North America Super Corridor Coalition 2009 NASCO Conference Report NASCO Conference Report June 2009 Important Notes and Disclaimer Summaries of the speakers presentations contained in this report reflect the consensus of all speakers who presented on a related topic. Presentation material was not made available in print or electronically to participants. Where diagrams or images best described the presentation content, alternative information sources where located and provided for this report. The Consultants have prepared this report using best available information and provide this information in good faith with the intended goals as stipulated. The Consultants do not accept any responsibility for any decisions taken directly or indirectly, in whole or in part, based on information contained in the report. Users of the information are advised to verify all data, charts and analyses for themselves before proceeding with any course of action that appears merited by this report. NASCO Conference Report June 2009 North America’s Super Corridor Coalition (NASCO) North America’s Super Corridor Coalition (NASCO) is an organization dedicated to increasing economic development activity by supporting initiatives aimed at improving multimodal infrastructures, technology and security innovations. NASCO’s mission is to stimulate dialogue between the public and private sectors about critical corridor-wide trade and transportation challenges. The NASCO corridor encompasses multimodal transportation infrastructure on or in close proximity to U.S. Interstate Highways 35, 29 and 94, and the significant connectors to those highways in Canada and Mexico. NASCO was created 13 years ago along when several other Corridor organizations were also formed. The initial purpose of the organization was to lobby for infrastructure along the corridor. Today the organization offers a broader spectrum of activities from promotion of free trade, to research into educational needs for their industry partners. The organization produces regular updates and newsletters for their membership. Through interaction and exchanging of information and problems, concerns, experiences and relationships, NASCO and its members are able to drive projects forward that the private sector and public sector players find difficult to achieve on their own. NASCO has a thirteen-year track record of successful advances in policies, projects and accomplishments. NASCO members include cities, counties, states, provinces and private sector representatives located along the corridor and its branch networks throughout Canada, the United States, and Mexico. The effectiveness of cargo movements along the NASCO Corridor directly impacts North America’s continental trade flow, the largest in the world: • Total commerce of the three NAFTA nations is approximately $1 trillion a year. • More than $190 billion a year moves between the NASCO Corridor States, Canada and Mexico. • In 2006, the U.S. transportation system carried goods for export worth $364 billion and imports worth $502 billion in trade with Canada and Mexico. • Between 1996 and 2006, U.S. merchandise freight with our NAFTA partners more than doubled in value, increasing from $419 billion to $866 billion. More information on NASCO can be found at www.nascocorridor.com. NASCO Conference Quebec 2009 “Even if you're on the right track, you'll get run over if you just sit there.” – Will Rogers Under the theme “Moving Moving North America Forward” the annual NASCO conference hosted representatives from all three countries and built upon the work that has already been accomplished at previous conferences in Monterrey, Nuevo Leon (Mexico), Winnipeg, Manitoba (Canada), Forth Worth, Texas (United States), and Guanajuato City, Guanajuato (Mexico). All conference material was available in Spanish, English and French with simultaneous translation services. Fifteen years after the creation of the North American Free Trade Agreement the conference presentations and information formed around four main themes: 1. The Economic Climate and Outlooks in Three Nations 2. Highlights of Logistical, Regulatory and Political Issues Threatening NAFTA 3. Forecasting Future Infrastructure Needs 4. NASCO/NAFTA Related Private and Public Developments A parallel meeting was hosted by Jean Charest for the Governors of Mexican and US States and Provincial Premiers. The Prime Minister of Canada attended a private dinner with the visiting representatives who included, the next Chair of the US National Governors Association. He pressed for and received agreement that the three countries should negotiate a new chapter to the Free Trade Agreement to include government procurement policies. During meetings with Charest, the State and Provincial representatives agreed to lobby their senior governments for a Pan-American solution to climate change, that existing NAFTA agreements had to be respected. Unfortunately, the Premier or Ministers from Ontario did not attend the meetings. The Prime Minister held a dinner with the elected representatives attending. Media reports afterward stated that he was also in agreement with the Governors and Premiers. Business matching meeting were held, by appointment, on two days of the conference. Summary of Speakers Comments: I. The Economic Climate and Outlook in Three Nations there.”