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That Seventies Issue - TRAINS
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[quote]QUOTE: <i>Originally posted by bobwilcox</i> <br /><br />[quote]QUOTE: <i>Originally posted by futuremodal</i> <br /><br />[quote]QUOTE: <i>Originally posted by oltmannd</i> <br /><br />[quote]QUOTE: <i>Originally posted by futuremodal</i> <br /><br />[quote]QUOTE: <i>Originally posted by CSSHEGEWISCH</i> <br /><br />Futuremodal seems to also ignore the fact that our trade deficit is also based on the fact that foreign-made goods are appreciably cheaper to the consumer than domestic-made goods, in part because foreign labor is much cheaper than American labor. <br />[/quote] <br /> <br />1. Labor costs (wages) are a very small part of why American goods are more expensive for Americans than are foreign goods. The transportation costs of shipping goods from overseas tends to wipe out labor cost savings. What really kills American manufacturing competitiveness is the level of regulation we endure and the subsequent inability to react quickly to market changes. You can also add the cost of labor protections to that list. By constrast, foreign firms have much lower regulation, are more elastic in terms of labor arrangements, and also tend to have substantial subsidies from their governments. <br /> <br />2. You also have to understand that we are not just competing on a unit for unit basis with other countries, e.g. it's not just us trading with country A, and us trading with country B. We are competing with countries A, B, and C for markets in countries X, Y, and Z. The fact that it costs more to transport our goods from point of origin within our boundaries to the nearest deep water port, relative to other nation's abilities to move their products from their points of origin to their deep water ports, is a significant part of why we are getting killed in foreign trade even with the depreciated dollar. We are saddled with a proprietary rail grid with access limited to the discretion of the owner, while other nations are blessed with open access of their rail lines. Also, other nations such as Canada allow heavier truck weights and longer truck lengths than the U.S. which means they can use the alternative of last resort more efficiently than we. <br />[/quote] <br /> <br />Not believable unless you can show some facts. <br />[/quote] <br /> <br />Don, <br /> <br />I don't have the time to do a complete study (unless you are willing to pay for my time to do so), but in the mean time just use a little common sense regarding the trade postition of the U.S. vs the rest of the world when in comes to transportation costs from the interior to the ocean ports. <br /> <br />For example, it costs roughly $80 m/t to transport grain from Minneapolis to the Pacific Rim. Via New Orleans its roughly $20 m/t by rail Minneapolis to NO, then $60 m/t by ship. Via PNW, its roughly $45 m/t by rail, then $40 via ship to Pacific Rim nations. The cost to ship by rail is double Minneapolis to PNW what it is Minneapolis to NO/Gulf ports. If the railroads charged a similar rate on both routes, the cost of shipping grain from Minneapolis to the Pacific Rim would fall to around $60 m/t. (Source: Grain Transportation Report from the USDA). That would in turn make U.S. grain sales to the Pacific Rim much more attractive to those buyers, and thus it would do it's part to decrease the imbalance of trade between the U.S. and the Pacific Rim. <br /> <br />The reason for this disparity has been explained at length in this forum, since BNSF is the only real rail shipping option between Minneapolis and PNW, with UP only adding marginal competition due to the duopolistic existence of the Western U.S. rail network, and thus they can charge monopolistic/duopolistic rates between the two areas. Compare this to the subsidies both CP and CN get to ship grain from the Prairies to Vancouver, or the rates charged on Australia's open access rail system for carriage of similar distances, and it becomes obvious that this situation is one of the reasons for the U.S. trade deficit. <br /> <br />The solutions to this problem include (1)reregulating the Class I railroads, <br />(2)open access of the current U.S. rail network, (3)addition of a second or third Northern Tier transcon via federal aid/land grants e.g. fostering rail based competition similar to what exists in the Midwest's North-South corridors, (4)or having a federal agency such as the Corps of Engineers or FRA do the building of new open access rail lines between the Midwest and PNW, all of which would aid the U.S. in ameliorating the imbalance of trade. <br /> <br />I would like to take the time to do a survey of the number of U.S. exporting firms who have their production facilities captive to one Class I vs those who have access to more than one Class I and/or other viable shipping alternatives such as barging, and then compare this list to firms in other nations and their shipping options. The null hypothesis would be that there is no statistical difference in domestic shipping costs, a notion that would be easy to disprove. Common sense would indicate there is a significant difference, both in terms of U.S. export domestic transport costs vs import costs, and in terms of U.S. export costs vs other nation's export costs. <br />[/quote] <br /> <br />Once again you forget the little fact that the railroads have competition. In this case grain will flow from the Twin Cities to New Orleans on something called a barge using the Miss. River. <br />Do you suppose that has something to do with the rail rate level on the same od pairs? <br />[/quote] <br /> <br />Apparently you haven't read my previous posts regarding what constitutes rail competition. You have to employ the "three or more" rule to gauge a realistic level of competition on typical long hauls. Again, a sole service provider constitutes a monopoly, two service providers constitutes a duopoly. Three service providers would constitute a "triopoly", a word that doesn't exist in the popular lexicon since with three competitors you have de facto competition, with the "odd man out" providing the price risk. That means real long haul competition requires either a minimum of three Class I's from point of origin to destination, two railroads and at least one barge line, or one railroad and two or more barge lines. You really can't include trucks on long hauls for anything other than high value, single load items, they just can't compete for bulk commodities over the long haul. <br /> <br />The Minneapolis to Gulf corridor has the "three or more" characteristic in place with or without competition from the barge lines, while the Minneapolis to PNW does not. That explains why the cost to transport a bushel of wheat by rail Minneapolis to PNW is twice the rail rate from Minneapolis to Gulf. The grain rate Minneapolis to PNW is around $1.24/bushel, compared to $0.64/bushel to the Gulf. So even though the distance to PNW is only one fifth longer, the rate is double. This would not occur if there was de facto competition. <br /> <br />The ocean rates Gulf to Pacific Rim are double the ocean rates PNW to Pacific Rim, concurrent with the fact that the distances are also double respectively. By comparison, the fact that the increase in rail rates Minneapolis to PNW is three times the increase in distance over the Minneapolis to Gulf route is startling from an economists perspective, and wipes out the advantages one would think would be in effect in terms of total mileage from Upper Midwest to Pacific Rim, effectively erasing the logic inherent in the old adage "the shortest distance between two points is a straight line". <br /> <br />I would have thought the Canadian railroads would have been able to provide some rate relief Minneapolis to PNW with their intrusions into the Upper Midwest, but apparenly they aren't interested in playing that game, since U.S. grain marketers don't have the same access to transport subsidies as their Canadian counterparts. Plus, the Canadian railroads have no interest in ameliorating the U.S.'s trade imbalance with Pacific Rim nations, as a U.S. firm would be assumed to embody.
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