Impact of North American Free Trade Agreement (NAFTA) on Washington Highways. Part I: Commodity and Corridor Projections

Transcription

1 Impact of North American Free Trade Agreement (NAFTA) on Washington Highways Part I: Commodity and Corridor Projections EWITS Research Report Number 14 January 1997 by Ken Eriksen, Transportation Economist Washington State University Department of Agricultural Economics in cooperation with Kenneth L. Casavant, EWITS Project Director Washington State University Department of Agricultural Economics 103 Hulbert Hall Pullman, WA (509)

2 EWITS Research Reports: Background and Purpose This report is the fourteenth in a series of reports prepared from the Eastern Washington Intermodal Transportation Study (EWITS). The reports prepared as a part of this study provide information on the multimodal network necessary for the efficient movement of both freight and people into the next century. EWITS is a six-year study funded jointly by the Federal government and the Washington State Department of Transportation as a part of the Intermodal Surface Transportation Efficiency Act of Dr. Ken Casavant of Washington State University is Director of the study. A state-level Steering Committee provides overall direction pertaining to the design and implementation of the project. The Steering Committee includes Jerry Lenzi, Chair, Regional Administrator (WSDOT, Eastern Region); Richard Larson (WSDOT, South Central Region); Don Senn (WSDOT, North Central Region); Charles Howard (WSDOT, Planning Manager), and Eric Berger, Executive Director, County Road Administration Board. Pat Patterson represents the Washington State Transportation Commission on the Steering Committee. An Advisory Committee with representation from a broad range of transportation interest groups also provides guidance to the study. The following are key goals and objectives for the Eastern Washington Intermodal Transportation Study: Facilitate existing regional and state-wide transportation planning efforts. Forecast future freight and passenger transportation service needs for eastern Washington. Identify gaps in eastern Washington s current transportation infrastructure. Pinpoint transportation system improvement options critical to economic competitiveness and mobility within eastern Washington. For additional information about the Eastern Washington Intermodal Transportation Study or this Research Report, please contact Ken Casavant at the following address: Ken Casavant, Project Director Department of Agricultural Economics Washington State University Pullman, WA (509)

3 DISCLAIMER The contents of this report reflect the views of the author, who is responsible for the facts and accuracy of the data presented herein. The contents do not necessarily reflect the official views or policies of the Washington State Department of Transportation or the Federal Highway Administration. This report does not constitute a standard, specification, or regulation. EWITS PREVIOUS REPORTS NOW AVAILABLE 1. Gillis, William R. and Kenneth L. Casavant. Linking Transportation System Improvements to New Business Development in Eastern Washington. EWITS Research Report Number 1. February Gillis, William R. and Kenneth L. Casavant. Lessons from Eastern Washington: State Route Mainstreets, Bypass Routes and Economic Development in Small Towns. EWITS Research Report Number 2. February Gillis, William R. and Kenneth L. Casavant. Washington State Freight Truck Origin and Destination Study: Methods, Procedures, and Data Dictionary. EWITS Research Report Number 3. December Gillis, William R. and Kenneth L. Casavant. Major Generators of Traffic on U.S. 395 North of Spokane: Including Freight Trucks and Passenger Vehicles Crossing the International Border. EWITS Research Report Number 4. January Newkirk, Jonathan, Ken Eriksen, and Kenneth L. Casavant. Transportation Characteristics of Wheat and Barley Shipments on Haul Roads To and From Elevators in Eastern Washington. EWITS Research Report Number 5. March Jessup, Eric and Kenneth L. Casavant. A Quantitative Estimate of Eastern Washington Annual Haul Road Needs for Wheat and Barley Movement. EWITS Research Report Number 6. March Gillis, William R., Emily Gruss Gillis, and Kenneth L. Casavant. Transportation Needs of Eastern Washington Fruit, Vegetable and Hay Industries. EWITS Research Report Number 7. March Casavant, Kenneth L. and William R. Gillis. Importance of U.S. 395 Corridor For Local and Regional Commerce in South Central Washington. EWITS Research Report Number 8. April 1995.

4 9. Gillis, William R., Eric L. Jessup, and Kenneth L. Casavant. Movement of Freight on Washington s Highways: A Statewide Origin and Destination Study. EWITS Report Number 9, November Chase, Robert A. and Kenneth L. Casavant. Eastern Washington Transport- Oriented Input-Output Study: Technical Report. EWITS Research Report Number 10. March Chase, Robert A. Kenneth L. Casavant. The Economic Contribution of Transport Industries to Eastern Washington. EWITS Report Number 11. April Lee, Nancy S. and Kenneth L. Casavant. Waterborne Commerce On the Columbia-Snake System. EWITS Report Number 12. October Alderson, Lynn C., Eric Jessup, and Kenneth L. Casavant. Transportation Characteristics and Needs of Forest Products Industries Using Eastern Washington Highways: Part 1: Economic Structure of the Industry. EWITS Research Report #13. November EWITS Previous Working Paper Series Now Available 1. Lee, Nancy and Ken Casavant. Grain Receipts at Columbia River Grain Terminals. EWITS Working Paper #1, March Lenzi, Jerry, Eric Jessup, and Ken Casavant. Prospective Estimates for Road Impacts in Eastern Washington from a Drawdown of the Lower Snake River. EWITS Working Paper #2, March Ellis, John, Eric Jessup, and Ken Casavant. Modeling Changes in Grain Transportation Flows in Response to Proposed Snake River Drawdowns: A Case Study for Eastern Washington. EWITS Working Paper #3, March, Painter, Kate and Ken Casavant. A Comparison of Canadian Versus all Truck Movements In Washington State With A Special Emphasis On Grain Truck Movements. EWITS Working Paper #4, March Jessup, Eric L. and John Ellis, and Kenneth L. Casavant. Estimating the Value of Rail Car Accessibility for Grain Shipments: A GIS Approach. EWITS Working Paper #5, April Painter, Kathleen M. and Kenneth L. Casavant. Truck Movement Characteristics on Selected Truck Routes in Washington State. EWITS Working Paper #6, August 1996.