— “If you don't know where you are going, any road will get you there.”—Lewis Carroll By all measures of success: employment; exports and imports; investment; productivity gains and economic growth NAFTA was deemed a success. However, the consensus was that NAFTA was not a destination but a stepping stone in creating a common economic zone while maintaining sovereign political entities. During the last political season in the US, NAFTA became the whipping boy for not the impacts of Asian trade and not North American trade. No serious economist would suggest pulling out of the existing agreement. Speakers recalled the issues arising when attempting to approve the first Canada/ US agreement. It was noted that even in relatively good times, free trade agreements take a lot of work to develop. After nearly two decades of sustained economic growth, the Canadian, U.S. and Mexican economy has moved deeply into recession. In the US both consumer spending and investment has fallen. The inventory of unsold homes has shrunk, however 10% of all properties are still in default and 1/3 of all properties are still “under water”, meaning that their value is less than the debt held associated with them. The unemployment rate will reach 10% in the US before the economy turns around. With current government spending and consumer debt issues it is unlikely that the American economy will be robust in any near term analysis. When the U.S. emerges, in early 2010, from the recession, with very small limited growth, it is likely the beginning of a period where governments will have to increase taxes and consumers will need to change their savings habits. It will be difficult for the world to replace the Americans as consumers they make up 15% of the worlds buyers and by 2007 had negative savings to spending ratios. This compares poorly to the Chinese who save 40% of their income. The Canadian economy is expected to move into a slow and tepid recovery by late summer and unemployment will peak at 9.5%. Employment growth in Canada similar to the US and Mexico will lag behind economic growth. Interest rates are now at the lowest they have been since the Bank of England was formed in 1694. Canadian interest rates will remain at or near 0% for the remainder of the year and then rise quickly. The Canadian dollars worth is now very closely tied to the price for oil. The Conference Board believes that going forward $70 will be the new bottom price per barrel and by 2011 we will likely normally see $100 barrels. Mexico’s economy has evolved dramatically in the past twenty five years and can now be declared a full democracy with a well managed economy. The recession has caused a 20% drop in exports and damaged their economic performance. They will recover slowly, with positive figures expected by 2010. NASCO Conference Report June 2009 Economic Recovery Plans: Canada The Canadian plan consists of five main elements; Stimulate Household Spending, Increasing Housing Construction, Infrastructure Investments, Support for Businesses and Communities and Improve Access to Financing: Economic recovery measures include: • $8.3 billion for training/retraining funds • $7.5 billion in extra support for sectors in needs such as • $12 billion in new infrastructure stimulus automotive, forestry and manufacturing, and communities • $20 billion in income tax reductions • $200 billion to improve access to financing for Canadian • $7.8 billion for housing, stimulate construction, home consumers, households and businesses ownership and energy efficiency • $12 billion in new infrastructure stimulus funding Full information on the Canadian plan is at http://www.actionplan.gc.ca/eng/feature.asp?pageId=125 United States The current US budget of $3.6 trillion is the largest transfer of wealth from the government to the economy since World War 2. The Troubled Asset Relief Program (TARP) is a program of the United States government to purchase assets and equity from financial institutions represents $787 billion in spending and the stimulus package totals $878 billon. To date 2163 transportation projects have been approved, representing 25% of the available funds. Speed has been the critical factor in negotiating approvals and not any long term vision. Some money has been allocated through formula to each state. If states do not use their funds then the monies will be reallocated to other projects. Full details on the US program are available at: http://www.recovery.gov. Mexico The total Mexican budget was $300 billion; the additional stimulus added an additional $54 billion. This will create a fiscal deficit of about two percent. Economic recovery measures include: • Freezing gas prices and lowering natural gas prices by 10% • Increasing medical/maternity coverage from two to six $42 billion infrastructure program months • $12 billion in infrastructure stimulus • $163 million to help the unemployed or underemployed, • $193 million to improve