International Trade and Transportation Infrastructure Development: Experiences in North America and Europe

By Juan Carlos Villa, Maria Boile and Sotirios Theofanis

International Trade and Transportation Infrastructure Development: Experiences in North America and Europe examines the impact of trade agreements, such as the North American Trade Agreement (NAFTA) and the European Union Customs Union, and their relationship to transportation systems and infrastructure in member countries. It analyzes historical trade by mode, evaluating modal shifts due to trade policy and disputes, and their implications for all involved nations. This book also examines both supply and demand trends, reviewing transportation processes, and the stakeholders involved. Capacity development, funding mechanisms, and operational characteristics of each mode are detailed in relation to the policies that influence them. The book reviews recent trends and the impact of disruptive technologies, as well as future potential regulatory changes, with relation to upcoming infrastructure plans, project funding, and operations.

This book is an ideal reference for transportation practitioners involved in planning, feasibility studies, consultation and policy for international transportation systems or infrastructure. Academic researchers and graduate students in transportation planning, international relations, and trade will also find this book useful.

• Compiles in one source up-to-date insights on important public transport themes, issues, and debates
• Examines a wide range of public transport topics in the multidisciplinary fields of economics, policy, operations, and planning
• Bridges the gap between scientific research and policy implementation

• Language: English
• Publisher: Elsevier Science
• Release date: Apr 29, 2020
• ISBN: 9780128162569

Juan Carlos Villa

Juan Villa is Research Scientist and Manager Latin America for the Texas A&M Transportation Institute (TTI) based in Mexico City, where he is responsible for performing research in freight transportation, logistics, and trade. He is a researcher with 39 years of experience in the U.S., Europe, Mexico, and other Latin American counties. Villa serves as a member of the U.S. Department of Commerce’s Committee on Supply Chain Competitiveness, and is the Chair of the Transportation Research Board International Trade and Transportation Committee. He has been published in several journals, including Elsevier’s Research in Transportation Business and Management and Transportation Research Record Journal of the Transportation Research Board.

Book preview

Preface

International trade tripled in the two decades between 1990 and 2010. This expansion is the result of sustained economic growth, as well as a strong increase in economic interdependence among countries, particularly in two trading blocs: North America and the European Union. Consequentially, world trade increased much faster than the transportation infrastructures that handle merchandise trade. Analyzing international trade flows in North America and the European Union, and the related development of transportation infrastructure, I realized that there was no single source of information that has documented how transportation infrastructure is planned, funded, built, and maintained in the three North American countries. This led me to the idea of writing this book with my experience in North America and I invited my colleagues, Maria Boile and Sotiris Theofanis, to enrich the content with European experience. This book also analyzes how supply chains have been evolving to serve trade demand and make better use of existing transportation infrastructure and international regulations.

When I started writing this book, I thought it would be a relatively easy task, given my more than 35 years of experience in the North American transportation sector, having worked in various transportation modes: roadways, rail, maritime, and land ports, as well as in various disciplines including planning, project development, technology implementation, infrastructure privatization, and trade and economic analyses. However, when I started analyzing the details of each topic it was overwhelming. The amount of information I processed and the pace of transformation triggered by recent trade wars, natural disasters, and major infrastructure changes, such as the expansion of the Panama Canal, became a larger task than anticipated.

I was able to conclude this work by defining a cut-off date for data analysis. However, recent events such as Brexit, the new NAFTA, or USMCA, and other events provide ample material for a continuation. I would not have been able to reach this point without the support of my family, particularly my lovely wife Carmen, who has stood by me not only through this endeavor, but also throughout our journey together, moving from country to country and multiple homes. This support has allowed me to participate in multiple transportation and trade-related projects that have contributed to this book. I would also like to thank all my friends and colleagues at the Texas A&M Transportation Institute for their support and the opportunity to share great work experiences that have helped in developing this book. Special thanks are given to Jose Manuel Ancona, who had the patience to work with me gathering and analyzing data, preparing charts and graphs for this book, and to Fernanda Villegas and Gary Amayo, who also helped in preparing charts and checking references. Thanks also to Arturo Becerra, my wife’s colleague, who developed the book cover.

Juan Carlos Villa, January 2020

Global trade has been growing fast during the last several decades, and it is expected to continue to grow, despite the recent slowdown. International and regional advances like those relating to the United States and the European Union have been coupled with other global and regional initiatives, including the recently emerging Chinese Belt and Road Initiative (BRI). These developments have shaped the existing transportation infrastructure and are creating a need for further network development and new transportation services and operations.

We were pleased to join our colleague Juan Carlos Villa in writing this book, providing our perspective and contributing to this tempting initiative. We understand this book and our contribution to be an ongoing and continuing effort in looking at the evolution of global trade and how it influences the development of global transportation infrastructure.

Special thanks go to Eleni Vargianiti and Angelos Aggelakakis for assisting us with the data gathering and analysis.

