Report: Trade accounts for 35% of the rail industry's revenue

Dive Brief:

  • With roughly 50,000 U.S. rail jobs worth over $5.5 billion in wages depending directly on international trade, the rail industry has a large stake in future trade policy, according to a recent assessment by the Association of American Railroads (AAR). 
  • The AAR reports international trade accounts for 35% of the industry's annual revenue (over $274 billion by Class I rail in 2014) and 42% of railcar loads and intermodal units. Much of that transport is directly linked to both imports from and exports to Canada, Mexico and Asia.
  • As a result, the AAR said it supports assistance for U.S. workers affected by trade, but opposes "unraveling policies that would lessen U.S. competitiveness, productivity and participation in international trade."

Dive Insight:

"The chain is integrated, which largely requires a free flow of goods," the AAR says in its trade policy page. "Undo any part of it — including rail — and policymakers risk undoing today's economic framework and greatly affecting American life as it is experienced today."

From trucking to air transport, the transportation industry's success is deeply tied to the amount of international trade, notwithstanding deficits. In general, free trade yields lower barriers to entry and new markets, which leads to a generally higher supply (and demand) of products. To carriers, it hardly matters whether goods are imported or exported: an increase in volume means an increased need for transport, and therefore revenue. It should not be surprising that rail, despite its visibly domestic presence, is heavily linked to foreign trade.

For that reason, the rail industry appears poised to continue investing heavily on its own infrastructure in expectation of greater global production.

In one example, U.S. railroads are seeking greater intermodal connections to spur growth. In 2016, BNSF shared its belief that opportunities abound to build domestic volume through intermodal transport. According to BNSF, 8 million or more truckloads could convert from highway to rail, particularly those issuing from the west coast.

To prepare, the industry has already pledged to privately invest $22 billion this year to improve tracks, locomotives and technology. Among U.S. industries, freight railroads make six times more capital expenditures than the average manufacturer.

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Filed Under: Freight
Top image credit: Ron Reiring