The Development Of Intermodal Transportation Economics Essay

A major factor underlying this transformation of freight transport is represented by the changes in the scale, in the composition, and in the structure of the American and global economies. The demand for transportation services has grown in response to the generally brisk performance of the US and global economies in this period. The US economy is becoming dominantly services-oriented, and shifting from mass manufacturing to high value-added custom manufacturing. The resulting combination of increasing information content and decreasing material intensity of goods changes the character and value of goods being moved. Further, the US and other Organisation for Economic Co-operation and Development (OECD) countries, in search of lower overall factor costs, have created global and regional free trade regimes, and globally organized production systems and value chains, which require speedy and timely movements of goods. These flows of goods are coordinated across national and global transport nodes and links in order to support the smooth functioning of the globalized economy. Technological changes in the transport sector in the US have arrived in the form of the Interstate Highway System, the jet aircraft, the container and container ships, roll-on/roll-off vessels, and a variety of micro infrastructure to facilitate operations at seaports and airports. The use of information technology (IT) greatly enhances transport operator and system efficiency, offering not only speedier goods transport at declining costs but also the ability to ‘integrate’ goods supply chains regionally and globally, while maintaining lean inventories. The third factor underlying the major changes in the freight system is the institutional and organizational restructuring of the transport system since the 1980s. Public policies to reform economic institutions by deregulating and privatizing the transport sector have stimulated technical innovations and enhanced productivity in that sector – in the process lowering costs and improving speed and reliability. At the same time, two organizational innovations – business logistical systems and intermodalism – provide major sources of change in the freight sector.

Intermodalism is desirable since inefficiencies in the freight sector impact upon the competitiveness of US firms in the transport and transport-using sectors. Intermodalism seeks to enhance the performance of the transportation system by increasing safety, reducing congestion and decreasing delays, thereby enabling more efficient freight and passenger trips (Hickling 1995). Greater efficiency translates into lower costs and an increase in the competitiveness of US firms in the global marketplace. The Intermodal Surface Transportation Act (ISTEA) emphasizes the importance of intermodalism and challenged the transportation authorities, at the federal, state and local levels in the US, to increase interconnectivity between the maritime, air and land transport modes, and thereby enhances the effectiveness of the total network.

It is widely recognized in the US, in both industry and policy circles, that cooperation between transport modes has the potential to reduce congestion, especially in major freight corridors. While congestion problems result from a variety of factors, the concentration of production and trade in a relatively small number of metropolitan gateway cities, the increased dominance of a few ports, and the intermodal competition for the same freight, adds to the congestion. The traditional attitude toward infrastructure investment, namely building one’s way out of congestion, has not been helpful since

Transport integration across modes faces additional complex problems arising from institutional and regulatory choices made at several levels of the government, that is, federal, state and local. These choices, legacies of the past, currently impact upon the costs and the quality of service of freight movement, aspects particularly important during the current phase of increasing globalization. A more complete definition of intermodalism needs to incorporate the physical, institutional and informational elements that facilitate cargo shipments in a ‘seamless’ manner across different modes. Thus, intermodalism can be more accurately defined as movement of cargo across a transportation network in which the physical, institutional and information infrastructures are integrated to reduce transaction costs and maximize operational efficiencies. Since seamless transport across modes is a major objective, this chapter discusses some of the obstacles to and many of the advances made towards furthering intermodalism in freight transport in the US.

The major factor underlying the increasing demand for intermodalism is the globalization of the American economy. North America, Europe and other countries have built on the Bretton Woods system, the General Agreement on Tariffs and Trade (GATT) and the World Trade Organization (WTO) to create a global free trade regime, including regional Preferential Trading Areas such as the North American Free Trade Agreement (NAFTA), the EU and Mercosur. The industrialized countries, driven by the pressure to reduce overall factor costs in the competitive global economy, are using these open trading regimes to erect a globally distributed production system. There is increasing division of labour in the production processes as component activities are further disaggregated and spatially reallocated. This partition of the production process – the slicing of the ‘production value chain’ – across national borders leads to different stages of production being carried out across several countries.

The deregulation of the US transport sector since 1978- 80 has not only improved the performance of the various modes, but has also stimulated intermodalism. First, major changes occurred in the US in the conduct, performance and structure of airlines, trucking and railroads after deregulation: more competition among all modal carriers, lower prices, a wider set of service offerings, and new entry into most geographic and product markets. Carriers have been able to rationalize their networks, improve the efficiency of their operations, and set rates in line with competitive market conditions. There was a significant change in the cost structure of the railroad industry following deregulation, with productivity growing at well over 2 per cent a year (Bereskin 1996).