has said that he intends to look at developing a holistic governing strategy rather than confining issues to the narrow focus of Cabinet-level departments. That means energy and transportation policy, for example, could be better coordinated so that environmental improvements aren't undermined by separate transport initiatives.

   And his governing philosophy regarding spending, especially for infrastructure, favors merit and national priorities over haphazard local pet projects larded on by lawmakers.
   Obama has also endorsed the need for tougher regulation of industry for the common good, but at the same time has expressed interest in 'smart government' that removes unwieldy, outdated regulations that act as barriers to economic growth.

   'When you don't guard against excess then a lot of times government ends up having to step in anyway in a much more burdensome way,' Obama said, pointing to the bailout of the financial system as an example.

   Whether one agrees with his politics or not, Obama is receiving high praise from all corners for the way he is quickly building his Cabinet and handling the transition. The selection of former congressman and Clinton administration advisor Rahm Emanuel to be chief of staff, for example, has been hailed as an exemplary move because he will help keep Democrats who control Congress from freelancing too much.

   Meanwhile, 'parachute teams' descended on scores of agencies throughout Washington to learn as much as possible about programs, budgets and potential pitfalls. Obama is credited with starting transition planning months before Election Day and now has 135 people, comprised of Democratic Party supporters and subject matter experts, combing through agency documents and asking pointed questions of Bush administration officials.

   Most trade associations that focus on international trade and transport said it was too early to assess specific policy approaches, but praised the systematic approach the incoming administration is taking to prepare for power.

Koch



   'They seem organized, disciplined and focused,' said World Shipping Council President Christopher Koch, a veteran Washington hand who took a leave of absence last summer to work on John McCain's campaign.

   Peter Friedmann, executive director of the Agriculture Transportation Coalition, had this to say about the Obama review team's approach to dealing with smaller, lower-profile regulatory bodies and sub-cabinet agencies that usually do not get much attention during transitions:

   'Typically, it's only the White House Personnel Office seeking to fill the political positions with party loyalists, who are interested in filling the political spots. But, both the Maritime Administration and the Federal Maritime Commission are now subject, under the Obama transition, to conduct a serious assessment of the role of the agency, its objectives and its agenda. This review is being conducted by serious and knowledgeable individuals. It is certainly in-depth substantive attention at this level, which exceeds that which I personally have witnessed or participated in during previous transitions, both Democratic and Republican.'

Friedmann



   The transition teams have also invited stakeholders to their review meetings, an approach Washington insiders say they have not experienced before during a transition. A representative from the National Industrial Transportation League, for example, sat in on a FMC transition meeting.

   The FMC transition team is led by John Cullather, who has worked for 31 years in the House of Representatives specializing in merchant marine and maritime policy. Since 1995 he has been the Democratic staff director for the Transportation and Infrastructure subcommittee on coast guard and maritime transportation.

   The Obama transportation team also met separately with railroads, motor carriers, ocean carriers, ports, shippers and other groups as it looks to develop a national policy for funding transportation infrastructure, according to Friedmann.

   Veteran lobbyists say they are pleasantly surprised by the depth and thoroughness of the transition process and the new administration's attempt to hit the ground running on Jan. 20.


Peter Gatti
executive vice
president,
National Industrial
Transportation
League
'My sense is they've been in a listening mode. That's a good thing. They're not coming in with preconceived ideas, but instead are seeking effective approachers '



   'It's something I have not seen in my 30-odd years here in Washington,' said Peter Gatti, executive vice president of the National Industrial Transportation League.

   'They deserve a lot of credit for transferring so quickly from a campaign to heading up a government,' he added. 'My sense is they've been in a listening mode. That's a good thing. They're not coming in with preconceived ideas, but instead are seeking effective approaches.'

   Many issues that shippers, carriers, customs brokers and logistics companies care about will likely take a backseat to Obama's top priority in the next year or two: fixing the financial crisis, creating jobs and ending the recession.

   With those cautionary notes, what follows is a gaze into the crystal ball based on positions posted on campaign and transition Web sites, public statements, and voting records to see what the logistics sector can expect from an Obama administration during the next four to eight years.