5 Table of Contents Executive Summary... 1 Introduction... 5 North American Free Trade Agreement... 5 Objectives... 6 Study Procedure... 6 Census Data and Industry Interviews... 6 North American Trade and the Washington Transportation System Trade Structure Transportation System in Washington Highway Transportation Rail Transportation Marine Transportation North American Trade Corridors in Washington State Interstate 5 Corridor U.S. 97 Corridor U.S. 395 Corridor Interstate 90 Corridor Summary Commodity Analysis and Projections, by Corridor Baseline Commodity Profile Projection Data Base Commodity Projections Corridor Analysis Interstate 5 Corridor U.S. 97 Corridor U.S. 395 Corridor Interstate Industry Survey References

6 Table of Contents continued Appendix A The Free Trade Agreements Appendix B Eastern Washington Intermodal Transportation Origin and Destination Study Appendix C Appendix D Industry Group Response to Projections Fresh Vegetables Fresh Fruit Meat: Fresh, Chilled, and Frozen Canned and Preserved Fruits, Vegetables, and Seafoods Miscellaneous Food Lumber Converted Paper Products Industrial Inorganic Chemicals Agricultural Chemicals Implications List of Figures Figure 1 Data Management, Analysis, and Modeling Framework... 7 Figure 2 NAFTA Projections Procedure... 8 Figure 3 Ports of Entry Along the Washington-British Columbia Border Figure 4 Major Highway Corridors Supporting the Transportation of NAFTA Commodities on Washington Highways Figure B.1 Eastern Washington Intermodal Transportation Study Interview Sites

7 List of Tables Table 1 Table 2 Table 3 Table 4 Population, Gross Domestic Product, Exports, and Imports to the World and the NAFTA Region for Canada, Mexico, and the United States, U.S.-Canadian Cross-Border Commercial Traffic Volume for Washington- British Columbia Ports of Entry, Principal Southbound Commodities via Washington-British Columbia Crossings U.S.-Canada Marine Trade Movements Through Washington State Ports (metric tons), Table 5 NAFTA Shipments on Washington Highways, Table 6 Highway Miles, Surface Types and Function Classes for the Interstate 5 Corridor Table 7 NAFTA Movements in the Interstate 5 Corridor, Table 8 Highway Miles, Surface Types, and Function Classes for the U.S. 97 Corridor Table 9 NAFTA Movements in the U.S. 97 Corridor, Table 10 Highway Miles, Surface Types, and Function Class for the U.S. 395 Corridor Table 11 NAFTA Movements in the U.S. 395 Corridor, Table 12 Summary of NAFTA Movements on Washington Highways, Table 13 Table 14 Table 15 Table 16 Canadian Commodities That are Major Generators of Commodity Tonnage on Washington Highways, Canadian Commodities at the 3-digit SIC Level Chosen for Commodity Analysis, U.S.-Canadian Commodity Traffic Through Washington-British Columbia Ports of Entry, , by Percent Projected U.S. Commodity Exports to Canada on Washington Highways, (tons)

8 List of Tables continued Table 17 Table 18 Projected U.S. Commodity Imports from Canada on Washington Highways, (tons) Projections of U.S.-Canadian Traffic on Washington Highways, Percent Change in Volume to 2005, the Average Annual Percent Change and Total Volume in Table 19 Commodity by Movement Type, 1994 and Table 20 Projected U.S.-Canadian Commodity Flows on Washington Highways, (tons) Table 21 I-5 Corridor Commodity Tons, by Movement Type and Percent, for 1994 and 2005 Projections Table 22 Table 23 Table 24 Table 25 Table 26 Table 27 Commodity Movements by Percent of Tons and Movement Type, in the I-5 Corridor, Commodity Movement Projections, by Percent and Movement Type, I-5 Corridor, U.S. 97 Corridor Commodity Tons, by Movement Type and Percent, for 1994 and 2005 Projections Commodity Movements, by Percent of Tons and Movement Type, in the U.S. 97 Corridor, Commodity Movement Projections, by Percent and Movement Type, U.S. 97 Corridor, U.S. 395 Corridor Commodity Tons, by Movement Type and Percent, for 1994 and 2005 Projections Table 28 Commodity Movements, by Percent and Movement Type, U.S. 395 Corridor, Table 29 Commodity Movement Projections, by Percent and Movement Type, U.S. 395 Corridor, Table 30 I-90 Corridor Commodity Tons, by Movement Type and Percent, for 1994 and 2005 Projections Table 31 Commodity Movements, by Percent and Movement Type, I-90 Corridor,

9 List of Tables continued Table 32 Commodity Movement Projections, by Percent and Movement Type, I-90 Corridor, Table A.1 Table C.1 Table C.2 Table C.3 Table D.1 Comparison of Chapter Headings in the 1987 CUSTA and the 1992 NAFTA Treaties U.S.-Canadian Commodity Flows, at the 2-digit SIC Level on Washington Highways, U.S.-Canadian Commodity Flows, at the 3-digit SIC Level, on Washington Highways, U.S.-Canadian Commodity Trade, in Tons, Crossing Washington- British Columbia Ports of Entry, Industry Responses to NAFTA Commodity Trade Projections to

