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Partnership to Promote Enhanced Freight Movement at International Border Gateways: A Strategic PlanPrevious Section | Table of Contents | Next Section 1. INTRODUCTIONIn November 1998, the Subcommittee on Transportation Research and Development of the National Science and Technology Council (NSTC) released the first Federal Transportation Technology Plan. This plan presents initial implementation strategies for the private-public partnerships identified in the 1997 NSTC Transportation Science and Technology Strategy 2. Among these partnerships, the initiative for "Enhanced Goods and Freight Movement at Domestic and International Gateways" addresses the need for more flexible, efficient, and seamless freight transportation systems. The partnership promotes an integrated freight R&D and investment policy and private-public collaboration on large-scale investment projects. This strategic plan outlines the partnership’s outcome goals, investment strategies, and impacts for freight movements through the Nation’s border gateways. Together with a companion document for ports and intermodal terminals3, this plan provides a framework for a comprehensive research and development (R&D) investment strategy for freight transportation. VISION, GOALS, OUTCOMES, AND PARTNERSA broad partnership among the Federal Government, State and local agencies, international societies, port and airport authorities, and industry, the gateways initiative will improve freight mobility through technology applications. As stated in the NSTC Transportation Technology Plan, the partnership’s vision is "a more productive national economy afforded by a more flexible, efficient, and seamless freight transportation system." Its ultimate goals are to (1) improve freight mobility at the Nation’s land borders and ports; (2) ensure diffusion of existing freight information technologies and networks; and (3) expedite the global flow of goods. Among the near-term outcomes of the partnership are the following from the Department of Transportation (DOT) FY 2001 Performance Plan:
The lead Federal agencies for the partnership are DOT’s Office of Intermodalism and Intelligent Transportation System (ITS) Joint Program Office. Other Federal partners include, from DOT, the Federal Aviation Administration, Federal Highway Administration, Federal Railroad Administration, Maritime Administration, Research and Special Programs Administration, and United States Coast Guard; the Department of Commerce; the Department of Defense; the Department of Energy; the Department of Justice’s Immigration (INS) and Naturalization Service; the Environmental Protection Agency; the Department of State; the Treasury Department’s US Customs Service; and the Department of Agriculture. Among the current and potential non-Federal partners are national governments and international societies, State and local agencies, port and airport authorities, air cargo companies, trucking companies, ship operators, railroads, parcel and freight companies, and equipment and vehicle manufacturers. The gateways partnership is coordinated by the NSTC. Federal participants contribute resources and support as required, seeking ongoing guidance and involvement from state, local, and private partners. DOT’s ITS Joint Program Office provides overall leadership and management of the partnership. OUTCOME GOALSThis strategic plan covers the border gateways elements of the gateways partnership. (A companion document addresses freight movement at port and intermodal terminals.) These elements support national transportation strategic goals for mobility and for economic growth and trade, as set forth in DOT’s 1997-2002 Strategic Plan: Mobility: Shape Americ’s future by ensuring a transportation system that is accessible, integrated and efficient, and offers flexibility of choices. Economic Growth and Trade: Advance America’s economic growth and competitiveness domestically and internationally through efficient and flexible transportation. This plan defines four key outcome goals for border gateways that support these broad national objectives. For each outcome goal, the plan presents (1) an investment strategy; (2) anticipated impacts; (3) critical technology (or other) elements; and (4) case studies. The four outcome goals are: Outcome Goal 1: Improved facility capacity to reduce congestion at border corridors through application of advanced traffic control systems. Outcome Goal 2: Improved intermodal access at the border facilities through deployment of automated cargo inspection and clearance systems. Outcome Goal 3: Improved intermodal connectivity through promotion of an integrated, corridor-level infrastructure investment and planning process. Outcome Goal 4: An enhanced US international competitive position based on facilitation of the transaction processes at the US land borders. SCOPE OF EFFORTSBecause it deals with investment in freight infrastructure-traditionally a private-sector function—and because of the nature of these investments-innovative, interagency, intermodal, and international-this partnership crosses the traditional boundaries of transportation investment decisions. Concepts such as "total corridor," "integrated fleet management and regulatory compliance information systems," and "cost-shared intermodal facilities" do not fit within the traditional frameworks guiding investments in transportation