American policymakers should tread carefully in their quest to reverse the negative effects of globalization.
As Congress and the Trump administration turn their attention to international trade, they should narrowly target assistance for U.S. workers harmed by trade agreements rather than promoting policies that would unwittingly roll back U.S. participation in international trade.
The law of unintended consequences is very much at play here. Over-zealous action could damage the freight-railroad industry, a core part of the economy that is essential to many other U.S. businesses, all of which could themselves be damaged by a weakened freight-rail network.
International trade plays a massive and growing role in the U.S. economy. American exports and imports combined are equivalent to around 27 percent of GDP, up from around 17 percent 30 years ago. But forAmerica’s freight railroads, international trade plays an even greater role.
A new assessment of the impact of trade on freight railroads shows that at least 42 percent of rail carloads and intermodal units, and more than 35 percent of annual rail revenue, are directly associated with international trade. If freight hauled by railroads indirectly associated with trade were included, the figures would be notably higher.
International trade accounted for $26.4 billion of freight-rail revenue and 511 million tons of rail traffic in 2014, according to a new analysis by the Association of American Railroads. During the same period of time, approximately 50,000 rail jobs, worth over $5.5 billion in annual wages and benefits, depended directly on international trade, the analysis showed.These are jobs that would be threatened all over the country by any drastic protectionist policy changes, because rail movements associated with international trade include virtually every type of commodity railroads carry and involve every region.
They include, for example, coal for export from ports in Maryland, Virginia, the Gulf Coast, and the Great Lakes. They include paper and forest products imported from Canada into the Midwest, as well as paper products exported from the Southern U.S. They include imports and exports of Canadian and Mexican automotive products to and from auto factories in dozens of U.S. states, reflecting the deep integration of the North American auto industry. They include containers of consumer goods from Asia coming ashore in Los Angeles, Long Beach, Oakland, Tacoma, Savannah, Norfolk, Newark, and many other ports. They include plastics shipped by rail from Texas and Louisiana to the East and West Coasts for export to Europe and Asia. They include iron ore mined in Minnesota and shipped by rail to Great Lakes ports, and grain grown in the Midwest and carried by rail to the Pacific Northwest and the Gulf Coast for export to Asia. They also include construction and farm machinery manufactured in the Midwest and exported from both the East and West coasts.
The freight-rail industry, in other words, touches every corner of our vast economy.
Many countries have rail networks in active decay, but the U.S. freight-railroad system is both a global and domestic powerhouse. According to research from Towson University’s Regional Economic Studies Institute, in 2014 alone U.S. railroads supported approximately 1.5 million jobs, $274 billion in goods or services produced, $88 billion in wages, and $33 billion in tax revenues. These huge economic benefits will be put at risk if trade is curtailed.
Treasury Secretary Steve Mnuchin recently stated that, “We believe in free trade, we are in one of the largest markets in the world, we are one of the largest trading partners in the world, trade has been good for us, it has been good for other people.”
America’s freight railroads could not agree more.
— Edward R. Hamberger is president and CEO of the Association of American Railroads.
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