10 Executive Summary The North American Free Trade Agreement (NAFTA), implemented January 1, 1994, will remove barriers to trade throughout North America (the United States, Canada, and Mexico). In 1995, NAFTA trade exceeded $384.8 billion and U.S.-Canada trade made up more than 70 percent of that trade. Washington s transportation system provides critical trade access between the western U.S. and Canada. Under NAFTA, Washington s transportation system will become more important for North American trade, in particular trade between the U.S. and Canada. Greater than 53 percent of western U.S.-Canada trade used ports of entry along the Washington-British Columbia border in In Washington, 87.3 percent and 12.7 percent of the cross-border trade in 1992 crossed in western and eastern Washington, respectively. In 1994, U.S.- Canada commodity movements represented 28.3 percent of the 90.1 million tons of commodities on Washington highways million commodity tons valued at approximately $33.3 billion were transported in over 1.8 million truck trips. The overall purpose of this study was to analyze NAFTA impacts on Washington s transportation infrastructure and the need for sustaining investments to insure infrastructure to achieve the goals of free trade. Specific attention was given to NAFTA, in particular U.S.-Canada, commodity flows on Washington highways. The study objectives were: 1) to identify NAFTA trade corridors used in Washington, with emphasis on U.S.-Canada trade; 2) to identify commodity groups that were major generators of NAFTA trade in Washington; 3) to determine NAFTA s impacts on future commodity movements in and through Washington; 4) to determine impacted corridors and assess needed transportation investment to support NAFTA trade on Washington corridors; and 5) to assess implications that arise from changes in NAFTA trade for Washington corridors. The U.S. and Canada entered into the Canada-United States Free Trade Agreement (CUSTA) January 1, CUSTA s goals were to reduce and remove trade barriers, in particular, tariffs, by 1999, to increase trade between the U.S. and Canada. Precedence for the NAFTA was made possible by CUSTA. Once NAFTA was initiated on January 1, 1994, CUSTA was superseded by NAFTA. NAFTA expands the CUSTA to include Mexico and expands its objectives by adding protection for intellectual property rights, ensuring land transportation market access, increasing investment opportunities, and upholding environmental standards and agreements while promoting sustainable development. Washington s transportation system provides access to NAFTA trade on its highways and rails, and through its maritime facilities. In 1994, 25.8 million tons of NAFTA (U.S.- Canada) commodity trade used Washington highways; earlier in 1992, 3.3 million tons used rail and in 1993, 6.5 million tons went through Washington maritime facilities. 1

11 Three highway movement characteristics make up NAFTA commodity movements in Washington: trips destined for Washington with Canadian origins (imports); trips destined for Canada with Washington origins (exports); and Canadian movements that transit Washington where the movement either originates in Canada and has a destination outside Washington (southbound transit), or has a destination in Canada from an origin outside Washington (northbound transit). Transit movements occurred most frequently with 861,000 truck trips transporting 15.3 million tons, or 60.0 percent of the NAFTA commodities on Washington highways in Movements that originated in Washington (exports) and were destined for Canada totaled more than 6.4 million tons, or 25.1 percent, and conversely, movements destined for Washington (imports) with Canada origins were about 3.8 million tons or 14.9 percent. Three north-south trade corridors (Interstate 5, U.S. 97, and U.S. 395) and one eastwest corridor (Interstate 90) form the major highway infrastructure on which NAFTA trade was transported. In 1994, the Interstate 5 corridor (I-5) had 72.2 percent of the truck trips and 96.1 percent of the commodity tons. Transit movements in the I-5 corridor made up 63.4 percent of total movements, with origin movements at 24.1 percent and destination movements 12.5 percent. Twenty-nine commodities had origins in the corridor, with food and kindred products, general freight, chemicals and allied products, paper and allied products, and wood and lumber products making up 57.7 percent of those commodities. Twenty-three commodities had destinations to the corridor with wood and lumber products, food and kindred products, and chemicals and allied products making up 58.4 percent of those movements in In 1994, the U.S. 97 corridor had 16.7 percent of total truck trips and 2.3 percent of the commodity movements in Washington. Transit movements were 67.0 percent of the corridor movements, with corridor origins at 18.9 percent and destination movements 14.1 percent. Crops, food and kindred products, and lumber and wood products were 93.9 percent of the origin movements in the corridor. Chemical and allied products, lumber and wood products, livestock, and crops were 71.9 percent of the corridor destination movements. Commodity tons using the U.S. 395 corridor in 1994 made up 14.6 percent of total movements. Transit movements were 81.2 percent of corridor movements, origin 7.7 percent and destination 11.1 percent. Fifteen commodities had origin movements in the corridor with crops, stone, clay and glass products, and wood and lumber products making up 68.9 percent of the movements. Fourteen commodities had destination movements in the corridor with wood and lumber products, livestock, and chemicals and allied products making up 86.2 percent of the movements. Nine commodity groups out of 126 commodities made up 45.4 percent of the commodity movements on Washington s highway corridors. Those nine commodity groups: fresh vegetables; fruit; meat (fresh, chilled, and frozen); canned and preserved fruits, vegetables, and seafoods; miscellaneous food preparations; lumber; converted paper products; industrial inorganic chemicals; and agricultural chemicals were identified for commodity analysis. Two groups, fresh vegetables and lumber, made up 2