Social Security • $55 million to pay 50 % of replacement for old appliances • The federal government will make at least 20 percent of its purchases from small- and medium-size companies • $372 million fund to start a "Made in Mexico" program for businesses to sell supplies to the petroleum industry NASCO Conference Report June 2009 Summary of Speakers Comments: II. II. Highlights of Logistical, Regulatory and Political Issues threatening NAFTA problems “Complex problems have simple, easy to understand, wrong answers.” Henry Louis Mencken The major threats to NAFTA’s effectiveness are: i. Border Management Policy ii. Regulatory Policy iii. Environmental Policy iv. Infrastructure i. Border Management Policy For generations Canada and the United States shared a border that was considered a political not a practical border. Reacting to 9/11, the US and Canada, the U.S. and Mexico signed Smart Border Accords. These agreements covered four areas; Common Risk Assessment; Information Technology Sharing; Security Information Sharing and Resource Allocations to Securing Borders. The Accords allowed threats at each border to be handled separately. Security implementation features do not have to be equal at both borders both borders. The accord allows the countries to take different security measures, but both borders have political parity. In 2005, all three countries agreed to a Security Prosperity Partnership which spawned a myriad of government officials from security to tourism who worked with minimal input from the private sector creating recommendation. The results of this organization are listed at http://www.spp.gov. Speakers were critical of the effectiveness of this organization and the accomplishments may be events that may have occurred without or regardless the involvement of the Security Prosperity Partnership. ii Regulatory Policy The speakers emphasised the economic disadvantage that North America has compared to the regulatory environment of the European Union. Without common transporation rules, permitting and a streamlined customs policy, our NAFTA advantages are minimized. Examples were given of the numerous permits that would be required from states, cities and provinces to move a single load from Guadalajara, Mexico to Vancouver, Canada and the relative simplicity to bring goods to port from China. Antiquated cabotage rules slow growth and inhibit rail movement Speakers expressed concern about regulations promoting protectionism masquerading as food safety precautions. NASCO Conference Report June 2009 Summary of Speakers Comments: 2. Highlights of Logistical, Regulatory and Political Issues threatening NAFTA cont... iii Environmental Policy Speakers and leaders agreed that North America must develop common environmental regulations and most importantly develop a single solution to CO2 emission. Both the NASCO and other Gateways organizations are practically positioning themselves as environmental solutions by consolidating traffic into corridors and ordering freight traffic in an efficient manner. iv Infrastructure The U.S. transport system will impede manufacturing and distribution growth with the next decade. Current spending on infrastructure and the recession have pushed back growth pressures, but a crisis is still pending. More detailed information is listed later in this report. Canadian Trade by Region 2006 Source Transport Canada 2006 LENS 2: Volumes and Values of National Significance NASCO Conference Report June 2009 Summary of Speakers Comments: 3. Forecasting Future Infrastructure Needs raining “It pays to plan ahead. It wasn't raining when Noah built the ark.” Anonymous All modes of transportation are forecasting gridlock in the next 20 years; the conference highlighted these issues and outlined some plans to rebuild and expand corridors. While the economic slowdown and future forecasts of only 2% growth will alleviate some of the distress, the U.S. will still add a new population equal to Canada every decade for the next 30 years. They will live in urban settings and require goods and services. US Highway Network 2002 Congestion US Highways Projected 2035 Congestion Source: U.S. Department of Transportation, Federal Highway Administration, Office of Freight Management and Operations, Freight Analysis Framework Congestion is defined as a traffic condition where vehicle speeds are slowed into start and stopping conditions. NASCO Conference Report June 2009 Rail America’s freight rail system carries 14 percent of the nation’s freight by tonnage, 29 percent of ton miles, and 5 percent of the value. The rail market share is shrinking because of the need for smaller faster deliveries. The economy is producing and shipping more value-added products and less heavy manufactured goods. Even with a shrinking share of the market congestion is predicted. It is nearly impossible to ship across the US and not ship through the Chicago hub. It currently takes 30 hours just to rail ship across the city of Chicago. 