Bringing freight lessons home: lessons from other nations on improving freight transportation indicate the need to set a clear national vision and coordinate public and private action effectively.

In a globalized economy, the transportation system of every country is part of a worldwide network. In the United States and elsewhere, increasing volumes of import and export goods move through key gateway ports to and from the rest of the internal transportation systems. International freight flows and rising volumes of domestic freight vie for space on mixed-use systems, overloading capacity at most of the gateways and at many of the increasingly crowded urban cores. Capacity constraints impact the speed and reliability of our transportation system and directly affect the cost of freight transportation. These challenges are not unique to the United States; countries all over the globe face them as well.

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Sharing strategies to address these challenges helps solve them. To better understand how other nations are addressing their transportation challenges, the Federal Highway Administration (FHWA) and the American Association of State Highway and Transportation Officials (AASHTO) fund and conduct the International Technology Scanning Program. This program seeks out and evaluates innovative technologies and practices that could improve the performance of the U.S. highway system. The scanning approach enables the U.S. transportation community to adopt advanced technology much more efficiently without spending scarce research hinds to re-create improvements already developed by other countries.

To understand how other nations are addressing the increased freight flows on their transportation systems, the International Technology Scanning Program conducted three international scans on freight movement. The report from the first scan in 2001, Freight Transportation: The European Market (FHWA-PL-02-009), focused on the European Union (EU) and investigated the issues, constraints, opportunities, and challenges faced by the EU in developing a policy of open boundaries and the strategies it uses to implement that policy. The second scan in 2002 investigated the characteristics of trade flows between the United States and Latin American countries. The team studied how the scan countries handle trade-related transportation infrastructure, border crossings, and freight security, and issued a report titled Freight Transportation: The Latin American Market (FHWA-PL-03-013). The third scan in 2007 investigated how China provides intermodal access to its new ports and employs investment strategies to foster freight mobility and intermodal connectivity The report is Freight Mobility and Intermodal Connectivity in China (FHWA-PL-08-020).

Although the countries visited in these three scans have obvious differences in history and governmental structure, they face similar transportation challenges: how to best target infrastructure investment; how to coordinate public and private sector action; and how to fund transportation improvements, whether operational enhancements or new capacity. Common issues emerged from the three scans; each of the following sections identifies those issues, briefly discusses each scan's experience, and then poses a question for the reader on how that issue could apply to the U.S. transportation system. Instead of providing solutions or answers, this article aims to challenge readers to think about the issues and formulate their own ideas.

A Common National Vision

Issue: The extent to which an overarching vision or transportation policy provides a framework within which investment and competition can take place.

EU. The EU serves as the institutional framework for establishing consensus on strategies to facilitate an open and competitive market in Europe. The founding EU members saw transportation policy as one of the key policy areas where substantial benefits could occur through EU-level action, and the expanded membership repeatedly reinforced this stance. The EU developed a common transport policy in which public investment in transportation is designed to act as a catalyst for private investment in services and facilities that could provide important public benefits. An example of this action is the creation and funding of the multimodal Trans-European Transport Network (TEN-T), which spans the EU.

Latin America. At the time of the scan, 2002, none of the countries visited (Argentina, Bahamas, Brazil, Chile, Mexico, Panama, and Uruguay) had a comprehensive, systems-oriented national transportation policy, nor did they have one that transcended the individual nations from a regional perspective. Little integration or coordination was evident among investment programs for the various modal systems. Since that time, however, Mexico has focused on freight movement with the development of its National Infrastructure Program 2007-2012.

China. China competes as a nation; its national, provincial and metropolitan transportation policy is closely coordinated among the three levels of government and is clearly spelled out in China's 5-year plans. Governmental entities below the national level are provided the leeway to decide how to best meet the established national goals while also addressing local goals, but the national goals must be met. This framework is evident in the investment by ProLogis, an owner and developer of distribution facilities, in the Lingang logistics hub, a 300-square-kilometer (116-square-mile) industrial park on the mainland that will serve Yangshan port, a new container terminal in Shanghai. The national plan goals that targeted the development of the Yangshan port were key drivers in this investment decision.

