(Thomas - R. - Leinbach, - Cristina - Capineri) - Globalized Freight Transport PDF

Globalized Freight Transport
TRANSPORT ECONOMICS, MANAGEMENT AND POLICY
Series Editor: Kenneth Button, Professor of Public Policy, School of Public Policy, George
Mason University, USA
Transport is a critical input for economic development and for optimizing social and political
interaction, Recent years have seen significant new developments in the way that transport is
perceived by private industry and governments, and in the way academics look at it.
The aim of this series is to provide original material and up-to-date synthesis of the state
of modern transport analysis. The coverage embraces all conventional modes of transport but
also includes contributions from important related fields such as urban and regional planning
and telecommunications where they interface with transport. The books draw from many dis-
ciplines and some cross disciplinary boundaries. They are concerned with economics, plan-
ning, sociology, geography, management science, psychology and public policy. They are
intended to help improve the understanding of transport, the policy needs of the most eco-
nomically advanced countries and the problems of resource-poor developing economies. The
authors come from around the world and represent some of the outstanding young scholars
as well as established names.
Titles in the series include:
Structural Change in Transportation and Communications in the Knowledge Society

Edited by Kiyoshi Kobayashi, T. R. Lakshmanan and William P. Anderson
Globalization, Policy and Shipping
Fordism, Post-Fordism and the European Union Maritime Sector
Evangelia Selkou and Michael Roe
Cost–Benefit Analysis and Evolutionary Computing
Optimal Scheduling of Interactive Road Projects
John H. E. Taplin, Min Qiu, Vivian K. Salim and Renlong Han
The Future of Automated Freight Transport
Concepts, Design and Implementation
Edited by Rob Konings, Hugo Priemus and Peter Nijkamp
Telecommunications, Transportation and Location
Kenneth Button and Roger Stough with Michelle Bragg and Samantha Taylor
Competition in the Railway Industry
An International Comparative Analysis
Edited by José A. Gómez-Ibáñez and Ginés de Rus
Globalized Freight Transport
Intermodality, E-Commerce, Logistics and Sustainability
Edited by Thomas R. Leinbach and Cristina Capineri
Globalized Freight
Transport
Intermodality, E-Commerce, Logistics and
Sustainability
Edited by
Thomas R. Leinbach
University of Kentucky, USA
Cristina Capineri
University of Siena, Italy
TRANSPORT ECONOMICS, MANAGEMENT AND POLICY
Edward Elgar
Cheltenham, UK • Northampton, MA, USA
© Thomas R. Leinbach and Cristina Capineri 2007
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A catalogue record for this book

is available from the British Library
Library of Congress Cataloguing in Publication Data

Globalized freight transport : intermodality, e-commerce, logistics and
sustainabilty / edited by Thomas R. Leinbach, Cristina Capineri.
p. cm. – (Transport economics, management and policy series)
Includes bibliographical references and index.
1. Freight and freightage. 2. Transportation. 3. Business logistics. 4. Freight
and freightage–Europe. 5. Freight and freightage–North America. I. Leinbach,
Thomas R., 1941- II. Capineri, Cristina. III. Series: Transport economics,
management and policy.
HE199.A2G53 2007
388.044–dc22 2006014935
ISBN-13: 978 1 84542 502 9

ISBN-10: 1 84542 502 2
Printed and bound in Great Britain by MPG Books Ltd, Bodmin, Cornwall
Contents
List of figures vii
List of tables ix
List of editors and contributors xi
Preface xii
1. The global economy and freight transport flows 1

Thomas R. Leinbach and Cristina Capineri
PART I GLOBALIZED TRADE AND INTERMODALITY:

EUROPEAN AND NORTH AMERICAN
PERSPECTIVES
2. Shifting modes and spatial flows in North American

freight transportation 17
John T. Bowen and Brian Slack
3. Intermodal freight transport in Europe 54
Michel Beuthe
PART II GLOBALIZED TRADE AND LOGISTICS:

EUROPEAN AND NORTH AMERICAN
PERSPECTIVES
4. Globalized trade and logistics: North American

perspectives 103
Jean Paul Rodrigue and Markus Hesse
5. Globalized trade, logistics and intermodality: European
perspectives 135
Dirk Henstra, Cees Ruijgrok, Lori Tavasszy
PART III GLOBALIZED FREIGHT, SUSTAINABILITY,

E-COMMERCE AND TECHNOLOGY
6. E-commerce, logistics and the future of globalized freight 167

William P. Anderson and Thomas R. Leinbach
v
vi Contents
7. Sustainable solutions for freight transport 189

William R. Black
PART IV GLOBALIZED FREIGHT AND POLICY

CONSIDERATIONS IN EUROPE AND
NORTH AMERICA
8. Policy implications of dynamic globalized freight flows in

Europe 219
Roger Vickerman
9. Policy implications of dynamic globalized freight flows in
North America 238
Mark Maggio and Roger Stough
10. Globalized freight transport: conclusions and future research 259
Cristina Capineri and Thomas R. Leinbach
Index 273
Figures
2.1. Value-weighted mean distance for trade in goods
(imports and exports combined), 2003 19
2.2. Shifts in relative share of container traffic, 1983–2003 32
2.3. Intermodal rail traffic growth 33
2.4. Major air freight hubs in North America 48
3.1 Origins and destinations of air freight flows (EU-25) 63
3.2. Combined railroad transport in 1000 tonnes 69
3.3. Containers transported by ICF and affiliated firms 71
3.4. EU-15 maritime containers 72
4.1. Major modal US gateways, 2003 111
4.2. Traffic at major North American container ports, 2003 113
4.3. Tonnes of landed freight at major American airports, 2003 115
4.4. Daily truck volume, 1998 117
4.5. The North American land bridge 118
4.6. Containerized cargo flows along major trade routes,
2000–2004 121
4.7. Volume to capacity ratio of road transportation, 1998 123
5.1. The evolution of logistics networks through time 137
5.2. Growth of trade flows to and from Western Europe,
1993–2003 139
5.3. Freight transport growth within the EU-15 140
5.4. Expected growth in world freight travel by land modes,
2000–2050 141
5.5. Container traffic growth favors Northern EU ports 142
5.6. Key areas of economic activity in Europe 143
5.7. Travel times in one-hour bands from the Netherlands to
EU destinations 144
5.8. Flexibility in hybrid networks 151
5.9. Different levels of logistical sophistication in different
sectors of industry 154
5.10. Organizational structure for a collaborative
logistic network 156
5.11. Example of hybrid multimodal network using an inland
navigation hub network for well-predicted demand,
and a truck network for excess demand 157
vii
viii Figures
5.12. The Sony multimodal hybrid network 158

5.13. The VOS network before reorganization 159
5.14. The VOS network after reorganization 160
6.1. Total logistics costs 175
6.2. Stakeholders in e-commerce 183
6.3. Physical and virtual value chains 185
7.1. Transatlantic container traffic at US ports 198
7.2. Transatlantic container traffic at European ports 198
7.3. Transpacific container traffic at US ports 199
7.4. Transpacific container traffic at Asia ports 199
7.5. Transatlantic and transpacific container traffic 1998–2002 200
8.1. EU-15 external trade, 1992–2003 221
8.2. EU-15 external trade and GDP 221
8.3. Openness: share of trade in GDP 222
8.4. Modal shares of EU external trade, 2003 223
8.5. Traffic by major European ports, 1985–2004 224
8.6. Container traffic by major European ports, 1980–2004 225
8.7. Air cargo traffic at major EU airports 226
8.8. Modal split of intra-EU-15 and US freight traffic,
1970–2000 227
9.1. US international trade in goods and services, 1992–2003 240
9.2. Total US imports and exports 241
9.3. Share of trade in GDP, 1992–2003 241
9.4. US transportation in GDP, total 242
9.5. Modal shares of US international merchandise trade by
value and weight, 2001 243
9.6. Modal shares of US international merchandise trade by
value and weight, 1997 244
9.7. Traffic by top 10 US maritime container ports,
1995–2004 245
9.8. Top 10 US airports for international freight by weight,
1990, 1995, 2000 246
9.9. Modal split of US intra-trade by weight 247
Tables
2.1. Domestic freight transportation in the Group of
Seven economies 18
2.2. Modal shares of commercial freight activity in the US 20
2.3. Modal shares of Canada–US crossborder trade, 2001 24
2.4. Modal shares in Canada and US intercontinental trade 25
2.5. Top 20 US international freight gateways, 2001 27
2.6. US–Canada container traffic growth, 1983–2003 31
2.7. US rail intermodal shipments 33
2.8. Top 15 air freight carriers, 2003 45
2.9. Links in the US air transport system with heaviest
freight flows, 2004 47
3.1. Transport in EU-15 by mode and average annual change 57
3.2. Modal split EU 15 57
3.3. Transport in EU-25 by mode and average annual change 58
3.4. Modal split EU-25 59
3.5. Modal split in Eastern Europe and Baltic States 59
3.6. Relative importance of the air freight markets in
2003 61
3.7. Cargo and mail loaded and unloaded in major
European airports 62
3.8. Top ten European airlines in cargo traffic, 2004 64
3.9. International cargo traffic of the top airlines, 2004 65
3.10. Top world air forwarders market shares, 2002 65
3.11. Railroad combined transport by UIRR firms in
tonnes-km and by means 70
3.12. Traffic through the Alps 73
3.13. Crossing of the Channel and Pyrenees 74
4.1. US freight shipments by tonnes and value, 1998,
2010, 2020 108
4.2. Major North American gateways 112
5.1. Existing intermodal markets in Europe 146
5.2. Concerns and benefits for extreme design options 154
6.1. E-commerce penetration in US industries, 2003 167
6.2. Per cent of enterprise turnover from e-commerce,
2004 168
ix
x Tables
6.3. B2B marketplaces 172