12 60.7 percent of the commodity tons being analyzed. The nine commodity groups were projected to increase 30.5 percent to 15.2 million tons, and the remaining 117 commodities were estimated to increase 30.5 percent to 18.4 million tons. NAFTA commodity movements will increase to 33.6 million tons, 30.5 percent, by Vegetables and miscellaneous food preparations will increase most among the nine commodity groups. Industry groups represented in this study were interviewed to compare estimated forecasts in the study with industry expectations. Most projections in this study were similar to industry forecasts. However, several forecasts were significantly different from industry projections. The variance in forecasts was attributable to recent policy or industry changes. Estimates of NAFTA commodity ton-miles on Washington highways exceeded 10.3 billion in 1994, and are projected to exceed 13.4 billion by In 1994, 68.6 percent of the ton-miles were transit movements, with origin movements at 18.6 percent and destination movements 12.8 percent. By 2005, transit ton-miles will be 67.9 percent of the ton-miles, origin ton-miles will remain the same while destination movements will be 13.4 percent. The nine commodities selected for analysis and projection were 42.2 percent of the ton-miles in 1994 and, by 2005, will be 41.6 percent. Destination movements of the nine commodities had more ton-miles than origin movements. The remaining 117 commodities had the opposite situation, with origin ton-miles greater than destination ton-miles. Destination movements of the nine commodities do not exceed actual tonnage of origin movements, but, do consequently, travel more miles on Washington s highways than origin movements, thus having ton-miles greater than origin movements. Conclusions NAFTA trade will continue to increase its presence on Washington s highways with commodity trade increasing 30.5 percent by Transit movements of that trade make up nearly 70 percent of the NAFTA ton-miles. Transit movements of vegetables, fruit, and lumber are major transit commodities hauled on Washington highways. Washington destination commodity tons are less than origin commodity tons among the nine commodities analyzed, but result in more ton miles than origin movements because the nine commodity groups are transported greater distances on Washington s infrastructure. Destination movements will increase in the share of ton-miles while origin and transit movements will decrease. The Interstate 5 corridor received 75.3 percent of the ton-miles in 1994 and is estimated to decrease to 74.7 percent by 2005 because ton-miles in the U.S. 97 and U.S. 395 will each receive a greater share of the ton-miles. Ton mile changes in the I-5 corridor will increase in origin and destination movements while commodity increases will be in fruits, canned and preserved fruits, vegetables and seafoods, miscellaneous foods and industrial chemicals. Increased ton-miles in the U.S. 97 corridor will be transit movements and commodity increases in fruits, canned and preserved fruits, vegetables and seafoods, miscellaneous foods, and chemicals (industrial and agricultural). U.S. 395 corridor commodity ton-mile changes are attributable to increases in destination 3

13 movements and increases in canned and preserved fruits, vegetables and seafoods, miscellaneous foods, and chemicals (industrial and agricultural). Specific attention must be committed to transit movements since they represent heavier loads being transported greater distances on Washington highways. Washington s infrastructure supports NAFTA trade, yet the associated benefits received for that trade may not necessarily be in proportion to the costs associated with transportation characteristics of that trade on Washington highways. A means to internalize the benefits and costs within the state is needed. NAFTA trade is certain to increase on Washington s highways. If infrastructure investment is not adequate to keep Washington s highways at serviceable levels, trade flows will be impeded and the associated highway damage of that trade will increase substantially as highway deterioration is accelerated. The incidence of NAFTA trade varies by corridor. Thus, highway impacts vary by corridor, with noticeable increases occurring in eastern Washington. However, the present serviceable levels of highways among corridors may vary and serviceable levels of highways within corridors may vary. As such, attention to highways in the corridors with low serviceable ratings and increasing volumes, such as in eastern Washington, should be given priority; otherwise changes in NAFTA trade may significantly deteriorate those highways over the next 10 years. 4

14 Introduction Washington State and its transportation infrastructure provides critical gateways and corridors for North American trade between Canada and the United States. In 1992, western U.S.-Canada commercial truck traffic made up more than 832,000, or 53.0 percent, of the 1.6 million cross-border trips at Washington-British Columbia ports of entry (Federal Highway Administration, FHWA). Canadian commodities represent 28.6 percent of the 90.1 million tons of commodities on Washington highways; in 1994, over 1.8 million truck trips transported nearly 25.8 million tons of Canadian commodities valued at approximately $33.3 billion (Eastern Washington Intermodal Transportation Study). Four corridors, three north-south: Interstate 5; U.S. 97; and U.S. 395, and one east-west: Interstate 90, are heavily used for the transportation of Canadian commodities on Washington highways. North American Free Trade Agreement On January 1, 1994, Canada, Mexico, and the United States enacted the North American Free Trade Agreement (NAFTA), creating the world s largest free trade agreement, encompassing more than 376 million consumers and $7 trillion in gross domestic product (World Bank). The NAFTA purposes are to create a free trade environment where producers, processors, and transportation firms move goods safely, timely, and cost effectively in a continuous flow, without complications or delays, from sources such as packing houses or processing plants directly to the buyer. The NAFTA is an extension of the Canada-United States Free Trade Agreement (CUSTA) which was enacted on January 1, The CUSTA s goals were to reduce and remove trade barriers, in particular tariffs, by 1999, to increase trade between Canada and the United States. The CUSTA was subsumed into, and superseded by, the NAFTA. The NAFTA expands the CUSTA objectives by adding protection for intellectual property rights, ensuring land transportation market access, increasing investment opportunities, and upholding environmental standards and agreements while promoting sustainable development (Schaeffer and Wahl). Free trade agreements attempt to let international markets perform on a level playing field between trading partners. Under a free trade agreement, barriers that inhibit trade and keep out competition are removed. Commonly used trade barriers between countries are tariffs and non-tariff barriers (quotas, sanitary and phytosanitary requirements, licenses, etc.) on imported goods. As free trade agreements are enacted and implemented, the type and flow of trade changes as firms pursue new markets and manufacturing and logistics strategies under cost competitive advantages. Trade flows are dependent upon the transportation sector to transport commodities from manufacturer, processor, and producer to consumer. However, problems can exist when transportation options and corridors are inadequate to support increased trade volumes, or price signals do not reflect all costs, which then impedes the movement of products and decreases the economic returns to production and/or the utility of the consumer. The issue of transportation options is the underlying theme of this study. 5