Homeland Security Obama named Gov. Janet Napolitano of Arizona to head the Department of Homeland Security.

   Napolitano previously served as Arizona attorney general and U.S. attorney for Arizona. As a top law enforcement officer she is familiar with many aspects of homeland security at the state level, especially dealing with illegal immigration, Mexico trade and land border security. Sealing the Southwest border with Mexico is one of DHS's top missions, and her experience in Arizona was one of the factors that led to her nomination.

Napolitano



   During her tenure as governor, Arizona became the first state to implement a homeland security strategy and opened the first state counter-terrorism center. She also has experience presiding over large-scale disaster preparedness exercises and planning. She called up the Arizona National Guard two years ago to help the federal Border Patrol control illegal entry along the U.S.-Mexico border and advocates comprehensive immigration reform. As attorney general, she helped write a law to break up human smuggling rings.

   She is widely praised as one of the most effective state executives in the country.

   Obama's homeland security objectives include:

   ' Allocating homeland security funds to states, ports and other entities based on risk and improving DHS procurement processes to prevent waste and fraud in contract awards for programs. The department has already moved during the past two years to more risk-based grant formulas and budgeting.

   ' Creating a national infrastructure protection and resiliency plan, in conjunction with the private sector, for natural disasters and terrorist attacks.

   ' Strengthening safety and security regulations on the chemical industry, especially for facilities near heavily populated areas.

   ' Pressing harder to develop advanced radiation detection technology that can differentiate between naturally occurring radiation and weapons-grade material smuggled in containers, and working with the maritime industry to integrate the systems into port operations without causing cargo disruption.

   ' Improving land border security by supporting investments in technology, physical infrastructure and manpower.

   ' Designing security requirements for new infrastructure projects so that critical assets are more resilient to natural and man-made threats. Combining security and infrastructure needs underscores Obama's attempt to create holistic policies instead of ones in issue silos.

   Obama, who named New York Sen. Hillary Clinton to be secretary of state, has also acknowledged the importance of partnering with other nations on military activity, intelligence, law enforcement, border controls and transportation security to defeat terrorist networks and promised to strengthen the Foreign Service to facilitate those efforts.

Clinton



   Obama also said he will establish a Shared Security Partnership Program to invest $5 billion over three years to improve cooperation between U.S. and foreign intelligence and law enforcement agencies. The program will include information sharing, as well as funding for training, operations, border security, anti-corruption programs, technology and the targeting of terrorist financing.

   One of Obama's national security priorities is to reduce the threat of nuclear terrorism, largely by preventing the spread of nuclear weapons. Obama said he will institutionalize the Proliferation Security Initiative, a U.S.-led effort with partner nations approving mutual rights to board, search and, if necessary, detain vessels suspected of carrying weapons of mass destruction or components in international waters.

   The Border Trade Alliance, which promotes cross-border trade in North America, applauded the nomination of elected officials from three border states, including New Mexico Gov. Bill Richardson as Commerce secretary.

The Border Trade Alliance applauded the nomination of elected officials from three border states, including New Mexico Gov. Bill Richardson as Commerce secretary.



   At the State Department, Clinton will oversee the administration of the presidential permit process for constructing new facilities at U.S. land ports of entry. The BTA wants to cut red tape that stretches the approval process for projects up to 10 years.

   Napolitano, who will be responsible for trade and travel through border checkpoints, should look to make immediate investments in low cost improvements such as signage, emergency generators and lighting, while seeking long-term funding from Congress to upgrade and expand facilities, the BTA said. DHS estimates it needs $5 billion over the next 10 years for modernization to meet cargo and travel demand at land borders.


Transportation. During the primary election campaign, Obama addressed the issue of the transportation infrastructure investment gap, a topic that normally doesn't get much play in presidential politics. He wants to create a National Infrastructure Reinvestment Bank to expand and enhance, not supplant, existing federal transportation investments. The idea was previously proposed by Senate Banking Chairman Christopher Dodd, D-Conn., and Sen. Chuck Hegel, R-Neb. The independent entity would direct funds to priority transportation needs in an effort to take politics out of the equation. Obama called for the Infrastructure Bank to be capitalized with $60 billion over 10 years, but experts say that amount is a tiny fraction of what's needed to repair crumbling roads, bridges and other structures.