We would like to dedicate this book to our daughters, Ioanna-Myrto and Maro-Athina, thanking them for being who they are.

Maria Boile and Sotiris Theofanis, January 2020

Part I

The Link Between Trade and Transportation

Outline

Chapter 1 Trade and transportation relationship

Chapter 1

Trade and transportation relationship

Abstract

International trade is the exchange of products and services between countries. Trade routes are a logistical network identified as a series of pathways and stoppages (links and nodes in a network) used for the commercial transport of cargo, including trade over bodies of water. Trade and the transportation system serving it are interlinked. This chapter presents a brief history of trade and its relationship with the transportation system, along with a description of containerization and the impact that this development has had in international trade. It also includes a general description of the North American and European transportation systems by mode, followed by general statistical data on trade by gateway in North America. This chapter serves as the introduction for a more detailed description of trade in the two commercial blocs and the multimodal transportation system that serves trade flows.

Keywords

International trade evolution; containerization; North American Transportation System; European Union Transportation System

1.1 Introduction

International trade is the exchange of products and services between countries. In this book, we are referring to the trade of goods or cargo, which are products conveyed by some sort of transportation mode. Usually, transportation modes for international trade include water, air, or land. Land transport modes used for international trade are road (trucking) or rail. Usually, more than one mode of transport is used to ship freight from the point of origin in one country to the destination in the receiving country. The development of modal and intermodal transportation infrastructure that includes ports, inland terminals, warehousing facilities, and the like increases regional accessibility to global markets. International multimodal transport is defined as the carriage of goods by at least two different modes of transport, on the basis of a multimodal transport contract, from a place in one country at which the goods are taken in charge by the multimodal transport operator to a place designated for delivery in a different country. This definition is from the United Nations Convention on International Multimodal Transport of Goods (United Nations, 1980).

International trade has evolved throughout history. When local economies grew to a point that the products or commodities needed to satisfy domestic needs in order to continue its development were not available in the region, they started trading for resources produced outside their communities. Many nations flourished due to their trade capabilities, developing transportation infrastructure and procedures to make the movement of goods more efficient.

A trade route is a logistical network identified as a series of pathways and stoppages (links and nodes in a network) used for the commercial transport of cargo, including trade over bodies of water. Allowing goods to reach distant markets, a single trade route contains long-distance arteries, which may further be connected to smaller networks of commercial and noncommercial transportation routes (Burns, 2003).

Water modes were the first means of transporting goods, as roadway systems were not well developed. Mesopotamia had fertile basins on the borders of the Tigris and Euphrates Rivers that allowed this civilization to flourish and use its water roadways to import and export goods.

The most commonly known trade route is the Silk Road that connected the Eastern and Western worlds by land and sea. The name was coined by Ferdinand Freiherr von Richthofen, a German geographer, for the trade of Chinese silk. However, several authors contend that the spice trade with India and Arabia was far more consequential for the economy of the Roman Empire than the silk trade with China.

The Silk Road was not actually a single road, but a network of ancient trade routes across the Afro-Eurasian landmass that connected East, South, and West Asia with the Mediterranean and the European world, even with parts of North and East Africa. The Silk Road was a name applied to all the routes through Syria, Turkey, Iran, Turkmenistan, Uzbekistan, Kyrgyzstan, Pakistan, India and on to China (Fig. 1.1).

Figure 1.1 Map of the Silk Road trading routes. Cartwright, M. Globalizaton history. <https://es.wikipedia.org/wiki/Historia_de_la_globalizaci%C3%B3n>.

One clear example of the importance of trade in economic development comes from Europe around the year 1000, where issues with safety and security on mainland trading routes led to the development of important commercial routes along the coast of the Mediterranean Sea. An important maritime trade network connecting coastal cities in the Mediterranean gave these cities great power and spurred economic development. These so-called Maritime Republics, including Venice, Genoa, Amalfi, Pisa, and Republic of Ragusa, were empires along the Mediterranean shores. They monopolized European trade with the Middle East between the 8th and the 15th centuries. The main commodities that were traded included silk and spices, incense, herbs, drugs, and opium. The spice trade was very lucrative as spices were among the most expensive and demanded products of the Middle Ages. Muslim traders dominated the maritime routes throughout the Indian Ocean, sourcing the spices in the Far East and India and shipping them via maritime routes through Ormus in the Persian Gulf and Jeddah in the Red Sea. From there, overland trade was extended to the Mediterranean coast, where Venetian merchants then distributed the goods throughout Europe until the rise of the Ottoman Empire. In 1453 with the fall of Constantinople, Europeans were excluded from this important multimodal trade route (Wikipedia the Free Encyclopedia, 2019).

Another more recent example is the impact of the railroad on the geographic, economic, and political development of the United States. In 1869, the Transcontinental Railroad connected the entire continent east to west and expanded the market availability of goods. Items for sale on the US East Coast could be made available to the population on the West Coast. The railroad made it possible to transport goods in shorter times, increasing the variety of goods for people on the frontier. Railways also offered opportunities for entrepreneurs to start businesses to produce goods and to increase the supply of goods for sale. With the railroad, a product that might not have had enough demand in the local town could be shipped to different markets, increasing demand.

