American pie

Known colloquially as the “new world” since Columbus accidently discovered it in the late 15th century, the Americas have captured our collective imagination for hundreds of years. From cold Canadian forests to bustling city centres, Air Force One to fabled cannibals, the history of the world would not be the same without the countries that make up this huge continent…

Discussing transport and the Americas presents an interesting challenge. For a start, the name “Americas” refers to the continent of North America, encompassing Canada, the United States (US) and Mexico; and the South American continent, made up of countries in central and South America. There are few similarities between them.

Even though it is the world’s second largest country after Russia, at 3.4 people
per km2 Canada has one of its lowest population densities. The US is home to the world’s largest national economy and is regarded as one of the great superpowers – if not the greatest. By comparison, South and Central America are both considered to be largely third world, developing economies. So, where to begin?

Despite differences in culture, language, economy and political structures, these regions are linked geographically, which does play a large role in their impact and influence on each other, particularly with regards to trade.

Canada, the US and Mexico rely heavily on each other for trade. In 1994 all three countries entered a trilateral agreement known as the North American Free Trade Agreement (NAFTA). The enactment of NAFTA effectively created the world’s largest free trade market agreement: one that reduces tariffs, in some instances removing them altogether. Since approximately 88% of US trade with Canada and Mexico is transported overland, this had huge implications for the commercial transport industry.

NAFTA had two key impacts on road freight: it increased overall trans-border freight traffic, particularly by road; and it gave priority to north-south regional corridors at the expense of long-haul east-west intra-national routes.

The NAFTA corridor links the two largest land gateways of North America: Detroit, Michigan and Laredo, Texas. However, while 65% of NAFTA trade is serviced by trucks (the users of the NAFTA corridor), it is far from a continuous corridor. Northbound flows of Mexican imports and southbound flows of Canadian imports dwindle as the distance from their respective borders increases.

On the road again…
According to the North American Transportation Statistics’ (NATS) online database – last updated by the US Department of Transportation’s Bureau of Transportation Statistics (BTS) in late 2009 – road freight is the biggest freight mover in the US, beating rail, maritime, pipeline and air.

Nevertheless, rail freight is also a big player. Since deregulation in the 1980s, rail freight in the US increased by 77% in ton-km between 1985 and 2003 and remains a major contributor to overall transport, accounting for close to 40% of all the ton-kms transported in the US. If we compare this to Europe, where intermodal rail only accounts for 8% of overall transport, we can see how large rail still is in the US.

In terms of road versus rail however, while the structure of the US urban system clearly underlines the Midwest as the most accessible location for servicing a large segment of the American population by truck, the surge in international trans-Pacific containerised trade over the past few years has also opened the way for intermodal rail. Instead of containers remaining on ships crossing from the Pacific to the Atlantic, containers are moved on land via rail from west-coast to east-coast ports and vice versa. These “landbridges” are the outcome of cooperation between rail operators looking to be involved in lucrative, long-distance freight traffic, and maritime shippers who are eager to reduce shipping time and costs.

While rail is not always the cheapest option when compared to maritime shipping, and road transport remains North America’s dominant mode of transport, the incredibly long distances involved in traversing the continent – and the time it takes to ship goods around it – ensures that rail remains a viable alternative option to truck-based transport solutions.

Nevertheless, road transport continues to be important not only for US transport needs, but also for its trade relationships with Mexico and Canada. According to the NATS online database, trucks carried 58% of the freight, measured by value, between the US, Canada and Mexico in 2008, to the value of US$554 billion (R4 096 billion).

According to the data, 10.8 million trucks entered the US in 2008: 5.89 million from Canada and 4.87 million from Mexico. The value of freight shipments moved between the US, Canada and Mexico grew at an average rate of 8.9% per year between 2003 and 2008.

A Mexican standoff
The fact that NAFTA has played such a large role in increasing trade between the US and its neighbours does not mean the agreement is without fault or controversy. One of the provisions of NAFTA is the ability of Mexican and Canadian trucks to operate within US borders.

From an operational point of view, this facilitates trade by making freight transport easier. However, there have long been concerns about Mexico’s trucking standards; particularly load restrictions, driver license standards, and safety rules. Many US congressmen have lobbied for the removal of cross-border trucking provisions for Mexican carriers altogether.

Originally, NAFTA made provision for any concerns by establishing a 25 mile (40 km) restriction zone for Mexican carriers around the US/Mexico border. Under this restriction, Mexican carriers could cross the border, but they could not travel freely throughout the US. During the Bush administration this changed. The Bush-era Mexican truck demonstration project allowed select Mexican carriers to travel beyond the restriction zone. This project was subsequently cancelled by the Obama administration; so the Mexican government slapped US$2.4 billion (R17.7 billion) in retaliatory tariffs on US goods.

The matter is currently under review, and raises interesting questions about cross-border transport. For example, without regionally endorsed and legislated transport standards and load restrictions, is cross-border transport always viable?

Southern crossroads
One of the most interesting developments in South America over the past few years has been the burgeoning Brazilian motor manufacturing sector. Road transport is important throughout the continent of South America, particularly because the terrain of many of these countries – which includes rain forests and impassable mountain ranges – lends itself more to road freight than rail. But it is the manufacture of vehicles that really makes South America stand out.

While there are a few motor manufacturing companies who hail from Brazil (most notably bus body manufacturer Marcopolo), the country has become a manufacturing hub for the likes of Scania Truck and Bus; Mercedes-Benz Truck and Bus; Busmark; MAN Truck and Bus; VW Trucks and Buses and Irizar; as well as a number of automotive manufacturers including General Motors, Ford Motors and Volkswagen.

Although the global economic crisis has hurt the Brazilian economy as much as anywhere else in the world, 2008 saw an incredible influx of international investments into this South American country’s motor manufacturing sector.

In September 2008 Brazil was riding the crest of three years of exceptional growth as local manufacturers spent billions of dollars to keep up with both local and international demand. Brazil was fast becoming the engineering hub for global vehicle makers and looked set to attract US$23 billion (R170 billion) in investments between 2008 and 2012.

Why was Brazil becoming the new motoring mecca? Cheap and abundant labour mainly; but also a desire on the Brazilian government’s part to attract investments into the country. Its good geographical positioning between Europe, Africa and the United States, and a steadily growing local market also helped.

Trucks, buses and cars manufactured in Brazil make a significant difference to export prices, particularly in countries such as South Africa where the exchange rate has periodically hindered the import market. The decision made by Scania and Irizar, for example, to manufacture trucks and buses in Brazil has made their products far more affordable and accessible in many countries, particularly our own.