infrastructure. In this respect, this strategic plan is likely to present challenges to existing mode-based investment practices and the prevailing distinctions between the private and public realms. This partnership’s scope is bounded by the extent to which it can enhance freight movement at border gateways through the following three-pronged strategy: Technology development: These efforts will identify the enabling technologies that will enhance international border movements of cargo and support enabling research. Technology deployment: Activities will promote technology applications at border gateways that will increase facility capacity and efficiency for officials and users. The partners will accomplish this primarily through the identification of incentive grants and direct project funding for deployment of the border freight technologies with a potential for benefits exceeding the deployment costs. Technology dissemination: Since technology transfer is this partnership’s primary mission, the partners will assess the resources available to develop a clearinghouse for information on industry best practices and lessons learned. A related effort will identify areas where Federal leadership is needed to overcome institutional barriers to innovation, for example, the establishment of standards or joint use of military facilities. The geographic scope of the partnership is the land-border crossings involved in the three-nation freight traffic of the North American Free Trade Agreement (NAFTA) trading community. However, the full scope is global, as the ramifications of the flows of international cargo through the nation’s land borders are inherently broader than the North American trading region. Activities undertaken by international entities such as the Organization for Economic Cooperation and Development (OECD,) the World Bank, or Asia Pacific Economic Cooperation (APEC) affect the effectiveness of the strategies outlined. The partnership’s system boundaries include, but are not limited to:
The scope of the International Border Gateways Partnership is dominated by the land-based border activities of the rail (containerized and bulk) and highway freight system (single-mode and intermodal). Finally, the technological scope of the partnership encompasses state-of-the-art freight vehicle technologies, communications equipment (stand-alone or imbedded), sensing and control devices, and information systems. THE FEDERAL ROLEMarket imperfections have historically warranted government intervention. The need to provide for the public good, correct for externalities, and make provisions for market failures and attainment of economies of scale provide the impetus for a strong Federal role in freight transportation infrastructure: Border gateways are a public good. They are critical to national security objectives while providing a key link in the global supply chain. The physical and communications infrastructure surrounding the nation’s land-border facilities have many of the attributes of a public good, even though their use may not always be "non-rival" and "non-excludable." Conventional market pricing mechanisms are inapplicable for meeting the infrastructure needs at borders. Access to the gateways should be available to the international trading partners regardless of their ability to pay. For national security purposes, as well, international traffic flows through the gateways are to be controlled. Private markets are unable to meet either criterion for providing transportation infrastructure at borders. The magnitude of investment required for the construction of major freight terminals often precludes a single private entity accepting investment responsibility. Funding large-scale freight projects is beyond the scope of most private firms. The high startup costs also create pricing problems that lead to the exclusion of many facility users. Furthermore, the "lumpiness" of many such projects preclude dividing them into smaller units to place them within the range of a private firm’s budget and demand curve. Multi-jurisdictional freight facilities involve significant externalities. If the funding decision is left solely to the private or local-level discretion, there is a risk of the loss of positive spillover benefits resulting from the foregone investment opportunities, or a risk of generating significant negative externalities. Federal leadership is needed to promote national goals. National security, transportation safety, environmental externalities, and economic impacts of major transportation facilities are of such great importance that they cannot be left solely to private or local markets. Locally optimal solutions might undermine nation’s global objectives. The local control of these facilities might promote the short-term market objectives of some individual firms or local stakeholders, but the long-term impacts at the regional or nationwide levels are likely to be sub-optimal. The strategy for promoting a technology-intensive freight infrastructure investment program contains the following elements: Technology Development The Federal role in technology development—encompassing basic research, product and procedures development, studies, field tests, effectiveness evaluation, and the development of system architecture and standards–is critical because R&D for new technologies has attributes of a public good, generates positive externalities, and