7.1. Emissions for freight modes 209
7.2. Objectives and activities necessary to improve
sustainability of freight flows 213
Editors and Contributors
Thomas R. Leinbach Professor, Department of Geography, University of
Kentucky.
Cristina Capineri Associate Professor, Faculty of Political Sciences,
University of Siena.
William P. Anderson Professor, Transportation Studies Center and
Department of Geography, Boston University.
Michel Beuthe Professor, Groupe Transport and Mobilité, Facultés
Universitaires Catholiques de Mons (FUCAM), Mons, Belgium.
William R. Black Professor, Department of Geography, Indiana
University.
John T. Bowen Associate Professor, Department of Geography and
Urban Planning, University of Wisconsin, Oshkosh.
Dirk Henstra Twynstra Gudde, Department of Mobility, Amersfoort.
Markus Hesse Institut für Geographische Wissenschaften, Freie
Universität Berlin.
Mark Maggio Professor, Luther College, Decorah, Iowa.
Jean Paul Rodrigue Associate Professor, Department of Economics and
Geography, Hofstra University.
Cees Ruijgrok TNO Inro/Universiteit van Tilburg.
Brian Slack Professor, Department of Geography, Concordia University,
Montreal.
Roger Stough NOVA Endowed Chair and Professor, School of Public
Policy, George Mason University.
Lori Tavasszy TNO Inro (Institute for Traffic and Transport, Logistics
and Spatial Development), Delft.
Roger Vickerman Jean Monnet Professor of European Economics,
University of Kent.
xi
Preface
The concern for the viability of freight systems was embedded within the
overall goals of a project intended to generate new research on crucial
transport issues and involved both European and North American scien-
tists. With funding from the European Union and the National Science
Foundation, STELLA (Sustainable Transport in Europe with Linkages
and Liaisons with America) and STAR (Sustainable Transport Analysis
and Research) were successful over recent years in creating a dialogue
among European and North American scholars through a set of focus
groups on various themes associated with transport. The essence of this
volume is derived in part from major findings from discussions in Focus
Group 1 (Globalization, E-Economy and Trade) held at Certosa di
Pontignano, Siena (June 2002), Brussels (March 2003) and Washington,
DC (January 2004). In addition a topical users and policy forum meeting
held in Bologna in June 2004 aided in the development of the volume pre-
sented here.
Essentially this focus area noted above was charged with analysing the
ways in which the new economy is affecting transport, trade and related
activities in North America and Europe in the context of emerging global
economic activities, interactions and communications. More specifically the
group’s activities were intended to address the role of transport and com-
munications in facilitating globalization, particularly in regards to inter-
modal freight services, manufacturing processes and logistical solutions to
shipping goods; to examine the role of ‘e-commerce’ and the dynamics of
the ‘new economy’ in this evolutionary globalization/transport process; and
to examine the status of policy developments in regards to trade, transport
and communications and private sector firms.
We wish to acknowledge several people for their assistance and contri-
butions over the duration of the meetings of the focus group. For the initial
meeting at Certosa di Pontignano we wish to thank the University of Siena
for their support. For the focus group meeting in Brussels we wish to thank
the Tuscan regional government for use of their meeting facility. In add-
ition we wish to acknowledge with gratitude the generous support of the
US National Science Foundation’s Programs in Geography-Regional
Science, Western Europe, International Division, Infrastructure Systems
Management and Hazard Response under an award to William Black, PI,
xii
Preface xiii
Indiana University (BCS-0211499). Funding for the European contribu-

tions to STELLA was provided by the European Community, Vth
Framework Program for Research and Development.
Thomas R Leinbach and Cristina Capineri

Florence, October 2005
For Marge and Amy and Fiore and Cesare

1. The global economy and
freight transport flows
Thomas R. Leinbach and Cristina Capineri
INTRODUCTION
Freight transportation has always been an integral component of economic

development. It has now emerged as one of the most critical and dynamic
aspects of the transport sector, where change has become the norm. Freight
transportation is the main element supporting global commodity and more
generally supply chains, complex and functionally integrated networks
of production, trade and service activities that cover all stages of produc-
tion from the transformation of raw materials to market distribution and
after market services (Nijkamp 2003). Yet the rising cost and complexity of
shipping and delivering goods is adding to profit pressures faced by manu-
facturers across the globe. However, as a result of the surge in global activ-
ities over the past ten years, this theme has taken on new dimensions and
importance.
Highway flows have long dominated freight flows in Europe and North
America. By 2020, the US highway system and truck fleet will move 18
billion tonnes of the domestic volume and over 1 billion tonnes of inter-
national freight. By that date, cargo value will triple from today’s $9 trillion
to $30 trillion, and highway-bound freight will represent nearly 80 per cent
of all cargo value, domestic and international. In the EU-15 road freight
transport accounted for 1348 billion tonnes/km in 2002, having grown over
22 per cent from 1991 to 2002. Similarly data on European trade (EU-15)
confirm the growth trend so that by 2003 the combined value of import and
export trade accounted for over Euros 970 billion.
In addition over the past two decades sea freight, and especially con-
tainer traffic, has grown rapidly. In 2001 global containerized freight
throughput reached 237 million twenty-foot equivalent units (TEUs)
(UNCTAD 2003). While highway, rail and maritime freight flows are
increasing, the growth of air cargo associated with the development of
global production networks is also of vital importance. After the dramatic
6 per cent drop in 2001, induced by a simultaneous slowing of the world’s
1
2 Globalized freight transport
largest economic groupings, collapse of the ‘technology bubble’ and ter-

rorist attacks, air traffic increased more than 7 per cent in 2002. World air
cargo traffic will expand at an average annual rate of 6.2 per cent for the
next two decades, tripling current traffic levels. While not expanding as
rapidly as the intra-Asian markets, the more mature North American and
European markets are increasingly linked to those in Asia and will realize
increased volumes from those connections (Boeing 2004). The inter-
national division of labor as well as the utilization of information and com-
munication technologies combined with decreases in the cost of transport
has fostered an era of economic globalization resulting in significant
growth in freight flows worldwide.
This rapid growth is due to a complex set of production factors (for
example, the growth of outsourcing and diverse supply chains) combined
with the explosion of technology, especially the Internet, which has urged
us to move ever closer to a position of seamless behavior in the transport
sector (Leinbach and Bowen 2005). However as a result of this explosion
of activity and despite the application of technology and efficient solutions
to the movement of freight, points of constraint have developed. These
problems range from the inadequate supply of railway services to airport
and port congestion. Recent growth in international trade has placed
greater pressure on international gateways. Moreover, increasing security
concerns are boosting costs and increasing delays. As a result, some manu-
facturers are retaining their own assembly lines as backups and are gearing
up production to fill delivery-related gaps.
Outsourcing for many firms is clearly being slowed because of trans-
port problems. Other firms are shifting to costlier but more reliable modes
of transport (Aeppel 2004). In the last decade there has been a steady
growth of global trade and concomitantly freight transport (Capineri and
Leinbach 2003, 2004, 2006). The drivers of the shifts in transportation and
in the distribution of goods are the increased trend toward knowledge
sharing, the vertical disintegration of firms and the consolidation of the
networked firms, which are becoming more diverse in their business activ-
ities. The emergence of information networks with faster contacts and
transaction times imply faster and more reliable shipments, particularly in
innovative sectors (biotechnology, informatics, nanotechnology) but also in
the more traditional manufacturing activities.
The development of transport services and adequate infrastructures to
handle freight flows has become an important factor of economic compe-
tition between regions (Capineri and Randelli 2004; Bowen and Leinbach
2004; Leinbach and Bowen 2005). The whole world is not only becoming
our market but also our competitor. But competition more often takes
place at the level of sourcing and distribution processes rather than at the
The global economy and freight transfer flows 3
level of production. Thus, the increase of competition has made it neces-

sary for firms to reduce or even eliminate stocking and distribution costs
and to follow the ‘speed imperative’ as with just-in-time (JIT) production,
which reduces inventory stocks (and concomitantly the space and staff that
must be devoted to this function), enhances quality control by making
defective work more immediately apparent and accelerates time to market.
Currently, the increased opportunities for communications, the efficiency
of transport operations as well as the increased standardization of pro-
duction processes make it possible to integrate supply chains on a world-
wide scale (Hall and Braithwaite 2001).
THE CONCEPT OF SEAMLESSNESS IN FREIGHT