   Obama has since strongly supported a major economic stimulus plan, potentially worth more than $500 billion, that would include substantial funding to jump-start infrastructure projects around the nation that are planned, approved, but unfunded. The dual goal is to create jobs to spur economic growth while building infrastructure that improves the nation's competitiveness. The National Governor's Association is seeking $136 billion.

   The president-elect also has signaled his intent to address long-term infrastructure needs, such as modernizing the electrical grid, highways, rail, ports, water and sewer systems, and aviation infrastructure. He plans to establish a Grid Modernization Commission to help adopt best practices for improving the efficiency and security of the electricity grid.

   'The new way of doing business is, let's figure out what projects, what investments are going to give the American economy the most bang for the buck, how can we protect taxpayer dollars so this money is not wasted, and restore a sense of confidence among taxpayers that when we spend our money it's on things that are actually going to improve their quality of life, create the jobs that are so desperately needed, and spur on economic growth and business creation in the private sector,' Obama said at a press conference.

   Business groups have clamored for years about the need to invest in transportation systems to support economic activity, underscored by a U.S. Chamber of Commerce estimate that the United States faces a $500 billion shortfall over 10 years simply for repairing existing highway facilities. The American Association of Railroads said its industry needs to invest $148 billion by 2035 to expand its freight network. Meanwhile, the government and professional engineers say $128 billion is needed for airport improvements and $125 billion for locks and inland waterway systems.

      Industry representatives now seem confident that Obama will follow through on such investments, or get the ball rolling, because the projects are viewed as job creators.

   'Once the economy turns around we're going to have to have the infrastructure to handle the increased volume that will come,' Gatti said.

   Broad transportation policies outlined by Obama include:

   ' Modernizing the air traffic control system and taking a more conciliatory approach with air traffic controllers after the Federal Aviation Administration under President Bush tried to wring wage concessions, overtime limits and work rule changes from the controllers' union, leading to a steady flight of disgruntled workers.

   ' Tightening safety oversight of airlines.

   ' Supporting development of high-speed passenger and freight rail.

   ' Modernizing water infrastructure because of its ability to help farmers and manufacturers ship their bulk goods domestically and to overseas markets. Obama supported the recent enactment of the Water Resources Development Act, which provides funding for locks, dams, levees and other projects.

   ' Investing in public transit.

   ' Requiring governors and local officials in metropolitan areas to develop energy conservation plans to qualify for federal transportation funds.

   Obama also supports the Jones Act requiring U.S. vessels and crews for coastal shipping, as well as the Maritime Security Program and cargo preference laws. He voted for the Rail Safety Improvement Act of 2008 that requires railroads to implement positive train control technology, shortening of rail worker hours of service, new training standards, and other measures that increase railroad operating costs.

   Although new policy directions are still difficult to glean, folks at the American Association of Port Authorities are cautiously optimistic that maritime issues will get more attention because Mortimer Downey, a transportation consultant who has held various planning positions at the Port Authority of New York and New Jersey, and Michael Huerta, group president of ACS Transportation Solutions, are two of the transportation policy review team leaders. Huerta once served as executive director of the Port of San Francisco and commissioner of the New York City Department of Ports, International Trade and Commerce.



   Downey, considered a potential candidate for DOT secretary at press time, served for eight years as deputy secretary of transportation under President Clinton and was an assistant secretary in the department during the Carter administration. Huerta was chief of staff to former DOT Secretary Rodney Slater and associate deputy secretary of transportation earlier in the Clinton administration. AAPA officials believe Downey and Huerta will help ports get the ear of the president regarding rail-highway connectors to ports and dredging issues, especially during upcoming deliberations to reauthorize the multiyear surface transportation spending plan that expires in nine months.