is benefits from economies of scale. Investment in new freight technologies and R&D generates a higher than average rate of return in all sectors of the economy. Private rates of return from R&D investment have been estimated to vary from 20 to 30 percent, compared to the rate of return of approximately 10 percent for the business sector as a whole. Social rates of return, that is, the "spillover benefits" that fall outside the tangible expenditures on plant and equipment, are estimated to range from 20 percent to 100 percent of the investments, (with an all-industry average of 50 percent.) Robert Solow’s pioneering work on national output growth shows that in the period between 1909 and 1949, almost 90 percent of the doubled per capita output in the non-farm sector in the US was attributable to technological advances; and the remaining 10 percent to the increased capital-labor ratio. In the 1948-1969 period, new machinery or improved labor productivity accounted for only half of the growth rate in the Post-War US economy. The remaining half of the growth is attributable to productivity gains from the spillover benefits of improved industrial organization and advances in technology (i.e., the knowledge derived from new methods of production and plant management.)4 Technology Development as a Border Gateway Strategic Element Freight applications lie in a gray area between R&D and a market-based product development and commercialization strategy. The Border Gateway Pnitiative will support applications of proven technologies that augment existing public and private investments in physical freight infrastructure. These technologies provide the opportunity to correct a number of market failures including network congestion and capacity shortages at the nation’s land-border facilities. TECHNOLOGY DEPLOYMENTTechnology deployment provides the link between new technologies and industry application. The rationale for a strong role in deployment is the desire to capture the positive externalities present in transportation technologies. Deployment efforts consist of the direct application of the existing technologies or arrangements for grants to states, localities, and private entities for planning, showcasing, and integration of new applications. Without deployment, a new technology has no application, and little economic significance. The innovation process is complete only when the technology has been applied and adopted. Given that innovation is a high-risk venture, the Federal government is in a position to foster a socially optimal rate of R&D investment. An estimated five out of every ten products that emerge from R&D fail in product and market tests, and of the five that pass the marketability tests only two become commercial successes.5 When it comes to technology applications, markets are not in fact highly efficient agents of innovation and technology diffusion6. Private firms tend to under-invest in R&D for several reasons. Private firms are unable to internalize the significant returns that would accrue to non-stockholders, including their competitors. In addition there is a high level of risk. In the private markets, the decision to innovate is a function of the level of risk and the expected rate of return from introducing the new product or the process. Existing capital markets behave in a risk-averse manner, have a tendency to follow the market trends rather than lead, have short planning horizon and above-average discount rates, and fail to include external benefits when making investment decisions. As one economist has pointed out: "private capital markets are good at building behind the market, but not ahead of the market."7 Federal technology transfer programs have historically been effective in accelerating the rate of innovation adoption. Technology Deployment as a Border Gateway Strategic Element The Border Gateway partnership will effectively promote diffusion of advanced freight technologies by identifying and supporting cost-shared collaborative technology application and investment efforts for building and deploying large-scale improvement programs that enhance the efficiency of the private sector logistics, and bolster the nation’s trade competitiveness. This allows a true leveraging of the investment opportunities, since there is alignment of goals through shared-knowledge and open access to the commonly available resources, and not just through formula-based cost-sharing. TECHNOLOGY DELIVERYThe Federal role in program delivery where no direct provision of goods and services is applicable is limited to the development of procedures and support tools, and the delivery of training programs. Such mainstreaming activities are critical to raising the levels of skill and awareness about ITS services and technologies and helping state and local entities incorporate user service in normal deployment planning and programming processes. Technology Delivery as a Border Gateway Strategic Element The partnership will promote a technology-intensive border freight infrastructure through efforts to identify the areas where standard protocols and procedures need to be developed, and remove institutional barriers to efficient border freight processing and multi-agency facility investment. The partnership will also promote corridor-level planning, shared databases, and collaborative international investments. |
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