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Portland State University Portland State University
PDXScholar PDXScholar
TREC Friday Seminar Series Transportation Research and Education Center (TREC)
4-8-2016
The Myth of Oregon's "Freight Dependent" Economy The Myth of Oregon's "Freight Dependent" Economy
Joe Cortright Impreza Consulting
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Recommended Citation Recommended Citation Cortright, Joe, "The Myth of Oregon's "Freight Dependent" Economy" (2016). TREC Friday Seminar Series. 2. https://pdxscholar.library.pdx.edu/trec_seminar/2
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The Myth of a Freight-Dependent Economy
Joe Cortright April 2016
CityObservatory.org
Synopsis
• What drives our economy? • Freight facts • Containers: A case study • What about just-in-time? • A cluster case-study • Academic evidence
Freight dependent
Widmer in ItalyWhy?
Great Beer.
Not Transportation Prowess.
Backwards Logic
We export things because we’re good at making them
We don’t make things because we’re good at exporting them
We’re dependent on a lot of things:
• Caffeine Dependent • Electricity Dependent • Oxygen Dependent • Water Dependent • Internet Dependent
Freight Facts
Fact 1: Most freight is heavy, low-value and local
Growing, High value industries ship trivial amounts of freight
Industry Pounds/Worker/Day Minerals 10,000 Wood/Paper 7,348 Food Processing 3,794 Metals 2,243 Apparel 554 Machinery 510 Electronics 50 Software/Prof. Svcs. 0 Source: 2002 Commodity Flow Survey for Portland-Vancouver
Most freight is low value bulk
Commodity Share of Freight Gravel & Stone 32.8% Wood Products 17.4% Non-Metallic Minerals 11.5% Coal & Oil Products 5.6% Total, these bulks 67.3%
High value, low weight
Electronics
Machinery
Wood Products
Wheat
Value per pound of shipment (gross)
0 12.5 25 37.5 50
$0.11
$0.24
$6.46
$40.47
Source: 2012 Commodity Flow Survey, US Census
Most freight is purely local
Destination of Outbound Shipments: Oregon - 73.6%
Origin of Inbound Shipments: Oregon - 62.1%
Shipments Traveling less than 50 miles: 67.5%
Source: 2002 Commodity Flow Survey for Portland-Vancouer, US Census
Portland-Area Freight Movements by Destination, Origin & Distance Traveled
Fact 2: Oregon’s economy has shifted to lighter, high value products, and tonnage is down sharply
Electronics & machinery drive Oregon economy
0
12,500
25,000
37,500
50,000
2007 20120
30,000
60,000
90,000
120,000
2007 2012
Value, Millions. Source: 2012 Commodity Flow Survey, US Census
Everything ElseElectronics & Machinery
Up 51% Down 12%
Creating just as much value moving 42% fewer tons
0
40,000
80,000
120,000
160,000
2007 20120
50,000
100,000
150,000
200,000
2007 2012
Source: 2012 Commodity Flow Survey, US Census
Tons (Thousands)Value (Millions)
Down 42%
Oregon exports: Value up; tonnage down
0
10,000
20,000
30,000
40,000
2007 20120
5,000
10,000
15,000
20,000
2007 2012
Source: 2012 Commodity Flow Survey, US Census
Tons (Thousands)Value (Millions)
Up 55% Down 44%
Oregon: Trucking ton miles down 40%
0
7,500
15,000
22,500
30,000
2007 2012
Source: 2012 Commodity Flow Survey, US Census
Fact 3: The economy is up; freight is down.
National: Freight intensity of GDP down
Oregon: Freight intensity down 40%
Oregon Truck traffic still below year 2000 levels
Trucks crossing Columbia down 20%
12,000
15,000
18,000
21,000
24,000
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Source: ODOT, Class 6 and higher trucks crossing I-5 and I-205, AADT
Flawed Freight Plans
2010 Metro Regional Freight Plan
Trade volumes in Portland are expected to double by 2035, to 600 million tons annually.
The region’s goods movement system will need to absorb a doubling of freight volumes by 2035, with approximately 75 percent of that dependent on trucks . . .
REGIONAL FREIGHT PLAN
2035June 2010
June 2010
Containers: Case Study
Feb. 2015: Hanjin leaves
Apr. 2015: Hapag-Lloyd leaves
Portland’s Decline
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Source: Pacific Maritime Assn. (2015-16 estd.)