MOVEMENTS
Various adjustments and enhancements, both subtle and conspicuous, to

transport services have impacted the sector and its relations with the glob-
alization process. Accommodating new technologies, new markets and new
organizational structures has required major changes on the part of
providers and consumers, whether individuals or firms. The pressure of
competition requires that firms increasingly be focused upon greater
efficiency. Essentially this points to the gradual evolution of a ‘seamless’
transport market (Leinbach and Bowen 2005). The basic notion suggests
an environment in which national and modal boundaries neither delay
movements nor hinder the choice of the most efficient route and/or modal
combination for the movement required (Willoughby 2000). The liberal-
ization of many national (and increasingly regional and international)
transport markets and the innovation dynamics of technology-driven ser-
vices strongly influence this drive for seamlessness.
The backcloth for the drive toward seamlessness in transport services
is first and foremost the increasing globalization of economic activities.
Transport and communications especially play a fundamental role as
enabling mechanisms in this process. While internationalization has been
occurring for centuries, the activities associated with it have been impacted
by critical innovations. One major element in these developments has been
the expansion of the transnational corporation and spatially disaggregated
production chains (Leinbach and Bowen 2005). The coordination and
regulation as well as the geographical configuration of these networks have
immense importance for the profitability and viability of commerce as
practiced by enterprises. In a very real way, transport services hold these
global production networks together (Henderson et al. 2002). The nature
of transport services and the way they are applied has become an
immensely important consideration for firms as they seek to maintain a

competitive advantage.
Having identified the quest for a seamless transport market, it is import-
ant to identify the forces which are driving this quest. First, in a general per-
spective, it is clear that intense competitive pressures require goods- and
services-producing firms to manage almost simultaneously multiple inter-
organizational information and material flows. The global scale of this task
makes it especially daunting. But attaining efficiencies in this complex
endeavor allows firms to source, manufacture and deliver their goods and
services more efficiently, faster and cheaper. This development has forced a
radical rethinking in the architecture of production, the importance of
traditional supply chain relationships and the role of logistics. Logistic
activities have become a strategic mechanism in the transport systems and
competitive assets of regional economies. In 2000 logistics activities con-
tributed to 16 per cent of world gross domestic product (GDP) (18 per cent
in the EU) and the market of this sector has increased by more than 6
per cent on average, while logistics outsourced services grew by over 11 per
cent. Transport and logistics are outsourced for about 30 per cent of the
firms and their costs account for 10 per cent to 30 per cent of the total pro-
duction cost of an item, although the percentage varies according to the
type of product (ELA 2001).
TOWARD SEAMLESSNESS IN FREIGHT TRANSPORT
The lack of seamlessness has numerous consequences and can be witnessed

at several levels. First, logistic activities are highly concentrated in a few
gateways and in strategic regions, which often results in congestion and
delays in loading and unloading, which can cause bottlenecks in the chain.
Thus, some companies are setting up distribution centers next to their over-
seas factories from where finished goods or components are shipped
directly to an end customer rather than trying to bring goods into the US
or Europe first and then shipping them to the customer. Other moves
include hiring third parties that specialize in operating global distribution
systems, setting up warehouses closer to main gateways and bringing in
products through less overtaxed ports, including those on the East Coast
of the US. Companies are also investing heavily in new information tech-
nology that allows them to plan and schedule production and anticipate
disruptions to far-flung supply chains. Other examples show a return to
regional suppliers even if production costs may be higher.
As we attempt to achieve seamlessness, the object of attention must of
course be the ‘seams’ themselves. By this we mean the points of friction
where smooth flows can become constrained or interrupted. This becomes

more complex as we imagine networks of different types intersecting
with one another. In a simple way of course we have infrastructural seams
(differences in rail gauges and changes in modes), operational seams (sig-
naling systems, speed constraints), functional seams (processing points
where goods change form and value as well as distribution points where
repackaging and finishing occurs before onward movement) and of course
institutional seams (tariffs, taxes, pricing, data sharing, customs).
In many ways the attempts to improve the efficiency of freight transport
and pursue the notion of seamlessness may be viewed through several
critical concepts. These are the notions of intermodality, technology and
e-commerce, logistics and sustainability. These ideas are briefly elaborated
below before discussing the organization of the book.
INTERMODALITY
While individual transport modes have been transformed by technological

innovations, much of the recent reduction in transport costs (including
costs measured in terms of time) has come through measures to reduce the
barriers traditionally separating different modes (that is, road, rail, sea, air).
The clearest illustration of intermodalism is containerization through
which containers can be relatively easily transferred among ocean, rail and
road (truck) transport systems (Slack 2001).
The success of intermodalism depends upon the more general inter-
nationalization of standards that has facilitated globalization. In this regard,
the dimensions of a sea freight container can be likened to the technical
specifications of the nearly universally available computer operating systems
and office software suites that emerged in the 1980s and 1990s (Borrus 2000).
Intermodalism is also contingent upon regulatory changes and greater incor-
poration of information technology into transportation systems. With
regard to the former, transport has been among the most strictly regulated
service sectors in many economies, with different bodies regulating separate
modes. To permit goods to be passed easily among modes has required some
degree of regulatory harmonization. In the case of the latter, smoothing the
connection among modes has been facilitated not only by common stand-
ards and specialized equipment (to lift a container from a ship to a waiting
truck, for instance) but also by the development of systems permitting the
rapid dissemination of information about shipments. We further explore the
importance of information technology in transport services below.
Intermodalism is regarded as a particularly important cure for land
transport congestion but has contributed to that same problem in some
areas. While the expansion of global economic activity has been predicated
upon the earlier discussed advances in long-haul transportation, most trips,
both for people and for goods, are relatively short-haul. One result has been
worsening congestion on highways in densely populated conurbations.
Intermodalism offers a partial solution by shifting a portion of interurban
trips to rail. But intermodal transfers have exacerbated congestion within
certain urban areas, especially those adjacent to major seaports that attract
and disgorge a colossal volume of containers daily (Priemus 1999).
INFORMATION TECHNOLOGY
While virtually no sector of the economy has been untouched by the advent
of new information technologies (IT), their impact upon transport services
has been profound. Several examples will give some sense of the breadth of
applications of IT that have fostered a greater degree of seamlessness in trans-
port. First, crossdocking is an increasingly pervasive practice in which goods
arriving on one vessel (for example, truck, freighter aircraft) at a hub or other
central facility are immediately dispatched on another vessel bound for the
goods’ final destination, obviating the need for any storage time at the inter-
mediate location. Crossdocking depends on IT tools including bar code scan-
ners linked to complex database management systems. Second, the efficiency
of many different transport modes has been enhanced through the use of
global positioning systems, permitting express firms for instance to minimize
pickup and delivery times. Third, warehouse management information
systems permit the movement of goods within transport hubs and terminals
to be largely automated, minimizing both handling costs and errors.
The use of IT has also enabled firms to more closely track and control
the flow of goods so that the time embodied in a production process is not
merely sped up but is also more carefully managed. For example vendor-
managed inventory systems (VMI) enhance quality control by making
defective work more immediately apparent and accelerate time to market
(Lyons 2002). Perhaps one of the more important applications of informa-
tion technology which has had a major impact on the growth of commer-
cial interactions is e-commerce.
E-COMMERCE
The growth of the digital economy has had important implications on

transportation demand and supply both for goods and people. Particularly
important is the growth of e-commerce, that is the production, distribution,
marketing, sale or delivery of goods and services by electronic means

(Leinbach 2001). E-commerce implies transactions for a service which is
completed entirely on the Internet from selection to purchase and delivery
or it involves ‘distribution services’ in which a product, whether a good or
a service, is selected and purchased on-line but delivered by conventional
means.
Thus electronic forms of communication play a complementary role in
the transport/infrastructure system and show positive and negative exter-
nalities. Among the positive externalities we certainly can witness a high
speed of accessibility and information especially in peripheral areas. In
regards to negative externalities, a ‘probable’ effect will be a strong compe-
tition among the networks of various modalities in the light of congestion,
saturation and pollution phenomena. In particular, many have assumed
that the Internet changes everything, rendering all the old rules about com-
panies and competition obsolete. However after the initial fervor, it is time
to consider the Internet as an enabling technology, a powerful tool to be
used by any economic activity as part of any strategy. In fact Internet tech-
nology, as the latest stage of an ongoing evolution of information technol-
ogy, provides better opportunities for companies to establish distinctive
strategic positioning than did previous information technology.
The value of integrating traditional transport and Internet methods
creates potential advantages as the Internet can be used to reconfigure
traditional transport patterns of movements or to find new combinations
of e-networks and traditional networks (road, rail, and so on). This
takes place in supply chains which simultaneously raise the possibility of the
‘e-materialization’ of some goods and services.
One aspect of the relationship between e-commerce and transportation
is that information and communication technologies can be used to reduce
transaction costs associated with trading goods and services (Anderson
et al. 2003). The development of e-commerce is clearly related to the devel-
opment of producer services. Although a system whereby goods are
delivered directly to the consumer’s door may seem an expensive proposi-
tion, total distribution costs are lower under an e-commerce model.
Reduced costs may also result from the process of disintermediation
(regional distributors are eliminated) and reintermediation where content
aggregation occurs. E-commerce may act as a substitute for personal move-
ment of freight transportation of the package delivery variety.
In the discussion about the influence of e-commerce on the demand for
transport, three aspects play a role:
1. E-commerce changes the demands for goods in terms of volume and

in terms of the type of goods.
2. E-commerce suppliers make use of different distribution concepts than

traditional retailing. This means that e-commerce generates a different
need for the transportation of goods.
3. E-commerce could affect the number, size and location of physical
points of sale, such as shops. In the competition with e-commerce,
traditional retail outlets can be reduced or even increased in number or
size and location can be influenced. Such changes could affect the
traditional distribution of goods to retail businesses in shopping areas
(Visser and Nemoto 2003).
LOGISTICS AND GLOBAL PRODUCTION

NETWORKS
Logistics has become an integral part of the modern production process.