15 Objectives The overall purpose of the study is to analyze NAFTA s impacts on Washington s transportation infrastructure. Analysis will be accomplished by identifying the specific North American, in particular U.S.-Canada, commodity flows into, out of, and through Washington, and then projecting those trade flows. Mexican commodity volumes in Washington State are insignificant relative to U.S.-Canadian commodity volumes at this time, thus Mexico is not a part of this study. Specific traffic volumes on road corridors will be projected in this Part I of the study. Highway damage coefficients will be used to determine corridor highway infrastructure investment requirements to sustain industry capacity in trade and will be reported in Part II. The specific objectives of Part I were to: 1. Identify North American trade corridors used in Washington, with emphasis on U.S.-Canada trade; 2. Identify commodity groups that are major generators of U.S.-Canada trade in Washington; 3. Project future NAFTA movements by corridor; 4. Determine NAFTA s impacts on future commodity movements in and through Washington. Study Procedure Identifying international trade corridors required extensive data including: commodity type, volume, and value; origin and destination information (state, city, and facility type); and highways or routes utilized for transporting international commodities. This study utilizes the eastern Washington Intermodal Transportation Study, Washington State Freight Truck Origin, and Destination Database to extract the aforementioned information. (See Figure 1 for EWITS framework and Figure 2 for overall procedure.) Data from the database reveal U.S.-Canadian, NAFTA, commodity movements on Washington highways. Census Data and Industry Interviews The U.S. Department of Commerce, the Bureau of the Census, receives cross-border commodity data from the U.S. Customs Service for U.S. imports and from Statistics Canada for U.S. exports. They process and summarize the data for public use according to harmonized commodity code by value, volume, and port of entry. The harmonized system of commodity codes classifies international commodities between countries to a 6-digit level, and uses 98 chapters to organize the commodities. U.S. Bureau of the Census data used for analysis in this study encompass six years, 1989 to

16 Figure 1: Data Management, Analysis, and Modeling Framework Truck Driver Interviews Data Integrity Checks Data Entry Using Conway Survey-It Economic & Traffic Focused Data Borland Paradox Database Geographic Information Systems Maps from WSDOT Tabular Output Graphic Output WSDOT, Metropolitan, and Regional Transportation Plans Source: Gillis, William R. and Kenneth L. Casavant. Washington State Freight Truck Origin and Destination Study: Methods, Procedures, and Data Dictionary. Eastern Washington Intermodal Transportation Study Report #3. Department of Agricultural Economics, Washington State University, Pullman, December

17 Figure 2: NAFTA Projections Procedures Eastern Washington Intermodal Transportation Study, Washington State Freight Truck Origin and Destination Database, 1994 Corridor Identification Movement Type Bureau of the Census Data Standard Industrial Classification Commodities NAFTA Commodity Impacts Industry Surveys Truck Trips Commodity Tons Truck Route Commodity Value Damage Function Washington State Highway Corridor Damage Estimate 8

18 NAFTA impact analysis was accomplished by first identifying those U.S.-Canadian commodities, from the EWITS database, at the 3-digit SIC level, that were major generators of trade, by tonnage, on Washington s highways. Then the corresponding harmonized commodity codes were determined and Bureau of the Census data obtained from 1989 to 1995 from ports of entry along the Washington-British Columbia border. Trend line analysis was used to estimate growth rates among those major SIC commodities on Washington highways through 2005 and develop initial projections of future traffic. Sensitivity analysis was conducted on commodity movements by evaluating a 2 percent increase and decrease in commodity tons growth. Industry interviews were then conducted to verify and modify the trend line growth rates among the commodities. Interview questions sought to identify how much, by percent, did respondents expect industry volume of trade to increase or decrease, and how will the commodity be transported, i.e., by mode and route into, out of, and through Washington. 9

19 North American Trade and the Washington Transportation System Trade Structure In 1993, the NAFTA region, the U.S., Canada, and Mexico, had a population greater than 376 million and, in 1994, a combined gross domestic product of nearly $7.2 trillion (World Bank). The level of trade among the NAFTA countries experienced substantial growth the year after the implementation of the NAFTA. Trade among the NAFTA partners in 1994 totaled $347.6 billion, an increase of 17.2 percent from In 1995, trade was $384.8 billion, an increase of 10.7 percent. Trade between Canada and the United States in 1995 was $272.1 billion, 70.7 percent of the NAFTA trade; between Mexico and the United States $108.0 billion or 28.1 percent; and between Mexico and Canada, $4.7 billion or 1.2 percent (Table 1). In 1995, U.S. imports from Canada grew somewhat faster (13 percent) than U.S. exports to Canada (11 percent). The second phase of the NAFTA tariff rate reductions occurred on January 1, 1995, and the majority of the CUSTA s tariffs have been removed. NAFTA as a region had world imports and exports totaling $136.5 billion in However, the region had a negative global trade balance of $12.8 billion, with 1994 exports of $61.8 billion and imports of nearly $74.7 billion dollars (Organisation for Economic Cooperation and Development). Table 1--Population, Gross Domestic Product, Exports, and Imports to the World and the NAFTA Region for Canada, Mexico, and the United States, Item Canada Mexico U.S. NAFTA Region Population (thousands, 1993) a 28,782 90, , ,811 GDP (US $billions) $574.3 $344.1 $6,275.9 $7,194.3 Exports (US $millions) b $13,817 $5,292 $42,701 $61,810 Imports (US $millions) $12,319 $7,021 $55,319 $74,659 Trade Balance (US $millions) $1,498 ($1,729) ($12,618) ($12,849) NAFTA Trade (US $billions, 1995) c Canada (exports) -- $0.8 $145.1 $145.9 Mexico (exports) $ $61.7 $65.6 United States (exports) $127.0 $ $173.3 Total trade imports $130.9 $47.1 $206.8 $384.8 Sources: a) World Bank. The International Bank for Reconstruction and Development. World Tables, Washington D.C., b) Organisation for Economic Cooperation and Development. Monthly Statistics of Foreign Trade, Statistics Directorate, Paris, France, August c) U.S. Department of Commerce, NAFTA Office. Assorted NAFTA Facts. Washington D.C., 1995 and