Q: There have been repeated calls from many sectors for a national transportation policy in the United States. How would a national policy be implemented in the current framework of private sector assets (port terminals, railroads), State-managed transportation assets, and locally established planning priorities? How forceful should the Federal role be?

Linking Transportation, Trade, and Economic Policies

Issue: The extent to which a nation's trade or economic policies are directly supported by its transportation policy so that the transportation system is developed alongside a desire for increased trade.

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EU. Making the internal European market more transparent led to greater demand for transportation. This increased demand resulted in significant transportation challenges facing the EU and its member nations. These challenges include high levels of congestion on line-haul facilities and at transshipment points, and the sharing of facilities by freight and passenger movement. Again, the creation, development, and funding support for the multimodal TEN-T seeks to provide a sustainable and interoperable transportation network to support the opening of economic trade within the EU.

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Latin America. National strategic policies that link transportation investment to economic or trade policies are not apparent. Some of the countries focus on international trade (Brazil, Mexico, Panama, Uruguay), while others (Argentina) are more focused on regional trade. Because Argentina does not target global trade in its national economic policy, it does not invest in the transportation infrastructure necessary to support such trade, whereas Uruguay clearly links transportation investments to national economic goals and has the most developed road system of the countries visited.

The Latin American countries have no comprehensive agreement comparable to the Common Market of the EU, but instead a number of key trade relationships, each of which treats transportation issues differently. The trade relationships include the Andean Community, Caribbean Common Market, North American Free Trade Agreement (NAFTA), Plan-Puebla Panama, and Mercosur--a 1991 regional trade agreement.

Mercado Comun del Sur/Soufhern Common Market, or Mercosur, promotes free trade and the fluid movement of goods, people, and currency. Argentina, Brazil, Paraguay, and Uruguay are full members; Bolivia, Chile, Colombia, Ecuador, and Peru currently have associate member status, while Venezuela's status is still pending. The Mercosur countries focus much of their attention internally, with an emphasis on protecting production and commodity groups, rather than growing trade through an open boundaries strategy as found in the EU.

China. The Chinese central government links its national transportation investment policy closely to its trade and economic policy. Recognizing the vital role that transportation plays in pursuing its goal of continued economic growth, China is investing heavily in infrastructure--almost 9 percent of its gross domestic product--to directly support that growth.

Q: How should the United States link its trade policies with its transportation policy? Should U.S. Customs duties, a proxy for trade levels, augment public transportation expenditures?

What Drives Transportation Policy?

EU. Transportation policy at the EU level is linked integrally to national and EU policies on environmental issues and emphasizes sustainable mobility. However, the importance of economic competition, especially in a global market, is raising economic development, productivity, and accessibility to a comparable level of importance. This pressure is also felt at the local level with some local governments seeking to balance economic development with sustain-ability. Demonstrating that these are not mutually exclusive goals, local authorities were instrumental in the development of the port of Gioia Tauro in Italy. This port was originally developed as a Mediterranean transshipment hub but is now being looked at to provide an intermodal gateway to Europe. The gateway connections would be by rail and would relieve pressure on the northern European ports of Rotterdam and Hamburg. This new intermodal gateway could balance freight flows and modal usage across the EU.

Latin America. There was no clear consensus on the drivers of transportation policy in many of the countries visited with the exception of Uruguay, which clearly linked transportation investments to national economic goals. Uruguay is not on a major trade line, yet has adopted a liberal approach to free trade zones and private concessions to position the port of Montevideo as a gateway to southeastern South America. Its position as a gateway is supported by the highest density of paved roads in any Latin American country and an effort to expand that capacity by issuing a concession to construct and maintain an additional 1,272 kilometers (763 miles) of tolled roads.

China. Up to now, China's economic development clearly has driven its transportation policy, which is focused heavily on international trade. It appears that economic development will be the dominant driver in the near future. As the populations of urban centers along the coast have exploded, however, passenger movement often receives priority to meet the basic needs of these large populations and to maintain social harmony. In addition, the Chinese leaders have added environmental quality and energy conservation to the national agenda as performance measures.