Trade. During the primary campaign Obama's rhetoric, on the surface, sounded protectionist, as he focused on the loss of manufacturing jobs to other countries and talked about renegotiating the North American Free Trade Agreement to include stronger labor and environmental conditions. But he quickly signaled that any NAFTA amendments would be conducted in close consultation with Mexico and Canada and that the pact would not be scrapped or entirely renegotiated.

   Obama has made it clear that he understands the benefits of trade and wants to open foreign markets to U.S. goods, but said he wants to make sure labor and environmental rules apply to both sides so that American workers are not disadvantaged. It's likely he'll instead press Mexico to enforce labor and environmental standards.

   Obama opposed the Central American Free Trade Agreement because it lacked those standards, and said he will pressure the World Trade Organization to enforce trade agreements and stop countries from continuing unfair government subsidies to domestic exporters and non-tariff barriers on U.S. exports.

   Some trade experts predict Obama will eventually embrace free trade agreements, including the multilateral Doha talks organized by the WTO, but not for at least six months to a year.

   The president-elect plans to update the Trade Adjustment Assistance program that helps workers displaced by foreign trade by extending it to service industries, creating flexible education accounts to help workers retrain and provide retraining assistance for workers in sectors of the economy vulnerable to dislocation before they lose their jobs. Obama favors ending tax deductions for companies that ship operations overseas and giving government contracts to companies with domestic operations.

   Obama helped introduce the Patriot Employer Act of 2007 to reward companies that create good jobs with good benefits for American workers. The legislation would provide a tax credit to companies that maintain or increase the number of full-time workers in America relative to those outside the United States, among other provisions.

   Initiatives to make workers and companies more globally competitive could help ease the electorate's fears that trade erodes jobs and the quality of life, when much evidence – such as export job wages being higher and exports accounting for 12 percent of U.S. gross domestic product – points the other way.

   Still, unions, which heavily backed Obama's candidacy, will keep pressure on Congress not to approve any trade deals.

   Obama picked Richardson to head the Commerce Department and promote U.S. exports, intellectual property protection and domestic business development. Richardson is a former secretary of energy and United Nations ambassador.


Labor. One area that seems poised for change is enactment of the Employee Free Choice Act. The House of Representatives passed the bill in 2007 allowing workers to create a union by collecting signatures from a majority of workers rather than holding a secret ballot. It failed in the Senate after a Republican filibuster.

   Under the bill, if half of the workers plus one sign union cards the union is automatically recognized as their bargaining representative. Another provision states that if a collective bargaining agreement isn't in place within 60 days of recognition then a federal arbitrator will impose the first two-year contract on the parties.

   Business leaders are extremely worried that 'card check' will allow unionization much faster compared to collecting signatures from 30 percent of workers and then having the National Labor Relations Board conduct an anonymous election. They believe union organizers will intimidate workers into signing up for unions. It's the top legislative priority for organized labor, which argues that companies use intimidation and stall tactics to prevent their workers from becoming unionized.

   Today, unions represent about 7.5 percent of private-sector workers, down from about 25 percent in 1977.

   Obama co-sponsored 'card check' in the Senate and said he'll sign it into law upon passage. Many predict that will happen within the first 100 days of the administration. But Lance Compa, a professor at Cornell University's School of Industrial and Labor Relations, was quoted by Business Week as saying lawmakers may balk at undercutting an American institution like secret ballots. He foresees a compromise, with safeguards to ensure that employers and unions each don't abuse the organizing process.


Environment. Democrats in Congress and Obama himself have signaled that environmental protection will become a top policy priority, with climate change legislation and carbon taxes at the top of the agenda. The pendulum shift from industry to the environment is highlighted by the Democratic caucus voting for Rep. Henry Waxman of California to replace Michigan's John Dingell, a powerful supporter of the auto industry, as chairman of the Energy and Commerce Committee.

   The bottom line is that the transportation sector will be under increased pressure to reduce diesel truck, vessel, rail and airplane emissions.

   Anticipating opportunities from climate legislation, domestic maritime interests are positioning their industry as a more environmentally sound mode of transport that can reduce air pollution and congestion by taking trucks off the road if inland waterways and coastal shipping are treated as maritime highways. Air pollution restrictions could revive the Maritime Administration's short-sea shipping program.