This term encompasses the process of planning, implementing and con-
trolling the efficient, effective flow and storage of goods, services and
related information from point of origin to point of consumption for the
purpose of conforming to customer requirements. Perhaps more critically,
logistics enables companies to get the right goods to the right place at the
right time in the right condition and at the right cost. Important changes
in technology, markets, institutional structures and management theory
have led to new ways of conceptualizing this process and the development
of new efficiencies. Recent developments in logistics include the introduc-
tion of the notion of ‘reverse logistics’ that focuses upon the supply chain
that flows opposite to the traditional process of order acceptance and
fulfillment. For example, reverse logistics includes the handling of cus-
tomer returns, the disposal of excess inventory and the return journey of
empty trucks and freight cars. As part of this and closely related is the
notion of ‘green logistics’, the process of collecting, moving and storing
used, damaged or outdated products and/or packaging from end users. In
addition, ‘lean logistics’, which has evolved to the term ‘agile logistics’, has
become important (Hines et al. 2001). Derived from the Toyota Motor
Company, these similar concepts in logistics propose a new way of looking
at the supply chain and an alternative way of rethinking the logic of value
creation. Central to each concept is a detailed understanding of ineffi-
ciencies so that radical or incremental improvements may be made through
a framework called ‘value stream mapping’. Overall the rationale is to con-
tribute toward the development of more general logistical systems.
Evolving this goal further has included the development of integrated
logistical systems where manufacturing and logistics are fully integrated.
This process will be characterized by a deep enterprise-wide exchange of
information that provides for a fast and flexible flow of materials and prod-
ucts (McKinnon 2001). It is important to note that logistics in the economy
has two dimensions: logistics management in manufacturing and distribu-
tion organizations and logistics organizations providing services to the
manufacturing and distribution companies.
The externalization of logistics functions over the past decade has fueled
the rapid growth of what is referred to in the industry as third-party logis-
tics (3PL). 3PL firms carry out logistics functions that would once have
been performed by either the shipper (that is, the first party) or the recipient
(the second party). Much of the burgeoning 3PL business is carried out by
major freight forwarders (the traditional intermediary between a shipper
and an ocean freight or sea freight carrier). These firms leverage the volume
of the shipments they control, their warehouse space (within which they
perform value-added functions such as minor assembly), their expertise in
state-of-the-art logistics practice and their advanced IT systems to lower
the cost of portions of a customer’s supply and/or distribution chain.
A more recent development is the advent of so-called 4PL services, in
which a firm may take over a client’s entire transport and logistics oper-
ation. The importance of IT and of externalized logistics is expected to
grow with both the rapid expansion of business-to-business and business-
to-consumer E-commerce.
The use of IT has also permitted the development of faster, more reliable,
more precisely timed logistics strategies within which information-intensive
transportation services are central. As noted earlier, logistics, broadly
defined, refers to the management of the flow of goods (for example, raw
materials, components, finished goods) through supply and distribution
chains. The internationalization of production networks combined with
the heightened attention to time as a factor in competition (Schoenberger
1994) has made the operation of those chains a far greater concern for firms
in a wide range of industries. In a somewhat self-reinforcing fashion, the
decline in transport costs has contributed to keener international competi-
tion (particularly from China), which in turn has fueled deflation, which
has placed still greater pressure on firms to reduce costs, an important part
of which is the cost of transportation and logistics.
SUSTAINABILITY
Finally the theme of sustainability is critically important as we examine the

trends in freight movements in global perspective. There is currently a
significant debate surrounding issues of freight transport sustainability
(Janic 1999; Black and Nijkamp 2002). The problems to be faced include
excessive emissions that are detrimental to local and global environments,

increased fatalities and injuries, overuse of finite petroleum resources,
intolerable congestion levels and the impact that these have on the unsus-
tainability of modern supply chains. Transport, and particularly freight
transport, has recently been growing faster than GDP. Thus, despite the
increasing concerns about the environmental impact of transport and
increasing attempts to regulate transport through a more sensitive price
mechanism in many countries, the transport intensity of the economy has
been increasing. Moreover, energy consumption for transport activities has
increased 47 per cent since 1985, compared to 4 per cent for the other
economic sectors (EEA 2001). In particular in the EU, transport energy
consumption has grown by about 2 per cent per year during the period
1990–2000 and equaled 365 Mtoe (million tonnes oil equivalent) in 2000
(some 35 per cent of all energy use). As a consequence of the growth in
energy consumption, carbon dioxide emissions from transport also con-
tinued to increase. Aviation is the sector’s fastest growing energy consumer
and road transport is the largest, consuming around 72 per cent of trans-
port energy (including marine bunkers). The increased transport demand
and the continuing shift of transport use toward road and air combined
with the increasing use of heavier, more powerful vehicles have offset the
improvements in fuel economy of improved engine technology.
Among the various solutions to implement sustainability, four have
emerged as key: technology based (hybrid vehicles and alternative fuels,
reduction of empty back hauls); infrastructure based (improvements in effi-
ciency of infrastructure networks); flow based (managements of traffic and
logistic flows); and demand based (modal substitution, pricing incentives,
regulatory measures). For the freight transport sector, policy priorities in the
EU focus on energy efficiency, optimal loading of vehicles, the promotion
of new corridors, improving intermodal transport systems, developing
alternatives to air transport and completion of the internal market in rail
transport. Although interest in these solutions as applied to freight trans-
port is strong, barriers to their implementation are still substantial.
ORGANIZATION OF THE BOOK
The book is framed around four major sections, which have been discussed
above as they relate to freight transport trends. First, globalized trade and
freight is examined in the perspective of intermodality in separate chapters
both from the North American and European perspectives. Bowen and
Slack discuss the North American reliance on freight transport and track
the relative importance of the individual modes and major developments
in each. Then the balance of the modes in North American freight trans-
portation is considered at several scales. This is followed by an examination
of the historical development, contemporary importance and future poten-
tial of intermodal transport in the US and Canada. The chapter subse-
quently focuses on the dynamic air freight industry and its expanded role
in North America and ends with an exploration of the future trajectory of
current trends in North American freight transportation. As a complement
to this chapter Beuthe discusses intermodality in the European context. He
first attempts to measure the extent of intermodality despite the paucity of
data on the topic and to provide a view on the present situation of freight
transport in Europe and the challenges that must be met in the future. In
addition the author reviews the evolution and the present state of the
European Union policies on transport and particularly on inter-modality
along with the obstacles met in Europe by transport solutions combining
different national networks and means. Finally, future perspectives on
inter-modal transport in Europe are discussed.
Part II of the volume examines the role of logistics and the implications
for freight transport in both North American and European contexts. First
Rodrigue and Hesse focus on the ways in which North American freight
distribution systems are adapting to global trends in economic and trans-
port geography. Although those trends are based on a common logic,
namely reducing transport costs and improving efficiency of distribution,
the regional forms in which freight distribution takes shape have their own
specificities. They note that this is particularly due to spatial characteristics
and connections, the framework of transportation in metropolitan regions
and also policy and regulatory issues. The chapter also addresses recent
changes in the global production fabric and their implications for North
America. This includes the emergence of East Asia as a major global
manufacturing region, the enlargement of the production network in the
wake of NAFTA and the way such activities are influencing the demand for
logistics services and goods delivery. As a result, the authors provide new
insights on logistics integration and the changing framework of logistics
networks.
As a complement to this chapter, the one which follows by Henstra,
Ruijgrok and Tavasszy discusses logistics developments in a European
context. The chapter describes megatrends that are shaping international
trade, logistics organization and (multi)modal transport in Europe. It
focuses on impacts, both from the peculiarities arising from the European
unification process and transport policies but also takes into account the
highly fragmented transport market that tries to cope with the increased
level of congestion, the threat of increased taxes and fuel prices as well as
the ever escalating service requirements. They attempt to show that there is
an increasing need for consolidation and collaboration in supply chains