Q: Transportation directly supports economic activity and yet there are increasing environmental (greenhouse gas) and energy conservation concerns that directly impact transportation. How should these concerns be balanced?

Multimodal System Management and Planning

Issue: The extent to which the transportation system is planned, developed, or managed as a multimodal system, and the extent to which all modes are included in determining where transportation investments should take place.

EU. Development of an integrated and interoperable continental transport network has been a goal of the EU since its inception. The multimodal TEN-T consists of transportation infrastructure, traffic management systems, and navigation systems. The EU has established priorities for selecting projects that include the optimum combination and integration of various transportation modes, interconnections to eliminate bottlenecks, optimization of the capacity and efficiency of existing infrastructure, and improvement in intermodal platforms.

Latin America. The governments of many countries (for example, Brazil, Mexico, and Uruguay) are designing and implementing efficient logistics and integrated intermodal transportation corridors, although these projects are inconsistent in their level of development and, as noted, are not part of an overall national objective. (As noted earlier, since the 2002 scan, Mexico has embarked on its National Infrastructure Program 2007-2012.) Internal to Central America, the transportation component of the Plan-Puebla Panama is to better connect the region's (southern Mexico and Central America) major urban and rural areas through improved highways, and, by connecting to corridors throughout the rest of Mexico, to North America. Argentina, Brazil, and Uruguay also have undertaken corridor studies to determine the feasibility of toll roads for the Santiago de Chile--Belo Horizonte Corridor.

China. Intermodal connection is an important consideration in network design in China. In most of the central, provincial, and local governmental agencies visited during the scan, staff members responsible for each mode were located in one agency, which encourages the adoption of a multimodal systems perspective when looking at investments in regional transportation. The national expressway system and the national rail network will be the major means of connection between the political and economic centers of the country, reinforcing their importance in China's economic future. Yet, as noted in other sections of this article, the Chinese are not routinely integrating intermodal rail into their port development.

Q: How does the United States best integrate all modes into U.S. transportation management, planning, and investment decisions?

Modal Split

Issue: The extent to which each nation puts in place incentives or disincentives to achieve a balance in the modal split of freight movement.

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EU The EU and its individual national governments put significant emphasis on shifting freight mode shares from road transport to rail and inland water. All the government officials interviewed by the scan team discussed the importance of rail and inland water freight services, and the use of road pricing as a lever for influencing mode choice. The approach is to establish target market shares of the various modal systems. For example, the Netherlands established mode split goals for 2010. With the transport policy in place, road volumes would grow by 38 percent versus 50 percent (without the policy in place), railroads by 40 percent versus 13 percent, inland water by 40 percent versus 25 percent, and short sea by 40 percent versus 34 percent. At this time it is unknown how successful the Netherlands has been in achieving these goals.

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Latin America. None of the nations visited have taken direct action to encourage one mode over another. In Chile, which is a long, narrow country that could be a textbook example of coastal shipping, 95 percent of the freight moves by truck. Although the Chilean government is giving some attention to increasing coastal shipping, substantial institutional disincentives (such as cabotage) work against the use of more efficient coastal shipping. Freeport in the Bahamas has leveraged U.S. cabotage laws to its advantage and has become a thriving transshipment hub for trade with the United States.

China. China appreciates the need to balance mode split but has challenges achieving that balance. Although China uses its river systems extensively (see section on natural advantages), its intermodal rail service faces significant challenges, and rail access to maritime port facilities is not being consistently built into new port design. The most significant challenge is the low priority received by container movement on China's rail network; it follows military, passenger, energy (that is, coal), and food movements. Intermodal rail movement is unreliable, often with no scheduled departures. The current 5-year plan (2006-2010) has a goal of moving 10 million 20-foot equivalent units (TEUs) by intermodal rail by 2010. Achieving this goal would represent a three-fold increase from the current 3 million containers moved by rail, but even at 10 million would comprise only 3 percent of the intermodal freight moved in China. This will present a growing challenge as China implements its "Go West" policy, which refers to the next set of provinces west of the coastal provinces.

Q: Should the United States do more to encourage or incentivize increased rail and water shares of freight movement? How should this be accomplished?