20 Transportation System in Washington Supporting international trade is Washington s integrated transportation system, which provides a competitive and complementary multimodal environment to move people, goods, and services. Highway, rail, water, and air transportation modes form the physical transportation infrastructure. Highway Transportation Washington highways, the focus of this analysis, function as the backbone of the transportation infrastructure system, spanning more than 7,000 miles (773 miles of Interstate highways, 794 miles of non-interstate urban highways, and 5,481 miles of non-interstate rural highways) (Washington State Department of Transportation, WSDOT). The highway system interconnects major population centers, sea ports, airports, public and private intermodal facilities, interstate and interregional travel, and international borders. Twelve international ports of entry allow travel between the United States and Canada on the Washington-British Columbia border, with four ports of entry located in western Washington and eight in eastern Washington (Table 2 and Figure 2). In 1992, 53.0 percent of the 1.6 million international commercial vehicle cross-border trips made in the western United States (Washington, Idaho, Montana, North Dakota, and Minnesota) and western Canada (British Columbia, Alberta, Saskatchewan, Manitoba, and Ontario) crossed the Washington-British Columbia border. The principal southbound commodities crossing the Washington-British Columbia border, by port of entry, are shown in Table 3. In Washington, 87.3 percent and 12.7 percent of all cross-border commercial traffic crossed in western and eastern Washington, respectively. As an example of comparing western and eastern Washington ports of entry, 34.7 percent (544,990 commercial vehicles) of the western U.S. and western Canada commercial traffic crossed the Pacific Highway border crossing in western Washington (Blaine on SR5) and 2.8 percent (44,487 vehicles) crossed at the Oroville, Washington border (SR97) crossing in eastern Washington (FHWA). 11

21 Table 2--U.S.-Canadian Cross-Border Commercial Traffic Volume for Washington- British Columbia Ports of Entry, 1992 Port of Entry Commercial Traffic Volume Percent Southbound Northbound Total Eastern Washington: Boundary Danville 1, , Ferry 3,474 3,931 7, Frontier 12,634 13,318 25, Laurier 8,749 12,886 21, Metaline Falls 1,638 1,882 3, Nighthawk Oroville 24,881 19,606 44, Sub-total 53,093 52, , Western Washington: Lynden 21,914 39,813 61, Pacific Hwy 276, , , Point Roberts 8,885 8,077 16, Sumas 61,976 40, , Sub-total 368, , , Total 421, , ,412 Source: Federal Highway Administration. Descriptive Report of Cross-Border Traffic and Transportation in the Western U.S.-Canada Region, Washington D.C., September

22 Figure 3: Ports of Entry Along the Washington-British Columbia Border Boundary Bay British Columbia Osoyoos Paterson Douglas Alderwood Huntington Chopeka Midway Carson Cascade Waneta Nedwary Point Roberts Blaine Lynden Sumas Nighthawk Oroville Ferry Danville Metaline Frontier Falls Boundary Laurier Washington State Source: Federal Highway Administration. Descriptive Report of Cross-Border Traffic and Transportation in the Western U.S.-Canada Region. Washington, D.C., September

23 Table 3--Principal Southbound Commodities via Washington-British Columbia Crossings Port of Entry Principal Commodities Eastern Washington: Boundary Danville Ferry Frontier Laurier Metaline Falls Nighthawk Oroville Woodchips, Hay Lumber, Wood Chips Wood/Lumber Products Chemicals, Fertilizers, Wood Products, Metal Products, Paper/Printed Matter Lumber, Woodchips, Paper/Printed Matter Lumber, Shakes/Shingles, Fertilizers N/A Apples, Lumber, Woodchips, Livestock, Consumer Goods Western Washington: Lynden Pacific Highway Point Roberts Sumas Wood/Lumber Products, Agricultural Products Manufactured Goods, Wood/Lumber Products, Metals/Metal Products, Paper/Printed Matter Fuel, Consumer Goods, Building Materials Manufactured Goods, Machinery, Wood/Lumber Products SOURCE: Federal Highway Administration. Descriptive Report of Cross-Border Traffic and Transportation in the Western U.S.-Canada Region. Washington D.C., September Lumber and wood products are major commodity movements crossing ports of entry in eastern and western Washington. However, commodity movements other than lumber and wood do vary from eastern Washington to western Washington. For instance, common commodity movements in eastern Washington are hay, apples, livestock, fertilizers and wood chips which reflect production in eastern Washington and British Columbia. Commodity movements crossing western Washington ports of entry are manufactured goods, agricultural products, fuel, and machinery. Thus, changes in U.S.- Canada trade among these commodities will impact movements through Washington ports of entry (FHWA). Rail Transportation In 1994, Washington s rail system, a complement and competitor to the highway system, was made up of 13 common carriers (10 line haul carriers ranging in size from short lines to Class I, one nonoperating rail line owner, and 2 switching/terminal companies) and several noncommon carriers (lines owned by timber companies and the U.S. government who move freight within the state). Total rail trackage amounted to 2,992 miles with Burlington Northern-Sante Fe (BNSF) owning 67 percent or 2,005 route miles, Union Pacific (UP) owning 12 percent or 359 route miles, short line railroads owning 20 percent or 598 route miles and switching/terminal railroads owning 1 percent or 30 route miles of trackage (WSDOT). 14

