Transport Modes Must Adapt Operations As Trade Patterns Evolve, Executives Say

By Neil Abt, News Editor

WASHINGTON — Trade among emerging countriesin Asia and South America will surge in the coming decades, and that willrequire changes in the way different transport modes operate, analysts andindustry officials said.

“By 2050, 70% of world trade will be driven bydeveloping countries, and only 30% by advanced countries,” said Uri Dadush,senior associate at Carnegie Endowment and director of its internationaleconomics program.

That is the exact opposite of current trade patterns,Dadush said at a discussion focused on the challenges of growing globaltransport demand here on Jan. 23 at the Transportation Research Board’s annualmeeting.

The developing countries ex-pected to experience the largest tradegrowth between now and 2050 are India, Brazil, Mexico and Russia, Dadush said. 

He noted that in 2006, the United States was the top trading partner ofevery major nation except for Russia. By 2050, however, China is expected to bethe predominant trading partner of all of these same nations.

That includesthe trade of individual European nations with other neighboring countries. Inaddition, Dadush projected Japan’s annual trade volumes with China will be fourtimes larger than with the United States by the middle of the century.

Atthe same time, Dadush warned, significant geopolitical events and financialcrises in developing nations could have long-term effects on trade growthpatterns.

That point was underscored by Brad Julian, a longtime maritimeexecutive and now principal of Julian Associates LLC.

“We are intertwinedthrough globalization,” he said. “The impact on global trade was very evidentfrom the financial crisis and the tremendous growth in the container sector thatfollowed” as the recession eased.

Julian attributed a spike in demand in 2010to pent-up consumer demand, as well as inventory restocking by businesses. However, that blip has been followed by another slump, as evident in fallingfreight rates throughout 2011, especially on Asian routes, he said.

Anothermajor factor pushing rates lower is overcapacity created by larger ships beingput into service. These vessels, often carrying at least 18,000 20-footequivalent units, are expected in the coming years to be filled as demand risesand the expansion of the Panama Canal is completed. 

For now, ocean shippersare taking steps including slowing speeds — which provides economic andenvironmental benefits — and focusing on lanes and sailing schedules to maximizeefficiencies.

Freight railroads are also keeping a close eye on potentialshifts in North American trading lanes sparked by the Panama Canal expansion,said John Gray, vice president of policy and economics at the Association ofAmerican Railroads.

He said railroads are being cautious not to overinvestin new infrastructure, but they are expecting changes such as need for moreshorthaul rail moves on the East Coast at the expense of longer intermodal movesof freight arriving into the United States from West Coast ports.

Likewise,they are expecting the return of more manufacturing to North America fromoverseas, which will boost exports, Gray said. But they are less certain whichregions of the continent may benefit the most and what effect on rail demandthat could have.

Unlike the maritime sector’s move toward larger ships,Charles Schlumberger, lead transportation specialist at the World Bank, said theaviation industry, as a whole, is moving toward small aircraft to protectagainst fuel spikes.

“Jet fuel costs remain a giant issue for all airlines,”he said, adding that as much as 40% of a carrier’s costs are fuel, far abovelabor expenses.

As he predicted that the air cargo sector should grow at morethan a 5% annual clip between 2010 and 2030, he added that “the demand for aircargo will remain very volatile,” based on economic conditions.

“Aviationwill continue to grow faster than the world economy,” he said.

Looking at airfreight, he projected “massive growth” in Asia, complemented by strong gains inSouth America and Africa. The United States and European Union will see onlymoderate growth, Schlumberger projected.