Performance Measures

Issue: The extent to which performance measures are developed, evaluated, and used to manage the transportation system, and drive future investments.

EU. Keeping in mind that the scan was conducted in 2001, the scan team found no indication that the EU had developed performance measures or used them to manage the transportation system or drive investment. The team did identify one of the most important concerns of freight transport users--the reliability of service--which is thus a focal point for transport officials identifying needed improvements to the transportation system. According to the EU scan report, "Speed of travel is important ... but system reliability is even more important." The team concluded that this need should be weighed heavily when determining performance measures used in system monitoring and in project prioritization.

Latin America. Again, this scan was conducted in 2002, but the U.S. team did not find performance measures used by any of the nations visited during the scan.

China. The Chinese government measures the performance of officials by the results they achieve, and officials therefore pay attention to measures of progress. Most measures currently revolve around meeting economic performance objectives. To the extent that transportation system improvements enhance economic performance, they are pursued. This was noted in the earlier discussion on "Linking Transportation, Trade, and Economic Policies." The scan substantiated no performance measures specifically for the transportation system, but the culture is in place should they be established.

Q: Should the United States begin using performance measures to manage the transportation network and drive investment;' Who should establish these performance measures and what should they be?

Private Funding Of Infrastructure Improvements

Issue: The extent to which private funds are utilized effectively to expand or improve the performance of the transportation system.

EU. The EU transportation funding is contained in the total EU budget, which is supplied by customs revenues and value-added taxes. The buy-in on EU priority freight projects from member governments and from the private sector has been slower than expected. Causes include an overestimation of interest by private investors, plus environmental concerns with some of the projects.

Latin America. The scan team did not find public financing mechanisms for funding freight projects in most of the countries visited (Argentina, Brazil, Chile, Mexico, Panama, and Uruguay.) Latin American countries rely on concessions to private companies for providing the necessary port access and terminal infrastructure. Private concessions for port terminal operations have proved successful for the most part, but the necessary funding and maintenance of other infrastructure (such as roads) is not occurring. Reasons include the economic challenges the region faces and the reliance on investment returns for privately funded infrastructure. In many cases, declining revenues have hurt maintenance of existing infrastructure. That said, the corridors planned for key trade routes throughout Latin America are being evaluated for their economic feasibility. Under consideration, for example, are connections to the Uruguayan port of Montevideo as an emerging logistics center and regional container transshipment hub, and the Atlantic and Pacific corridors identified in Mexico's Plan-Puebla Panama.

China. The Chinese central government actively seeks private sector capital to expand the country's infrastructure. Much of the national public investment in transportation is intended to attract private capital. The private sector has responded positively with many investors being patient and anticipating longer term returns on investment. An example is the massive investment in terminal operations in Yangshan, which when fully built out in 2020 will be able to handle 25 million TEU per year. In 2007, Yangshan handled just over 5 million TEU annually. These investors are building for the future. This strategy does not always work in China's favor, however, as the government has not been successful in generating interest in its new rail and intermodal connector program. In addition, the tolls charged on many toll roads are meeting public resistance as being too high. In some cases, government agencies are trying to renegotiate concession agreements to allow lower toll rates compensated with longer concession periods from 30 to 50 years.

Q: The engagement of private sector capital in transportation infrastructure in these three scans is uneven. What is the best framework that will enable the United States to best utilize and integrate private and public funds to generate the infrastructure improvements necessary to maintain system performance and reliability?

Harmonized Operational Issues

Issue: The extent to which border nations harmonize transportation assets and border operations to affect efficient cross border transportation.

EU. The level of effectiveness of EU policies depends on the willingness of member countries to adopt the recommendations. In some cases, the EU has gone beyond policy to binding rules and regulations to guarantee universal implementation of a policy; the EU monitors these binding requirements. Examples include vehicle emissions standards, allowable vehicle weights, and trucker hours-of-service regulations. In addition to harmonizing standards, the EU has been very successful in its efforts to improve cross-border operations. On January 31, 1993, the EU abolished all national border checks for customs clearance for member nations, although spot checks still occur for drugs and immigration enforcement. The creation of free cross-border transport was identified by almost all those interviewed as one of the most important EU actions for creating a better market environment for freight transport. According to a 1999 report by The European Commission quoted in the EU scan report, "Without transport, it [the Single Market of the Union] would exist only in name. Without efficient, compatible, sustainable transport systems and operation, it obviously will not flourish."