24 The Washington freight rail system performs an important economic function transporting farm products, lumber/wood products, food/kindred, metallic ores, and containers/trailers on flat cars to and from production, processing, distribution and intermodal (deep water marine ports, river ports, road terminals, and shipper connections at sidings, elevators, etc) facilities throughout the state. The river and marine ports depend on a highly efficient rail system to transport international cargo to destinations outside Washington to compete with other West Coast ports (Portland, Oregon; Los Angeles/Long Beach, California; Vancouver, British Columbia). Washington s rail system has connections to destinations outside Washington, including other states and Canada, at Blaine, Clarkston, Pullman, Spokane, Sumas, Vancouver, Wallula, and Wishram, Washington. In 1992, 2.7 million tons (2.1 million tons southbound and 0.6 million short tons northbound) of cargo were transported by rail across the Pacific Highway/Blaine, Washington border crossing (FHWA) and 638,000 tons southbound across the Penticton-Osoyoos/Oroville, Washington border crossing. Marine Transportation Washington s marine transport system includes more than 21 river ports on the Snake and Columbia river systems and 15 deep draft marine ports on the Puget Sound, Lower Columbia, and Pacific coast. These ports provide access to world markets and compete for waterborne cargo with ports in Vancouver B.C., Oregon, and California. Washington s deep draft ports handled more than million tons of waterborne cargo in 1992, and the river ports, nearly 7.0 million tons in 1993 (BST Associates). Washington s waterborne commerce was valued at $57 billion in 1990 (WSDOT). Washington s ports rely on good highways, adequate rail and waterside access, and intermodal facilities to maintain a competitive transportation advantage for world trade. Washington ports generate approximately 50 percent of the state s total rail traffic. The Puget Sound ports have a competitive advantage delivering goods from Pacific Rim countries to the Midwest, saving an estimated two hours by truck over California ports (WSDOT). Washington ports provide access to U.S.-Canadian commodity trade. In 1995, nearly 6.8 million metric tons of U.S.-Canadian commodities were imported (75 percent) and exported (25 percent) through Washington ports (Table 4). Between 1990 and 1995, commodity movements through the ports increased 24.4 percent. Imports increased the most at 33.3 percent. Dry bulk imports and exports were the largest commodity movements with 5.1 million metric tons, 6.8 percent imported, and 32 percent exported. 15

25 Table 4--U.S.-Canada Marine Trade Movements Through Washington State Ports (metric tons), Year Breakbulk Logs Dry Bulks Liquid Bulks Total Imports: ,249 13,482 2,840, ,477 3,879, ,330 8,449 2,824, ,668 3,898, ,255 89,745 3,001, ,228 4,381, , ,634 3,308, ,648 4,860, , ,503 3,388, ,617 4,988, , ,333 3,487, ,345 5,172,394 Exports: , , , ,784 1,352,056 1,370, ,693 1,324,331 1,340, ,139 1,612,389 1,621, ,418 1,608,424 1,615, ,855 1,633,931 1,641,786 Total: ,146 13,482 3,647, ,477 4,707, ,114 8,449 4,176, ,668 5,269, ,948 89,745 4,326, ,228 5,721, , ,634 4,920, ,648 6,482, , ,503 4,996, ,617 6,604, , ,333 5,121, ,345 6,814,180 SOURCE: BST Associates Marine Cargo Forecast. Prepared for Washington Public Ports Associations and Washington State Department of Transportation. Seattle, Washington, January

26 North American Trade Corridors in Washington State In 1992, 53 percent of the U.S.- Canada cross-border truck traffic used ports of entry along the Washington-British Columbia border. However, movements using those ports of entry do not fully represent total U.S.-Canada commodity movements on Washington s highways. Other ports of entry outside Washington could have been used. The Eastern Washington Intermodal Transportation Study, Washington State Freight Truck Origin and Destination database contains data that captures all such NAFTA movements. This chapter reports 1994 U.S.-Canadian commodity flows on Washington highway corridors. In 1994, commodities on Washington highways totaled 90.1 million tons and NAFTA, U.S.-Canada, commodity flows were 28.3 percent of those tons (EWITS). Those NAFTA shipments were transported by more than 1.8 million truck trips, hauling nearly 25.8 million tons valued at approximately $33.3 billion. Three movement characteristics exist for the transportation of NAFTA commodities on Washington highways: trips destined for Washington with Canadian origins (imports); trips destined for Canada with Washington origins (exports); and Canadian movements that transit Washington where the movement either originates in Canada and has a destination outside Washington (southbound transit) or the movement has a destination in Canada from an origin outside Washington (northbound transit). Determining commodity trips, tonnage, and value was done by corridor of origin or destination while transit movements were by corridor(s) utilized. 1,2 Transit totals by corridor may reflect some double counting. For example, if a transit shipment entered Washington in the U.S. 395 corridor and exited Washington into Canada through the I-5 corridor, then its characteristics, tonnage and value, would be included in the U.S. 97 or 395 and I-5 corridor analysis as well. Thus, summing across corridors is not directly appropriate. NAFTA movements that transit Washington occur most frequently; in 1994, 861,000 transit truck trips transported 15.5 million tons, or 60.0 percent of the NAFTA commodities on Washington highways. Movements that originated in Washington (exports) and destined for Canada totaled more than 6.5 million tons or 25.1 percent of 1 The Eastern Washington Intermodal Transportation Study, Washington State Freight Truck Origin and Destination Database reports commodity volume as payload pounds. The payload weight was converted into tons where 2,000 pounds equals one ton. Thus, commodity volume is the amount of commodity tons loaded on each truck. 2 Commodity values utilized are broad averages for three-digit SIC commodity categories. Commodity values were obtained from the U.S. Census of Transportation economic value data for most three-digit Standard Industrial Classification categories. The Census data for each SIC category were updated to 1994 dollar values utilizing the Standard and Poors producer price index. Agriculture commodity values were obtained from the Washington State Agricultural Statistics Service (Gillis and Casavant). 17