resulting in hybrid multi-echelon networks using multiple routing options.
The principles behind the design of these networks are clarified and the way
these networks can be implemented in a multi-modal context is presented.
Part III focuses specifically on technology and especially the implications
of the growth in e-commerce for globalized trade and freight transport.
The chapter by Anderson and Leinbach reviews the structures and nature
of e-commerce and seeks to assess the potential influence of expanded B2B
e-commerce on volumes, patterns and structure of freight services in both
North America and Europe. The freight industry itself is affected through
shifts in the spatial distribution of production that are induced, in whole or
in part, by the widespread adoption of e-commerce, and structural changes
such as shifts in the mix of goods and services as well as changes in pro-
duction technologies and changes in the firm.
The chapter by Black examines sustainability in the context of global-
ized trade and freight transport. This first examines some of the differing
definitions of sustainability and discusses some of the attributes of trans-
port in general and freight transport in particular that make it nonsustain-
able. This is followed by a discussion of the nature of freight flows in global
trade. Specific problems with these flows as they relate to sustainability are
reviewed. The impacts of globalization are discussed as they relate to the
increased flows that have occurred over the past few decades. Some of the
solutions that have been proposed and in some cases implemented to solve
specific problems of sustainability in the freight transport sector are pre-
sented. In addition problems of security in this sector and their relation to
sustainability are examined briefly. The chapter concludes with a summary
of the various ‘sustainability solutions’.
Part IV of the volume focuses on the policy implications which are driven
by inter-modality, technology, logistics and sustainability implications
for globalized freight flows. Vickerman addresses policy questions in
the European context, and Maggio and Stough emphasize the North
American situation. The concluding chapter draws together the findings
throughout and lays out a template for research needed on a variety of
themes.
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January.
PART I
Globalized trade and intermodality:

European and North American perspectives
2. Shifting modes and spatial
flows in North American freight
transportation
John T. Bowen and Brian Slack
INTRODUCTION: THE FREIGHT TRANSPORT

INTENSITY OF NORTH AMERICAN ECONOMIES
Although the dependence of the North American way of life upon the car,
pickup truck, and SUV is legendary, the relentless movement of goods – by
truck and by train, by ship and by plane – that feeds the region’s immense
appetite for things is less commonly acknowledged. Indeed, the economies
of Canada and the United States are both freight transport-intensive.
The ratio of gross domestic product (measured in billions of US dollars), to
domestic inland freight (measured in billions of freight tonne-kilometers
FTKs), is markedly higher than in the other Group of Seven (G-7)
economies (Table 2.1). The transport intensity in Canada and the US is
chiefly attributable to the sheer physical size of the two countries and
the effective integration of each as a continental economy beginning in
the nineteenth century. The more recent rise of the Sun Belt in the
United States and the rapid growth of Western Canada since the 1960s
have stretched production linkages with a concomitant increase in the
average length of haul (see Table 1-35 in BTS 2005). The transportation
intensity of North American economies has been further facilitated by the
relatively low cost of gasoline and diesel fuel. In April 2005, for example, the
retail price for a liter of gasoline in US dollars was 0.59 in the United States
and 0.74 in Canada versus 1.19 in Japan and 1.54 in Germany (IAE 2005).
In terms of international freight transportation, some sense of the
freight flows engendered by each country’s economy can be garnered from
the relative volume and geographic distribution of their trade in goods
with one another and the rest of the world. As a share of gross domestic
product, trade in goods (imports and exports combined) is lower in the
United States and higher in Canada than in any other G-7 member
country. Canada’s international trade is strongly biased toward the United
17
18 Globalized trade and intermodality
Table 2.1 Domestic freight transportation in the Group of Seven economies
Country Inland freight Gross Domestic Inland Freight

tonne-kilometers Product (billions Intensity
(billions) of US Dollars)a (a/b)
(a) (b)
1990 1999 1990 1999 1990 1999
Canada 380 529 536 679 0.71 0.78
France 172 242 1087 1261 0.16 0.19
Germany 286 412 1546 1818 0.19 0.23
Italy 200 226 918 1043 0.22 0.22
Japan 546 559 4108 4615 0.13 0.12
United Kingdom 149 171 1132 1385 0.13 0.12
United States 3800 4525 7041 9417 0.54 0.48
Note: a GDP is shown in inflation-adjusted year 2000 dollars.
Source: OECD 2003.
States, which accounts for nearly 75 per cent of the former’s trade in goods
(OECD 2005). The United States has a more diversified set of trade part-
ners. Although Canada and Mexico lead the list and the North American
Free Trade Agreement (NAFTA) augmented their importance, the value-
weighted mean distance of US trade is higher than for any other G-7
country except Japan. In 2003 that distance, computed by weighting the
distance to each trading partner by the value of goods traded with that
country, was 4600 kilometers for the US versus fewer than 3000 kilome-
ters for every major European economy (Figure 2.1). American imports
of manufactured goods from Asia are particularly important in lengthen-
ing the mean distance over which US trade takes place and therefore
boosting the transportation activity generated by the gigantic American
economy.
With trade in goods growing much faster than either economy, the
dependence of Canada and the US upon international freight transporta-
tion is likely to increase. Indeed, the value of US manufactured exports has
increased over the past decade even as deindustrialization reduced the share
of manufacturing in the US economy (BTS 2003). Moreover, the increased
internationalization of each economy portends increased domestic freight
traffic as globally sourced goods are distributed to scattered domestic
markets. An additional factor that continues to foster increased trans-
portation is the homogenization of demand via scale-dependent ‘big box’
retailers such as Wal-Mart and Home Depot, which distribute a fairly
Shifting modes and spatial flows 19
Japan
Korea
Australia
Mexico
Iceland
United States
Finland
Hungary
Netherlands
Turkey
Poland
Canada
Ireland
United Kingdom
Czech Republic
Spain
Italy
Sweden
Germany
Belgium
France
Switzerland
Austria
– 1000 2000 3000 4000 5000 6000
Kilometers
Source: Authors’ calculations based on data in OECD (2005).
Figure 2.1 Value-weighted mean distance for trade in goods (imports and
exports combined), 2003
standardized array of goods continent-wide (for example, Andersen

windows manufactured at four locations near Minneapolis, MN). Finally,
the often-noted fragmentation of production processes, both within coun-
tries and internationally, necessarily amplifies the traffic in intermediate
goods. Dell and other electronics manufacturers in particular are well
known for their reliance on transportation services to tie together global
production networks (Kasarda et al. 2004).
The reliance of North America’s two large economies upon transporta-
tion is manifest across the various modes that integrate these vast countries
domestically, with one another, and with the rest of world. Our purpose is
to track the relative importance of those modes and to examine major
developments in each. The remainder of the chapter is presented in four
sections. In the next section, we consider the balance of the modes in North
American freight transportation at several scales. We then move beyond the
traditional categorization of modes to examine the historical development,
contemporary importance, and future potential of intermodal transport in
the US and Canada. The chapter then focuses on the dynamic air freight
industry and its expanded role in North America. The chapter ends with an
exploration of the future trajectory of current trends in North American

freight transportation.
THE BALANCE OF THE MODES IN NORTH

AMERICAN FREIGHT TRANSPORTATION
Against the background of North America’s high and rising dependence

upon freight transportation services, the modal balance has shifted, with
road transport and air freight generally growing faster than freight flows
over the past several decades. We consider the modal balance first in the
context of domestic transportation in each country, then in crossborder
shipments, and finally in the larger intercontinental trade between North
America and the rest of the world.
Domestic Modal Balance
In North America, the truck dominates the domestic movement of goods

by most measures. In 2002 the share of trucking in terms of tonnes shipped
within the United States was 58 per cent, up slightly from 1993 (Table 2.2).
In terms of tonne-kilometers, the share of trucking increased briskly over
the same period to about 32 per cent. The appeal of trucking is greater for
higher-value goods, which helps to explain the commanding 64 per cent
share of trucking in terms of the value of goods shipped domestically in the
United States. Similarly, in Canada over the same 1993–2002 period, tonne-
kilometers for intra-provincial trucking and inter-provincial for-hire
Table 2.2 Modal shares of commercial freight activity in the US
Mode 1993 2002

Value Weight tonne-km Value Weight tonne-km
Truck 65.1 54.5 25.6 63.7 58.2 32.1
Rail 3.9 11.8 26.5 3.7 12.0 27.8
Water 8.6 15.9 24.3 8.3 14.8 16.3
Air 5.5 0.1 0.2 7.4 0.1 0.3
Pipeline 4.3 11.9 16.3 2.7 10.5 16.7
Multimodal 9.2 1.7 4.6 10.6 1.3 5.0
Other/Unknown 3.4 4.0 2.5 3.6 3.2 1.7
Total 100.0 100.0 100.0 100.0 100.0 100.0
Source: BTS (2004).