2001 Congestion US Rail Projected 2035 Congestion US Rail Source: U.S. Department of Transportation, Federal Highway Administration, Office of Freight Management and Operations, Freight Analysis Framework Water Ports experience space limitations as a result of increasing volumes of cargo. Growth is limited by factors such as environmental and community concerns. Most ports must institute operational improvements to increase capacity and reduce congestion. When ports can berth and unload a ship quickly, the increasing size of container ships is moving congestion from ports to access roads and railroads. The number of the world's container ships that are too large to fit through the Panama Canal is increasing dramatically. On inland waterways, lock operations and aging infrastructure cause continuous bottlenecks. In 2007, 31% of the 510,000 commercial vessel passages through federal and state locks experienced delay. Inland waterways are especially susceptible to weather, including problems caused by flooding, droughts, and ice or other storm-related disruptions. III. Positive Private and Public Developments when goals."- "Obstacles are those frightful things you see when you take your eyes off your goals."- Henry Ford Private Sector Success Stories: Industries Mailhot Founded in 1956 in Quebec, Mailhot Industries manufactures telescopic and industrial cylinders. The company has offices in Alberta, Ontario, Illinois and Mexico. They began as suppliers to the Mexican marketplace but when the Peso devalued in 1994 they made the choice to enter into a partnership with clients to salvage the clients business and protect their market. Bombardier Mexico With headquarters in Germany, Bombardier operates a new aerospace manufacturing plant in Querétaro Mexico they produce electrical harnesses and structural aircraft components. Bombardier Transportation's Mexican operations produce passenger rail vehicles. Grupo Barco Grupo Barco is a supply chain logistics company that began in 1917as a customs brokers. Today they operate from Mexican headquarters with offices in the U.S. and China. They specialize in handling perishable products that require quick movement in the North American marketplace and ship 40% of the scrap metal out of North America destine for China. Trinity Industries Headquartered in Dallas, is a multi-industry company that owns a variety of products and services in the industrial, energy, transportation and construction sectors. They make the wind towers that move through the Fort Frances Border and are stored for distribution in Alberton Township. Ryder Mexico Ryder expanded into Mexico in 1994. Ryder manages more than 4,000 border crossings every week between Mexico and the US, 600 trucks and 100 trucks under contract. They have two rail switching operations and offer integrated logistics and warehousing services. CN Network Strategies CN worldwide now own and operates rail, shipping and trucking companies The company has embarked in a major expansion over the last decade recently they have opened a new port in Prince Rupert. Public Improvements Chicago Chicago is the meeting point for North America’s rail lines, the convergence of 6 of 7 of the continents major trade interstate highways, the home of the busiest airport in the world and the 3rd busiest multi modal hub. It is also slow and congested. A partnership called CREATES between U.S. DOT, the State of Illinois, City of Chicago, Metra, Amtrak, and the nation's freight railroads were created to find and implement solutions. The organization has decided on a series of both private and public projects and is working through the challenges to” put the go back into Chicago.” Windsor Detroit Gateway A state-of-the-art parkway is being built in Windsor to Detroit. The Parkway will be built below grade creating sound barriers for residents and a greenbelt. This will create a habitat for wildlife (deer are pictured on the slides) and 20km of trails. It will be the most expensive road project in Ontario history. Construction is hoped to begin in late 2010. The Ontario Deputy Minister of the Ministry of Transportation told the audience that the Windsor crossing was “The only non freeway to freeway border connection in Ontario.” Port of Montreal The Port of Montreal has experienced steady growth since 2001 Montreal is also one of the busiest inland ports in the world and a key transfer point for transatlantic cargo. The Port of Montreal handles more than 20 million tonnes of cargo. The Ports weakness being constrained caused it to use a hub and spoke model which is becoming common in the industry. CentrePort Winnipeg Inland port corporation CentrePort located at or around the Winnipeg airport 20,000 acres with of industrial land, an Intermodal transportation system connected to all modes of air, roads, rail and sea. It was built with municipal, provincial and federal funds. The governments of Manitoba or Winnipeg are offering non-specific “incentives” for developing. Gateways In addition to NASCO several other “gateway” organizations exist. These associations include: The Quebec-New England Corridor; 1-95 Corridor Coalition; Ontario –Quebec Continental Gateway/Trade Corridor and the Cascadia Corridor. Each organization is funded differently and all have been planning for expansion.