Portland Share of West Coast Container Traffic
Always a bit player
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0% 19
95
199
6
199
7
199
8
199
9
200
0
200
1
200
2
200
3
200
4
200
5
200
6
200
7
200
8
200
9
2010
2011
2012
2013
2014
2015
2016
Source: Pacific Maritime Assn. (2015-16 estd.)
Portland Share of West Coast Container Traffic
Port in declinePortland Business Journal, Feb. 2016: “The port's other businesses are also struggling mightily.”
Containers
Grain
Bulk Minerals
Break Bulk
Cars
Change in Cargo Volume, 2014-2015, Port of Portland
-90% -67.5% -45% -22.5% 0% 22.5%
2.3%
-85%
-9%
-41%
-86%
After Hanjin left
• Portland job growth accelerated from 3.2 percent to 3.8 percent
• Portland metro area added 38,000 jobs
• Unemployment dropped to 4.4%—the lowest level in 15 years
• Change: February to December 2015, compared to previous year.
Portland: 2nd fastest growing metro in 2015
Oregon Employment Department
High Tech on HanjinWhile the imminent departure of Hanjin Shipping Co. puts a severe dent in the Port of Portland's containerized trade, it won't affect companies that ship some of the state's most valuable products. Semiconductors, computer equipment, medical devices and other high-value items move primarily by air these days.
"At a high level, will it really affect us? No," said Jason Willey, investor relations director at Hillsboro's FEI Corp.
The company doesn't expect a customer to wait three or four weeks for a focused ion-beam system to cross the ocean and clear customs.
The port says the most valuable things that come to or go from Portland by sea are autos and agricultural products, from wheat to logs. But highly engineered computer product and other technical equipment flies in and out of the region's airports.
Athletic & Outdoor Cluster
Athletic & Outdoor
• 14,000 Jobs
• Hundreds of firms
• Very high wages
• Global leadership
• Fast-growing
Athletics & Outdoor Specializations
Portland specializes in these steps in the value chain
A&O Supply Chain
Donguan Memphis
Rail to Memphis
Portland
Ship to LA
Portland: High End of the Global Value Chain
AcFunction Location Wage Activity Location Avg. Pay
Production China $2 to $3/hour
Distribution Midwest $12-14/hour
Design, Finance Marketing, Mgt. Portland $40/hour
Academic Evidence
Does Freight MatterThe 90% reduction in freight transportation costs in the past century, and the declining importance of the good-producing sector of the economy, means that in our view, it is better to assume that moving goods is essentially costless than to assume that moving goods is an important component of the production process.”
Ed Glaeser, Harvard, July 2003 “Cities, Regions and the Decline of Transport Costs”
Diminishing Returns
• Highway Investment has strong diminishing returns
• Building the first roads has a big impact; later roads have successively smaller impact
• New roads today have almost no impact
Shirley & Winston, 2004
Rate of return on highway investments, by decade
0
4.5
9
13.5
18
1970s 1980s 1990s
Eberts, 2014
Figure 5. Gross Rate of Return of Highways to Consumers and Producers
Figure 6. Net Rate of Return of Highways and Interest Rates
Source: Author’s calculations of Mamuneas’s data.
-0.100
0.000
0.100
0.200
0.300
0.400
0.500
1948
1951
1954
1957
1960
1963
1966
1969
1972
1975
1978
1981
1984
1987
1990
1993
1996
1999
2002
Producer
Consumer
0.000
0.100
0.200
0.300
0.400
0.500
0.600
1948
1952
1956
1960
1964
1968
1972
1976
1980
1984
1988
1992
1996
2000
2004
total net rate of return
interest rate
57
Randall Eberts, White Paper on Valuing Transportation Infrastructure, Upjohn Institute, 2014
Duranton, Morrow & Turner, 2014
More highways = Heavier, but less valuable exports
A 10% increase in a city’s stock of highways causes about a 5% increase in the weight of exports, but does not cause a measurable change in the value of exports. . . . a 10% increase in within city highways . . . cause about a 5% decrease in the unit value of the city’s exports.
. . . city highways do not increase the value of exports . . . changes in trade caused by city highways probably do not have large welfare effects. . . . this suggests planners should not give much consideration to trade effects when planning a city’s highway network
Duranton, Morrow & Turner, “Roads & Trade: Evidence from the US,” Review of Economic Statistics, 2014
18-wheel welfare Cadillac
CBO:
Truck subsidies = $57 and $128 billion annually social costs, over what trucks pay in taxes,
Subsidy = 21 to 46 cents per truck mile.