trucking grew at average annual rates of 4.7 and 6.7, respectively (Trans-
port Canada 2003). In contrast, Canadian rail tonne-kilometers grew just
2.6 per cent per year. Canadian rail traffic is comprised primarily of com-
modities including coal, grain and forest products. The demand for these
raw materials has grown slowly in North America’s postindustrial
economy, though increased exports – particularly to China – may alter that
situation.
The increased weight of time as a dimension of competition in both
manufacturing and retailing has affected all modes of freight transporta-
tion, but has been especially advantageous to trucking. Business success
in many industries has become dependent on reacting more swiftly, innov-
ating more rapidly, and delivering goods quickly (Klein 2004). And the
expectations of consumers infected with the ‘fever of speed’ (Gleick 1999)
have pressured firms across a broad range of industries to move faster. At
the same time, just-in-time (JIT) production and similar supply chain man-
agement strategies have produced smaller, more frequent shipments of
intermediate goods and finished products. The emphasis on speed and
concomitant emphasis on smaller, high-frequency shipments both favor
trucking. In North America, trucking permits more rapid point-to-point
movement of goods versus rail, which is much more likely to require time-
consuming transfers among rail lines.
The suburbanization of manufacturing, wholesaling and retailing is a
further factor sustaining the dominance of trucking in North America
(Hesse and Rodrigue 2004). The typical suburban industrial park, though
occasionally served by rail, is complementary to the truck.
There are, however, several significant constraints on the future growth of
trucking in North America. Trucking is among the most energy-intensive
modes. The number of ton-miles per gallon for trucking is less than one-
quarter the figure for rail (Bernstein 2004). In this regard the trend
in oil prices since 2000 has been inimical to the industry. Second, trucking
is also the most labor-intensive of the major freight transportation modes,
and by the late 1990s many trucking concerns faced serious labor shortages
(Pudrum 2005). Truck-driving is not seen as an attractive job, mainly
because of low wages and poor benefits. Recruiting truckers is made more
difficult by the lengthening average haul, translating into more days away
from home for drivers.
The shortage of labor could be alleviated somewhat by permitting
Mexican trucks to operate across the Rio Grande. Under NAFTA,
Mexican trucks were to be permitted the right to operate anywhere in the
US by 2000 provided they were carrying international cargo, and American
trucking firms were to have gained reciprocal rights in Mexico. However,
safety concerns delayed implementation of this provision (BTS 2003).
Moreover, when this aspect of NAFTA is fully implemented, its impact on

the shortage of labor is expected to be modest (Kerr 2004).
The third challenge for trucking in the United States is the slow pace of
highway infrastructure expansion. Only one major interstate highway
project, the Interstate 69 corridor from Indianapolis, IN to the Mexican
border, was still in progress in 2005, but important links in this potential
artery tying together the three NAFTA economies (the section of I-69 from
Port Huron, MI, to Indianapolis was completed much earlier) remain
mired in controversy. In any case, the capacity crunch in urban areas is a
much more serious constraint than intercity capacity. Across 85 US metro-
politan areas studied by the Texas Transportation Institute, the number of
vehicle-miles traveled over the period 1982–2003 grew 41 per cent faster
than the roadway capacity (Schrank and Lomax 2005). Moreover, the pro-
liferation of premium-priced ‘hot lanes’ such as the 12-mile Express 91
lanes near Los Angeles for which the peak toll is as high as US $7, often
specifically excludes truck traffic (Egan 2005). To the degree that this form
of transport privatization gains hold in North America, it could prove a
significant obstacle to the trucking industry’s growth.
Rail transportation remains dominant in the carriage of lower-value
commodities and overshadows trucking in terms of FTKs within North
America. Overall, rail traffic in both countries has been relatively static, but
the slow growth conceals important shifts in the composition of rail traffic.
In Canada, for instance, the four principal commodities carried by rail have
exhibited either slow growth or significant declines over the past decade
(Transport Canada 2003). Comparing the average annual shipments of
1992–1994 to those of 2001–2003, we see that shipments of grain and
iron ore and concentrates fell while those of coal and forest products grew
modestly. At the same time, however, shipments of other (non-grain) agri-
cultural products, automobiles and auto parts, and refined petroleum prod-
ucts expanded robustly, though from much smaller base levels. Intermodal
traffic, which is examined later in this chapter, is crucial to the future
importance of rail in North America, but as with road transport, rail is
beset by the difficulty of adding new infrastructure, and key urban nodes
such as Los Angeles, CA and Chicago, IL pose the greatest challenges.
In Canada, pipelines actually account for the largest portion of domes-
tic FTKs (Transport Canada 2003), a position that is likely to be bolstered
by the exploitation of the tar sands in western Canada. The colossal size of
the tar sands and their greater importance in a world of higher oil prices
will make Canada a more important energy exporter, particularly to the
thirsty American market to the south. In the United States, too, pipeline
volumes continue to grow, and the opening up of the Arctic National
Wildlife Refuge (ANWR) for oil exploration will stem the decline in oil
shipments from northern Alaska that began when oil production there
peaked in 1988.
The relative importance of domestic waterborne freight transportation
most distinguishes the domestic balance of the modes in Canada and the
United States. The compression of Canada’s population into a narrow band
along the US border reduces the scope for coastwise and inland waterway
transportation. In the US, conversely, these modes remain important, at
least in tonnage terms. The relative value of the goods carried in this fashion
is very low, however, so that waterborne freight transportation accounts for
more than 16 per cent of FTKs but only 8 per cent of the value of goods
shipped in the US. In both countries, the limitations of the St Lawrence
Seaway, particularly the small size of its locks, encourage the use of road
and rail transport for goods that otherwise might move from the interior to
the Atlantic by water (Dan Egan 2005).
Finally, air transport is of only minor significance in domestic freight
transport in North America. The distances involved are generally too small
to warrant the expense of air freight except for urgent, typically lightweight
shipments. In terms of the weight of goods shipped, air freight accounted
for just 0.1 per cent of US domestic traffic in 2002. In value terms, the
mode’s share was 7.4 per cent, up sharply from the early 1990s but still low
compared to the share of air freight in the value of international trade.
Moreover, as described more fully later in this chapter, there are important
reasons to expect air freight’s slow growth in the early twenty-first century
to continue (Scherck 2005).
Crossborder Modal Balance
Canada and the US share significant cultural similarities, a high level of

development, and a long history of peaceful relations – all of which have
been ingredients in the proliferation of dense crossborder economic ties.
Important trade agreements since the 1960s, culminating with NAFTA,
have facilitated the further elaboration of linkages between the two G-7
economies. Those gains have been offset somewhat by increased security
concerns, especially since the terrorist attacks of 11 September 2001. The
disruption in freight flows following the attacks, particularly the two days of
paralysis that beset the air transport system within the US, highlighted the
vulnerability of JIT supply chain management; but there have been longer-
lasting effects, too, including heightened security precautions, particularly
at the previously lightly guarded border. More stringent customs and immi-
gration procedures exacerbate the friction of distance. Nevertheless, the
trade between the two countries is greater than that between any other pair
of trading partners.
The long land border between the US and Canada favors surface modes
of transport, and road, rail, and pipeline account for the great majority of
crossborder trade (Table 2.3). Pipeline traffic in fossil fuels is most import-
ant in terms of the weight of southbound flows, but in terms of total trade
(northbound and southbound combined), trucking is most important
both in terms of tonnage and especially value. The trucking industry on
either side of the border is relatively lightly regulated (Boylaud and
Nicolleti 2001) and liberalization of crossborder trucking began in earnest
in the late 1980s (Woudsma 1999). Liberalization helped to make the
industry on either side of the border relatively efficient, increasingly well-
integrated and well-positioned to meet the demands of customers
competing on time. Both trucking and rail freight have been transformed
by the long-term ‘continentalization’ of the North American market
(Heaver 1993).
Although Canada and the US share a 6400-kilometer border, trade and
consequently freight flows are concentrated at a small number of crossings,
partly because the intervening presence of the Great Lakes funnels traffic
toward a few points (Woudsma 1999). In particular, the value of goods
imported into the US at Detroit, MI, alone by road and rail was US $66
billion in 2003, a sum greater than the total value of US imports from
South Korea, France, or Saudi Arabia. More generally, over 60 per cent of
Canada–US trade is concentrated at the top three crossings: Windsor,
ON–Detroit, Sarnia, ON–Port Huron, and Fort Erie, ON–Buffalo, NY
(Transport Canada 2003). The concentration of traffic has been associ-
ated with congestion, particularly with the tighter security after 2001, and
at major crossings there are myriad proposals for expanded capacity,
Table 2.3 Modal shares of Canada–US crossborder trade,a 2001
Mode Value Weight Share of Value Share of Weight

(US millions) (tonnes) (%) (%)
Truck 234 824 125 974 991 61.7 35.3
Rail 60 171 77 223 425 15.8 21.6
Water 26 130 69 113 851 6.9 19.4
Air 24 999 297 287 6.6 0.1
Pipeline 9 180 83 771 797 2.4 23.5
Other 25 390 571 380 6.7 0.2
Total 380 694 356 952 732 100.0 100.0
Note: a Figures refer to the sum of northbound and southbound trade.
Source: BTS (2003).