By the end of the 19th century, the United States was becoming an urban nation, and the railroads were supplying these urban areas with food, building materials, fuel, and other commodities. The railroads also allowed those cities to grow, first with steam-driven railroads and later with electric streetcars, moving people longer distances.

These are just a few examples of how trade helped developing cities, regions, and countries. The transportation system is an important element of efficient trade that increases the competitiveness of certain regions. However, freight transportation is demand driven; that is, the demand for the movement of goods will bring about the development of transportation systems.

The remaining of this chapter provides information on the relationship between trade and transportation development in North American and Europe.

1.2 The relationship between trade and the transportation system

The transportation system is the channel that handles trade. An efficient transportation system reduces the costs and travel time of goods handling, hence creating jobs not only in the transportation industry but also throughout all the sectors involved in the extraction, production, assembly, distribution, and sale of traded commodities. Exports of commodities create jobs and boost economic growth by forcing local industries to be more efficient and to compete in foreign markets.

The Industrial Revolution was a key turning point in the evolution of world trade. There was some progress in the 17th and 18th centuries, such as advancement in ship design that led to the opening of new markets in the Americas and Asia (Maddison, 2008). However, the new transportation technologies that were developed during the Industrial Revolution, such as steamships and the railways, triggered the expansion of trade around the world.

Steamships were the first revolutionary technology to transform transportation in the 19th century. A steamship is a type of steam-powered vessel, which can be ocean faring and seaworthy, that is propelled by one or more steam engines that typically turn propellers or paddlewheels. Initially, steamships carried only high-value freight on inland waterways, but a series of incremental technological improvements led to faster, bigger, and more fuel-efficient ships. This drove transportation costs down and opened the market for the movement of goods along transoceanic trade routes and handling not only high-value commodities but other bulk products as well. By the late 1830s, steamships were regularly crossing the Atlantic; by the 1850s, service to South Africa had begun; and, with the opening of the Suez Canal in 1869, which created an important shortcut to Asia, transoceanic steam shipping took over Far Eastern trade routes as well (World Trade Organization, 2018).

The second important transportation technology breakthrough from the Industrial Revolution was the railroad. Like steamships, the railroad also rapidly reduced trade transportation costs and connected inland regions, complementing the ocean and river connectivity that steamships provided. The Stockton–Darlington Railway (S&DR) route, operational in 1825, was the world’s first freight rail line and was replicated in Great Britain and the rest of Europe. A transcontinental line linked the East and West coasts of the United States by 1869 (Findlay & O’Rourke, 2009), the Canadian–Pacific railroad was completed by 1885, and the Trans-Siberian Railway by 1903. By the end of the 19th century, rail lines were moving passengers and freight in Asia and in Latin America. Worldwide railway lines increased from 118,707 miles (191,000 km) in 1870 to nearly 6,325,000 miles (1 million kilometers) in 1913 (Fogel, 1964). Another technological development that increased the potential for distributing products by rail or steamship was the invention of refrigeration after the 1830s, which allowed for the transport of chilled meat and butter over great distances (Mokyr, 1992).

Even though it is not strictly transportation technology, the development of the telegraph in the mid-19th century was a key factor in the expansion of trade and international transportation. By the end of the 19th century, American-, British-, French-, and German-owned cables linked Europe and North America in a sophisticated network of telegraphic communications. Telegraphs linked financial centers, facilitating world trade and leading to a surge in investment. It is estimated that trade grew approximately 55% and international trade costs for France, Great Britain, the United States and 18 other trading powers, fell 25% in the 1870-1913 period (Jacks, Meissner, & Novy, 2008).

After World War II, there was a second wave of international trade and of growth in economic development. The use of containerization contributed to a substantial decline in ad valorem transport charges—the cost of transport as a share of the value of the traded good—from around 10% in the mid-1970s to around 6% in the mid-1990s (Hummels, 2007). Intermodal rail transportation and the use of double-stack container movements by rail in North America and rail electrification in Europe were other transportation innovations that boosted the efficient movement of trade in the 20th century.

Containerization changed international trade

Containerization was a key factor in the expansion of world trade. The first shipping container was invented and patented in 1956 by an American named Malcolm McLean. McLean’s efforts in convincing shippers and port authorities to move toward containerization allowed his trucking company to grow and for him to create SeaLand Industries. Containerization fundamentally transformed the centuries-old ways of the shipping industry to how we do things today. His efforts to increase efficiency resulted in standardized container designs that were awarded patent protection, which he made available by issuing a royalty-free lease to the Industrial Organization for Standardization (ISO). This move led to greater standardization, which helped in expanding the potential for intermodal transportation. In fewer than 15 years, McLean had built the largest cargo-shipping business in the world (Mayo & Nohria,