Kurt Nagle, President and CEO of the American Association of Port Authorities (AAPA), says much of the merchandise sold by, and purchased in, the U.S. passes through seaports and their connecting infrastructure.
That’s why it’s important that America continues to invest in its seaports and their linking but aging infrastructure. Seaports are not only vital for importing and exporting goods and strengthening the nation’s supply chain, but they’re also critical to the country’s overall economic wellbeing in terms of generating jobs and bolstering America’s overall competitiveness.
But Nagle says America hasn’t invested nearly as much in its seaports as it needs to. Consequently, the U.S. port system and its connecting infrastructure will face grave difficulties if an expected shortfall of $46 billion by 2040 is not properly remedied.
“If that gap isn’t closed, it’s projected that we’ll lose about $2 trillion in exports and almost a trillion dollars in imports. Overall, that’s about $2.9 trillion in trade that will be lost,” Nagle tells Industry Today.
“This could translate into a GDP loss between now and 2040 of about $4 trillion,” he adds.
WHAT’S TRIGGERING THE DEFICIT?
There are actually two different $46 billion figures related to this dilemma, but Nagle says each relates to something different.
First, a study done last year by the American Society of Civil Engineers (ASCE), which Nagle frequently refers to, shows that U.S. seaport agencies, in conjunction with their private-sector partners, are together investing $46 billion through 2016 in capital improvements to their marine operations and various other port properties.
That’s more than $9 billion per year, of which more than one-third is being spent by the port authorities themselves, according to the study.
“They’re making significant investments in those terminal facilities to be able to accommodate larger vessels, increase trade, and keep us competitive,” Nagle says.
But that’s only half what is expected to be needed.
The analysis, titled Failure to Act: The Economic Impact of Current Investment Trends in Airports, Inland Waterways, and Marine Ports, says that to accommodate growth in waterborne traffic, future spending needs are estimated to tally $30 billion by 2020 and $92 billion by 2040 based on current spending levels.
What do these figures essentially mean?
“What the $46 billion dollar gap shows is that between now and 2040 – and between what is the current trend in federal funding for port and waterway infrastructure and what is estimated to be needed to be able to accommodate the increase in trade – it’s about a $46 billion shortfall,” Nagle says. “That’s a whopping 50 percent shortfall.”
About $16 billion of the funding gap is likely to accumulate by the end of the decade, the report adds, with the additional $30 billion projected to accumulate between 2021 and 2040.
Meanwhile, more than 61 percent of the identified need and funding gap are intended for marine navigation and operations and maintenance, with the remaining percentage for inland waterways.
“The federal navigation channels are similar to what we’ve seen as a nation across our transportation structure: a continual under-investment by the federal government,” Nagle explains. “They (the federal government) are a part of the partnership in both the maintenance and the improvement of those navigation channels.”
WHAT’S THE WORST THAT COULD HAPPEN?
This significant discrepancy, according to the analysis, will have major, long-lasting impacts on our nation’s GDP and its ability to remain competitive in a global marketplace if it isn’t narrowed.
After all, the American economy has generally relied on low transportation costs for its exports to make up for higher costs in wages and production. If the costs to export goods increase, the country’s ability to compete in global markets for goods produced in the U.S. would take a significant hit.
For example, if current investment levels continue, losses will accumulate every year, according to the study, resulting in a total loss of nearly $4 trillion to the national GDP, and $7.9 trillion in lost business sales through 2040.
There’ll also be 738,000 fewer jobs created if the U.S. continues its current level of investment in seaports, the study says. That number jumps to 1.4 million by 2040.
These are jobs, the report explains, that’ll be lost because of the resulting “lack of U.S. competitiveness in global trade and because the nation’s households and businesses will be spending more for commodities that arrive by marine ports and are transported to market via inland waterways.”
By 2020, lost value of exports will be $270 billion. That rises to almost $2 trillion by 2040. Around $1.3 trillion in business sales will also be lost by 2020. That rises to $7.8 trillion by 2040. And the cumulative loss in national GDP will be about $700 billion by 2020 and $4 trillion by 2040, according to the study.
Disposable income also takes a hit, with losses projected at almost $872 billion through 2020 and $4.5 trillion through 2040.
“It’s a dramatic impact on our trade, a dramatic impact on our economy, and certainly a dramatic impact on employment,” Nagle says. “It’s very significant impact.”
He adds: “The reason for those impacts is it increases the costs of consumer goods, which affects our standard of living. Also, it increases the costs of production and manufacturing for U.S. industries that obviously, for the most part, rely on imported raw materials or components for their production.”
The problem is a concern for manufacturers and supply chain leaders of varying industries. It was the main topic of discussion at an afternoon-long roundtable discussion in late August at APM Terminals in Port Elizabeth, N.J. The congregation of more than two dozen shipping industry stakeholders – including Nagle – was organized by AAPA.
The discussion focused primarily on how to fund the aforementioned needed seaport investments. Some panelists suggested funding via taxes while others recommended using user fees or private investment.
The conversation also touched upon how manufacturing and shipping executives can better inform legislators, regulators, and even general members of the public how important transportation – and seaports, in particular – is to the wellbeing of the nation’s infrastructure and it’s gradually recovering economy. The better informed decision makers are, panelists said, the more likely they are to allocate more tax dollars.
Some helpful steps have already been taken, Nagle says. For instance, the Senate passed its version of the Water Resources Development Act earlier this year, and the House marked up its version in committee in September. Association officials are hoping October is the month the bill is on the House floor, Nagle says.
“Successful enactment of Water Resources legislation that addresses these types of issues, whether it’s the harbor maintenance tax or greater federal investment in the channels, will be a big help,” Nagle says.
But there’s more to be done, he says, including advocating for additional federal programs that cater to moving goods and freight, like the Moving Ahead for Progress in the 21st Century Act (MAP-21), which he says was a “step forward” in developing a national freight policy and national freight strategic plan.
“It’s vital that investments in transportation infrastructure be recognized as an effective utilization of limited federal resources, paying dividends through increased trade, jobs, and tax revenues,” Nagle says. “Industry certainly wants there to be more attention and priority, and more dedicated programs and funding, toward moving freight in and out of this country. It’s up to all of us to ensure that happens.”
About Kurt Nagle
Kurt Nagle has over 30 years of experience in Washington, D.C., related to seaports and international trade. Since 1995, Nagle has served as President and Chief Executive Officer for the American Association of Port Authorities (AAPA). He began working at AAPA, the alliance of the leading public port authorities throughout the Western Hemisphere, in 1985.