27 the total U.S.-Canadian tons and conversely, movements that were destined for Washington (imports) with Canada origins were about 3.8 million tons or 14.9 percent shown in Table 5 (EWITS). Table 5--NAFTA Shipments on Washington Highways, 1994 Characteristic Transit (percent) Origin (percent) Destination (percent) Total (units) Commodity Tons (millions) Trips (thousands) ,800 Commodity Value ($billions) $33.3 SOURCE: Eastern Washington Intermodal Transportation Study. Washington State Freight Truck Origin and Destination Database. Department of Agricultural Economics, Washington State University, Pullman, To identify the location of movement on Washington highways, four transportation corridors, three north-south: Interstate 5; U.S. 97; and U.S. 395 corridors, and one east-west, Interstate 90 corridor, were identified as forming the major infrastructure for which NAFTA commodities move into, out of, and through Washington (Figure 5). Each corridor has been identified by the major highway on which commodities are transported. However, corridor estimates report movements that occurred on all highways and roads within each corridor and were not limited to the identifying highway. For instance, in the I-5 corridor, many highways make up the corridor infrastructure: I- 90; I-405; U.S. 2; U.S. 12; SR 167 and SR 14. Thus, movements in a corridor are an accumulation from all highways used within that corridor. Nearly 100 highway segments were identified as supporting NAFTA trade. Interstate 5 Corridor The Interstate 5 (I-5) corridor has one major north-south highway, I-5, one major eastwest highway, I-90, and approximately 14 other highways that form the infrastructure on which NAFTA commodities are transported. State highways in the corridor total more than 3,200 miles, with approximately 75 percent rural and 25 percent urban highways. Of the rural highways, 39 percent are principal arterial, 28 percent collector, and 27 percent minor arterial. Urban highways are 53 percent principal arterial and 27 percent interstate. Highway surface types are 78 percent asphalt, 14 percent bitmunous, 7 percent concrete, and nearly 1 percent other (WSDOT, Planning and Programming Service Center) (Table 6). 18

28 Table 6--Highway Miles, Surface Types, and Function Classes for the Interstate 5 Corridor Highway Highway Highway Highway Total Function Class Miles Other Miles Gravel Miles Bitum Miles Asphalt Highway Miles Concrete Highway Miles R R R R4 R U U U U4 U Rural Subtotal , ,441.3 Urban Subtotal Total , ,277.2 SOURCE: Washington State Department of Transportation, Planning, and Programming Service Center. State Highway Log, Planning Report 1996, Volume 1. Olympia, (For definitions, see this source.) NOTE: R1 = Rural principal arterial R2 = Rural minor arterial R3 = Rural collector R4 = Rural unclassified R5 = Rural interstate U1 = Urban principal arterial U2 = Urban minor arterial U3 = Urban collector U4 = Urban unclassified U5 = Urban interstate The I-5 corridor is commonly referred to as western Washington, meaning the area west of the Cascade Mountain range. I-5 begins at Blaine, Washington, at the U.S.-Canada border on the north, and proceeds 276 miles south to the Washington-Oregon border at Vancouver, Washington. The I-5 corridor has a population of nearly 4.1 million or 77.8 percent of the state population and employs 1.7 million or 78.7 percent of the state work force (Office of Financial Management). 19

29 Figure 4: Major Highway Corridors Supporting the Transportation of NAFTA Commodities on Washington Highways SR20 I5 US97 SR20 US395 SR2 I-90 Corridor I90 I90 I90 US 195 I5 SR26 I82 US395 SR14 US97 SR14 I-5 Corridor U.S. 97 Corridor U.S. 395 Corridor U.S.-Canada commodities using I-5 corridor highways were valued at $30.1 billion and exceeded 21.1 million tons, 83.1 percent of the state total. Those commodities originating in the I-5 corridor totaled 5.1 million tons or 24.1 percent of the corridor total and those destined to the corridor weighed 2.6 million tons, or 12.5 percent of the corridor total. Commodities transiting Washington and using the corridor totaled 13.4 million tons, or 63.4 percent of the corridor total (Table 7). Nearly 81.0 percent of the transit loads within this corridor used Interstate 5 exclusively from the Washington- British Columbia border to the Washington-Oregon border. Table 7--NAFTA Movements in the Interstate 5 Corridor, 1994 Item Movement Type Corridor Total Origin Destination Transit Number of Trips (thousands) a ,424.7 Commodity Tons (millions) Commodity Value ($millions) 9, , , ,148.7 Average Commodity Tons per Shipment a Includes empties SOURCE: Eastern Washington Intermodal Transportation Study. Washington State Freight Truck Origin and Destination Database. Department of Agricultural Economics, Washington State University, Pullman,