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Latin America. Mercosur established size, weight, and safety standards for intra-Mercosur transport. To harmonize land transportation rules and regulations, Argentina, Brazil, and Uruguay signed an Agreement on Land Transport in 1966 that emphasizes consistent standards for granting permits, insurance requirements, and compatible customs procedures. Some major achievements include the harmonization of driving licenses, medical standards for drivers, safety rules, rail safety, and road control devices such as highway signs and traffic lights. However, Mercosur has not been as successful in obtaining agreement among member countries to develop consistent procedures to foster more efficient cross-border movements. The scan report quoted an unidentified Panamanian businessman as saying, "The future success of a free trade agreement for the Americas is tied closely to the existence of an integrated hemispheric transportation system. From a logistics perspective, the transportation system of one country must be closely linked to the transportation system of its trading partners."

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China. The China scan did not address this issue.

Q: The EU and Mercosur considered harmonizing transportation assets (for example, vehicles, driver standards) and border operations (clearance procedures) as key issues. The EU accomplished both and Mercosur one. The EU is a more involved, integrated agreement than Mercosur. What lesson does that have for NAFTA?

Landside Access

Issue: The extent to which freight can be moved efficiently to and from major intermodal hubs, particularly maritime ports.

EU The issue of landside access [access to a port by land] is a challenge for all EU ports. For the port of Rotterdam, one of the busiest in the EU, the Dutch government has developed the Betuwe Corridor, a 160-kilometer (99-mile) rail connection from the port of Rotterdam to the German national railway system. With no at-grade crossings, this electrified double-track corridor dedicated to freight movement pursues the Dutch and EU objectives of shifting freight from the road to rail or waterways, while easing congestion tin the roadways.

Latin America. Port terminals in Latin America operate 24 hours a day, 7 days a week (24/7), due to rising congestion levels and customer-oriented service. An operational shift to scheduling deliveries and pickups to nonpeak hours would expand the use of existing capacity. Most of the countries visited have limited investment resources available, however, and have had limited success in using concessions for access projects, as mentioned earlier in the investment section. The port of Sao Paulo, Brazil, actively pursued rail access to the port and, as of 2002, handled 20 percent of its container traffic (20,000 TEU per month) by rail. At the time of the scan, Santos and the port of San Antonio, Chile, were considering truck-only roads to improve port operations and traffic impacts on the surrounding community.

China. Although the Chinese ports operate 24/7 and are some of the most productive in the world, intermodal connectivity and landside access to the new Chinese ports evolved in the same way that they did in the EU and Latin America. Many new port facilities are located in large urban areas, and accessing these ports involves traversing mixed-use roadways that will, given the growth in Chinese international trade, soon be facing the same congestion issues as the ports noted in the EU and Latin American scans. The port of Yantian, one of the first to evolve after China opened its economic reforms, recently established a truck-only access to alleviate congestion issues. The Chinese government is not consistently incorporating rail access to maritime ports into new port designs.

Q: Effective and efficient freight movement into and out of large intermodal hubs are key to efficient freight movement. What are the best solutions, both operational and physical capacity, for improving the landside access to these assets, and how can they be implemented?

Utilization of Existing Capacity

Issue: The extent to which nations are improving capacity with operations or technology before they pursue new physical capacity..

EU: A focus of EU policy is to make the best use of existing transportation options before developing new transport networks, and one of the key targets for providing enhanced freight transport mobility is to use the existing multimodal transport infrastructure more effectively, possibly by driving mode shift. As one Dutch official stated, transportation system management strategies come first, followed by pricing strategies, and finally actions that construct new infrastructure.