including for instance a new bridge between Windsor and Detroit

(Martinez 2005). With respect to the Sarnia–Port Huron crossing, the
aforementioned I-69 could augment the crossing’s importance if the
highway is completed south of Indianapolis.
Intercontinental Modal Balance
Given the great distances separating the US and Canada from their
trading partners overseas, it is not surprising that sea freight and air freight
are the only two modal choices for virtually all intercontinental traffic
(Table 2.4). For the US, sea freight accounted for about 55 per cent of the
value of all intercontinental trade in 2001, air freight accounted for 39 per
cent and the remainder was moved by other means (for example, ‘flyaway
aircraft’ manufactured in the US and delivered empty to overseas
customers) or an unknown mode. The share for sea freight by tonnage is
far greater, of course. These modal shares are somewhat biased by the cat-
astrophic events of 11 September 2001. In 2000, the share for air freight
was several percentage points higher. It is also worth noting that while the
US overall has had a pronounced trade deficit for many years, the imbal-
ance in waterborne transport is much greater, with the value of intercon-
tinental sea freight exports equal to just 38 per cent of the value of
intercontinental sea freight imports. For air freight, the corresponding
figure was 77 per cent.
Table 2.4 Modal shares in Canada and US intercontinental trade
Mode Percentage by value of trade

Canadaa USb
Truck 24.2 0.0
Rail 3.0 0.0
Water 49.5 54.7
Air 21.0 38.2
Pipeline 0.0 0.0
Other/Unknown 2.3 7.0
Total 100.0 100.0
Notes:
a Excludes only trade with the US; figures are for 2003. See text for details on the role of
truck and rail transport in Canada’s intercontinental trade.

b Excludes only trade with Canada and Mexico; figures are for 2001.
Sources: Transport Canada (2003); BTS (2003).

For Canada, the intercontinental modal balance is somewhat more com-

plicated given the manner in which Transport Canada presents the relevant
data. In particular, the mode recorded for international shipments for
exports is that used to cross the border of Canada (Transport Canada
2003); for imports, it is the last mode employed before the port of customs
clearance. As a result, a shipment from Quebec trucked to New York and
then sent from there by air freight to Morocco is recorded as a trucked
export. The proximity of major US seaports and airports to the dominant
population and economic centers of Canada helps to explain, therefore, the
importance of truck and rail as modes in Canada’s intercontinental trade.
Nevertheless, sea freight and air freight account for the great majority of
trade between Canada and countries other than the United States, with sea
freight being overwhelmingly important in tonnage terms. In terms of the
value of Canada’s non-US trade, direct sea freight (as opposed to sea
freight via a US port) was responsible for 49 per cent and direct air freight
for 21 per cent in 2003 (Transport Canada 2003).
In both countries, as in much of the rest of the world, international air
freight has grown at an explosive pace. One way the US Bureau of
Transport Statistics put air freight’s new importance into perspective was
to rank the most important US trade gateways across all modes (Table 2.5).
In that ranking, and despite the substantial downturn in 2001 (the year for
which the data are available), New York’s John F. Kennedy Airport was
first, and six other airports ranked in the top 20. Meanwhile, the ports of
Los Angeles and Long Beach, CA, joined Los Angeles International
Airport in the top ten, making the Los Angeles metropolitan area the top
gateway overall to the gigantic US economy. It is worth noting that while
the value of imports far exceeded the value of exports through the two sea-
ports, the airport recorded a substantial trade surplus.
INTERMODAL TRANSPORT
It is significant that the most important impetus for intermodality on land

came from ocean transport. By the time regulatory reform was taking place
in the mid-1970s and early 1980s in North America, the shipping lines had
already established the container as the most cost-effective means of carry-
ing manufactured goods. A third generation of container ships were by then
in service, and new port terminals were being established in many of the
major ports in North America. Containerization had become a distinct and
growing system, with its own infrastructures and physical characteristics
(Hayuth 1987). The control of the shipping lines, however, stopped at the
port. Other actors and other modes were used in the US to carry out the
Table 2.5 Top 20 US international freight gateways, 2001
Rank Gateway Mode Trade (millions of dollars)

Imports Exports Total
1 New York-JFK, NY Air 66 502 50 079 116 581
2 Los Angeles, CA Water 86 757 17 436 104 193
3 Long Beach, CA Water 77 984 16 716 94 699
4 Detroit, MI Truck/Rail 42 776 49 205 91 982
5 New York/New Jersey Water 63 245 22 673 85 918
6 Laredo, TX Truck/Rail 44 901 34 706 79 607
7 Los Angeles Int’l, CA Air 29 853 34 030 63 882
8 San Francisco Int’l, CA Air 29 633 32 320 61 953
9 Buffalo-Niagara, NY Truck/Rail 31 103 29 375 60 478
10 Port Huron, MI Truck/Rail 38 372 17 276 55 648
11 Chicago-O’Hare, IL Air 24 998 19 918 44 916
12 Houston, TX Water 24 967 19 522 44 489
13 El Paso, TX Truck/Rail 22 013 15 918 37 931
14 Charleston, SC Water 20 928 12 483 33 411
15 Seattle, WA Water 23 298 5 298 28 595
16 New Orleans, LA Air 13 544 13 810 27 353
17 Oakland, CA Water 17 245 7739 24 985
18 Norfolk, VA Water 13 604 11 260 24 864
19 Miami, FL Air 7 162 15 403 22 565
20 Anchorage, AK Air 16 765 5 109 21 874
Source: BTS (2003).
landward distribution of the containers. If the container provided the means

of achieving intermodality, it was legislation that gave the opportunity to
exploit its potential. By removing restrictions on entry and ownership, and
by permitting confidential contracts, deregulation had a profound impact
on the organization of the intermodal industry and its economic health.
Early Intermodal Developments
North America played a significant role in the development of container

shipping. The early leaders were SeaLand, the company established by
industry pioneer Malcolm McLean, and Matson Lines. American President
Lines (APL) was another US carrier that played an important role on the
Pacific, and CAST, a Canadian company, was the first to experiment with
door-to-door rates (Muller 1995). North American ports were among the
first in the world to develop dedicated container terminals. The principal
early advantage of the container was that it gave shipping lines the
opportunity to make many more service calls per year because time
spent in port was reduced significantly. The shipping lines experimented
with various ship designs, trying to optimize speed, capacity and cost. The
ports experimented with handling and lifting devices as well as terminal
layout and operations, all with the goal of improving throughputs and
reducing costs.
The railroads had experimented with intermodal traffic in the 1950s.
Faced with growing competition from trucking for high value (and high
revenue) freight, piggyback, or trailer-on-flat-car (TOFC), services were
established. This required the acquisition of flat cars capable of carrying
trailers and the establishment of terminals equipped with ramps to allow
the trailers to be driven onto the flat cars. An extensive network was estab-
lished, but the traffic failed to meet expectations because the service times
were slow (Muller 1995; Slack 1990). The services also antagonized the
trucking industry because TOFC was seen as a competitor. For the rail-
roads TOFC was considered a costly failure. By the 1960s the US railroad
industry was in crisis that culminated in the collapse of the Pennsylvania
Railroad and the US government’s takeover of passenger train services.
The railroad industry was in a poor state to take a leadership role in inter-
modal transportation in the 1970s (Larson and Spraggs 2000).
The Emergence of Intermodal Services and Networks (1980–2005)
Between 1975 and 1980 a series of acts was passed in the US and Canada
that changed the way the different transport modes were regulated. The
power of the regulatory bodies was reduced, and entry and exit rules were
relaxed. Carriers were given the authority to engage in confidential con-
tracts with customers. Of particular importance were the rules relaxing
restrictions on intermodal ownership. Regulatory reform was to have a pro-
found effect on the intermodal industry (Larson and Spraggs 2000).
By 1980 the container shipping industry was beginning to feel the early
effects of what has become a tidal wave of traffic growth from Asia.
Increasing imports from Japan, Taiwan, Korea, Hong Kong and sub-
sequently China and South Asia to North America provided an enormous
traffic base. The problem was how to distribute these containers to North
American markets. The major population centers are in the East, and the
shortest all-water route is via the Panama Canal. But that route involves
high tolls on the canal and up to ten days’ extra sailing time, which reduces
the number of trips each ship can make per year. The alternative was to use
trains to transport the containers from West Coast ports across the con-
tinent. This saved time but gave the shipping lines less revenue because part
of the journey was by rail.
The railroads were in no shape financially to invest in rail cars and other
equipment necessary to handle the growing volume. Furthermore, many of
the companies were not convinced of the economic viability of this new
type of intermodal business. Thus it was the shipping lines that played the
early key role in establishing dedicated trains hauling containers from the
West Coast ports (Muller 1995). They purchased the wagons and occa-
sionally the locomotives. In many cases they leased and operated the inter-
modal rail terminals, because of their familiarity with the storage and
stacking of containers. A significant advantage for the shipping lines was
that these services allowed them to offer door-to-door rates, thereby
offering a more complete service to customers and giving themselves better
control over costs and profits (Hayuth 1987). It was deregulation that made
this possible.
APL played a particularly significant early role in the rise of this busi-
ness (Brooks 2000). It was through its experiments that a major break-
through occurred – the introduction of double stacking. Placing one
container on top of another doubles capacity with only modest increases
in costs. It gave rail intermodal a significant cost advantage over long dis-
tance road transport. Within a few years dozens of double stack trains were
hauling containers from West Coast ports to eastern markets. Ports such as
Seattle, WA, began operating stack trains for smaller-volume customers.
It was also during this period in the 1980s that a new market was devel-
oped. The shipping lines faced a problem of returns. Many of the contain-
ers were empty, because of the lack of exports back to Asia. APL sought to
fill its return boxes from eastern cities with goods destined for West Coast
cities. Since the containers were being transported anyway, low freight rates
could be offered. It proved to be quite successful and led to the establish-
ment of an important submarket, domestic containers. Since this submar-
ket brings rail intermodal directly into conflict with the trucking industry, it
has had to make adjustments. The maritime container, with its dimensions
of 40 or 20 feet (12.2 or 6.1 m) fixed by the International Standards
Organization, is not competitive with trucks that have trailers up to 53 feet
(16.2 m) long. Consequently the growth of domestic containerization
has led to a proliferation of container sizes to meet the specific needs of
particular markets – 28 ft (8.5 m) 48 ft (14.6 m) and 53 ft (16.2 m). The
effectiveness of the double stack services drew the participation of several
important trucking firms such as Yellow and the Hub Group, who utilized
rail intermodal in their long-haul traffic business (Slack 1994).
A very distinct network of intermodal services has emerged. The ports
on the East and West Coasts serve as principal terminals for some 300 daily
stack and other intermodal trains. These unit trains link the major markets
only. Local distribution, up to 250 kilometers, is provided by truckers
(drayage). The relatively small number of inland terminals is due to the

