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Freight Rail and Global Trade

Freight Rail and Global Trade

Freight Rail and Global Trade

Date: 2/22/2018

In today’s interconnected world, putting “America First” means embracing global trade.

The data are clear: Trade supports 40 million quality American jobs. One in four U.S. manufacturing jobs depends on exporting goods. And trade is now equivalent to roughly 27% of the nation’s GDP.

American consumers have benefited with access to cheaper goods, too.

Perhaps nothing exemplifies the benefits that come from trade as much as the free flow of goods between the U.S. and Mexico. Today, bilateral trade between the two nations exceeds $500 billion a year.

Like much global trade, the relationship is complex. Of all the goods imported to the U.S. from Mexico, around 40% of their value actually comes from parts and other components originally made in the U.S. To take just one example, American-made parts are exported to Mexico and used in the assembly of new cars and trucks. These vehicles are then sent back to the U.S. where they are sold — a win-win for businesses on both sides of the border.

The benefits of trade aren’t limited to just manufacturers, however. Aided by a familiar ally — freight rail — communities like Santa Teresa, New Mexico, are realizing new jobs, too.

In 2014, Union Pacific Railroad completed the construction of a $400 million terminal in this small town near the Mexico border. The railroad’s first delivery? Jobs. About 3,000 workers built the massive new facility, and today, 600 permanent jobs remain a windfall for this town of 4,200. Nearly a dozen new businesses have sprung up near the terminal too — from Penny’s Diner serving hungry rail workers, to ERO Intermodal Services, which maintains and repairs truck chassis and containers. State officials estimate that the Santa Teresa rail terminal has added nearly $500 million to the New Mexico economy since the terminal opened.

“Private rail investment was a critical and vital selling point for many businesses.” Jon Barela,

“It signaled to the world that Santa Teresa was a strategic place to do business with the potential to be a vital part of the border and cross-border trade,” says Jon Barela, former economic development secretary of New Mexico.

Stories like Santa Teresa’s can be found in communities across the country that are thriving because freight rail enables global trade. Since 1980, North American railroads have spent more than $660 billion on building a modern, safe, and cost-effective freight rail network, and today, that network carries approximately one third of all U.S. exports (measured by volume). More than 35% of rail revenue is directly associated with international trade and about 50,000 rail jobs — worth over $5.5 billion in annual wages and benefits — depend directly on international trade, according to new research from the Association of American Railroads.

“The freight railroads’ extensive and improved network enables connectivity between buyers and sellers and facilitates trade both within the U.S. and between the United States and other countries,” says Clifford Winston, a senior fellow at The Brookings Institution in Washington, D.C., and an expert in transportation economics.

In 2014 alone, railroads carried 511 million tons of freight associated with international trade, including 329 million tons of exports. On board these trains were American-mined coal, American-made plastics and American-grown corn, all headed to U.S. ports and border crossings and onwards to foreign markets.

To see this supply chain at work, look to Miami, Florida, where freight rail has helped transform the city’s port, PortMiami, into a global gateway for trade. In recent years, Florida East Coast Railway has installed three 3,000-feet rail tracks directly onto the port’s docks. This investment allows the port to handle 225,000 intermodal containers per year and swiftly and seamlessly move goods across the country and around the world. In fact, thanks to the integrated freight rail network, the goods arriving at PortMiami are able to reach nearly 70% of the U.S. population within four days.

Putting up barriers to trade risks upending the U.S. economy and this carefully calibrated supply chain. While simultaneously working to address the negative impacts of trade, Washington can achieve its goal of putting America first by supporting open and free-flowing trade.