Latin America: Most of the Latin American nations were still in the process of developing their infrastructure. It was not clear that operational measures were being pursued or used by any of the nations visited on the scan. However, as noted earlier in the discussion of landside access, most of the ports in the nations that were visited ran 24/7 port operations to make the most use of port and surface transportation infrastructure.

China: As noted before, China is in build' mode for most of its infrastructure, but is facing a serious issue with oversize and overweight trucks on the system they have put in place, and these trucks are an emerging and important concern for transportation officials. China has not progressed to the point of systematically managing its highway infrastructure, nor does it appear that the government is putting into the new capacity the technological capacity to actively manage it at a future date. Like the Latin American nations, the maritime ports operate 24/7 to maximize capacity utilization.

Q: New physical capacity is very expensive to build and then must be maintained. Many State and local governmental transportation agencies are actively pursuing operational means of improving system performance. How can this be accelerated? And what can the private sector do to utilize existing capacity more efficiently?

Natural Geography Advantages and Challenges

Issue: The extent to which a nation takes advantage of its natural geography to improve freight movement or addresses the natural geography that encumbers freight movement.

EU. Congestion is most severe at strategic geographic barriers that hinder continental travel because of the tunneling effect they have on traffic flow--the Alps, Pyrenees, and the English Channel. Conquering these barriers continues to be a challenge.

Latin America. The Darien Gap challenges completion of the Pan-American Highway linking North and South America. The gap, which separates Panama and Columbia, is not only one of the most difficult terrains in the world with dense rainforest and swamps, it is also one of the most environmentally important. Biologists consider the Darien Gap a biological defense against organisms that thrive in South American environments and would intrude on North American ecosystems if they could bypass the barrier created by the gap. Many of the countries that have river systems (such as the Amazon, Orinoco, and Rio de la Plata) are looking to take advantage of the Pan-American Highway, particularly to and from their gateway ports.

China. The Chinese central government is leveraging the country's natural geography to facilitate the movement of goods. River and coastal shipping continues to be a significant component of China's intermodal transportation system. Forty percent of the containers shipped through Shanghai's new Yangshan port, which is 32 kilometers (20 miles) off the mainland, arrive by barge. China's land geography was not part of the scan.

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Q: How can the United States take the best advantage of its natural geography to improve freight movement? Are there any challenges that need to be overcome? What are they and how can and should they be accomplished?

Next Steps

Any one of these issues is a challenge. Taken collectively, it is clear that no one entity, public or private, is going to be able to solve them. The issues are too interrelated, and solution sets will need to be coordinated across a broad spectrum of national, State, local, and private interests. Solutions need to be a collaborative effort.

As the United States approaches the next surface transportation bill, many of these issues will be open for discussion. A number of new ideas are contained in Transportation for Tomorrow, Report of the National Surface Transportation Policy and Revenue Study Commission and in the U.S. Department of Transportation's (USDOT) Reform Plan. For example, both of these documents call for a refocused Federal role and a targeting of Federal funds on those parts of the transportation system that serve a national or regional objective. They also call for the use of performance measures and greater analytic rigor in determining the transportation projects that should be advanced, and a shift toward greater involvement of private funds to improve the performance of the U.S. transportation network. Additionally proposals offered by private organizations such as the American Trucking Associations, AASFITO, and the American Road & Transportation Builders Association call for an increased focus on freight movement in U.S. transportation investment strategies.

All readers are encouraged to think about these issues, read the reports, and engage on this issue. You can add your thoughts to the dialogue at the Web site for the Framework for a National Freight Policy: www.freight.dot.gov/freight _framework/index.cfm. Together, we can meet these challenges.

Tony Furst is director of the FFTWA Office of Freight Management and Operations. Before joining FFTWA, Furst served in a number of positions at USDOT: program coordinator at the Maritime Administration, project coordinator at the Office of Intermodalism, and branch chief, maritime infrastructure security at the Transportation Security Administration.

For more information, contact Tony Furst at 202-366-9210 or [e-mail]. For the scan tour reports, see http://international.fhwa.dot.gov/pdfs/eurofreight.pdf, http//freight, transportation, org /doc/LatlnScan.pdf, and http://.international.fhwa.dot.gov/links/pub_details.cfm?id=56l.