high capital costs of providing sites and equipping terminals with lifting
equipment. This represents a very significant departure from the traditional
rail yard, which seeks to serve every local market (Slack 1990).
The growth of intermodal traffic has made the railroads ever more
accepting of intermodalism. In 1980 there was skepticism, but over time
this has been transformed into a positive reaction. In 2002, intermodal
business accounted for the largest share of the revenues of the companies.
The railroads themselves began to experiment with other intermodal
systems. One that has proved to be quite significant in some markets is
Roadrailer, a system that places road chassis directly on the rails. The trailer
either has rail wheels permanently affixed, or the trailer is positioned over
a separate set of bogies that are then attached in the rail yard. The latter is
more common because the weight of the first alternative limits the load
capacity on the road. Roadrailer provides excellent ride conditions, and
because trains can be assembled quickly (no lifting is required), it is used to
link factories that require parts on a JIT production system. The US rail-
road Norfolk Southern is the most extensive user of this system, with a
network hub in Fort Wayne, IN, in the heart of the automotive parts pro-
ducing industry, with services to Alabama, Georgia, Kentucky, Missouri
and Ontario – the locations of the assembly industry.
While TOFC traffic is still carried by the railroads, the lower speed of this
service has inhibited its growth. Canadian Pacific Rail (CP), however, has
developed a service for trailers between Montreal, QC and Toronto, ON
that it provides twice daily on fixed schedule in which departures take place
no matter the number of trailers loaded. Slots are sold at very competitive
rates to retailers and truckers who wish to avoid the costs of using drivers
and other operating costs and who can plan their operations around the
rail schedule. They have the choice of whether or not they use the slots
purchased.
The Growth of Traffic
Most seaports in Canada and the US have experienced significant growth

in container traffic since 1980 (Table 2.6). Most notable has been the shift
in traffic favoring the West Coast (Figure 2.2). There, the joint ports of Los
Angeles and Long Beach have grown to become among the largest ports in
the world. This cluster and the range as a whole have grown because of the
scale of Trans-Pacific container shipments and their ability to serve conti-
nental markets by intermodal rail connections. A fairly concentrated
spatial pattern of ports is presented. On the southern part of the range
is the dominant cluster of Los Angeles and Long Beach. In Central
Table 2.6 US–Canada container traffic growth, 1983–2003
20-foot Equivalent Units (TEUs)

1983 1993 2003
Pacific Coast
Canada
Fraser River Port, BC 25 460 252 510
Vancouver, BC 136 178 434 004 1 539 058
United States
Anchorage, AK 184 331 275 758 521 993
Long Beach, CA 2 079 491 4 658 124
Los Angeles, CA 576 278 2 318 918 7 148 940
Oakland, CA 804 551 1 305 134 1 923 136
Portland, OR 99 453 239 439 339 571
Seattle, WA 950 126 1 151 405 1 486 465
Tacoma, WA 132 088 1 074 558 1 738 068
Total Pacific 2 883 005 8 904 167 19 607 865
Atlantic Coast
Canada
Halifax, NS 182 620 300 933 541 650
Montreal, QC 598 120 1 108 837
United States
Baltimore, MD 526 000 487 772 528 899
Boston, MA 105 470 152 240 158 020
Charleston, SC 320 000 802 821 1 690 847
Hampton Roads, VA 222 967 786 023 1 646 279
Jacksonville, FL (a) (FY) 137 727 460 238 692 422
Miami, FL (FY) 277 246 572 170 1 041 483
New York/New Jersey 2 065 000 1 972 692 4 067 812
Palm Beach, FL (FY) 70 904 158 762 217 558
Philadelphia, PA 119 195 117 057 147 413
Port Everglades, FL (FY) 71 957 226 674 569 743
Savannah, GA 216 088 536 303 1 521 206
Wilmington, DE 172 998 254 191
Total Atlantic 4 132 554 7 344 803 14 186 360
US Gulf Coast
Gulfport, MS 89 862 199 897
Houston, TX 303 488 538 732 1 243 706
New Orleans, LA (a) 255 880 366 518 251 187
Total Gulf 559 368 995 112 1 694 790
Grand Total 7 574 927 17 244 082 35 489 015
20 000 000
16 000 000
12 000 000
8 000 000
4000 000
Pacific
– Atlantic
1983 Gulf
1993
2003
Figure 2.2 Shifts in relative share of container traffic, 1983–2003
California is the port of Oakland. The Pacific Northwest ports (Vancouver,

BC, Seattle and Tacoma, WA) comprise the third cluster.
On the East Coast, New York retains its primacy, but it has seen its
relative share decline progressively over the years. The growth of the south-
ern ports, Charleston, SC, Savannah, GA, and Miami, FL, has been quite
important because of regional market growth and aggressive port develop-
ment strategies (Machalaba 2005). It will be noted that both Boston, MA,
and Baltimore, MD, have seen their positions erode. Here too there are
three clusters, with New York/New Jersey comprising the dominant center.
The central region comprises Norfolk, VA, and Baltimore, and the south-
ern part is made up of Charleston and Savannah. Miami, Halifax, NS, and
Montreal comprise outliers (McCalla 1999).
On the Gulf Coast there has been a growing amount of concentration.
Houston, TX, now occupies the position of hub port. New Orleans, LA,
has experienced a decline in traffic, partly because of physical problems.
The extent of the impact of Hurricane Katrina remains to be assessed. The
other ports along the Gulf Coast are insignificant.
The concentration of container traffic in a relatively small number of ports
has very serious consequences that will be explored in the next section.
12
10
Millions of Units
0
1981 1991 2001
Figure 2.3 Intermodal rail traffic growth
Table 2.7 US rail intermodal shipments (in millions of units)
1999 2000 2001 2002

Domestic 2.2 2.4 2.5 2.3
ISO 4.8 5.3 5.4 5.8
Trailers 2.9 2.6 2.4 2.3
Total 9.8 10.3 10.3 10.9
Source: American Association of Railroads.
Intermodal rail traffic has experienced continual growth (Figure 2.3).

Intermodal shipments by US railroads have increased from three million
units in 1980 to over 11 million today, and Canadian railroads add a further
three million to the total. While rail intermodal traffic may have increased
overall, shifts have occurred in the relative importance of the major seg-
ments. Table 2.7 shows that domestic containers occupy an important
market share but that maritime containers account for the major portion
and that their relative share continues to increase. TOFC traffic is declining
both absolutely and relatively. This is mainly due to the higher costs asso-
ciated with piggyback – the inability to double stack and the operational
inconvenience of lifting trailers in yards where the majority of the business
is containers.
Unlike ports, for which there are extensive data on container flows, details
on actual patterns of rail intermodal flows are difficult to come by. There is
no systematic data collection on the traffic of the rail hubs, for example.
What is unquestionable is that Chicago is the dominant hub, served by all
the major railroads and the historic point of interchange between east and
west. Surveys undertaken by the metropolitan transport authority in 1995
identified a total traffic of 8.8 million TEUs, which meant that it was then
larger than any seaport in North America. Today the city handles over 500
trains per day, and its intermodal traffic is in excess of 10 million TEUs
(Chicago Regional Environment and Efficiency Program (CREATE) 2005).
Organizational Restructuring (1980–2005)
Deregulation and traffic growth have helped shape the organization and
structure of the intermodal industry. On the maritime side the container
shipping industry has undergone a massive restructuring. The most visible
manifestation has been the increase in vessel size (Gilman 1999). Although
the industry had experienced a steady growth in vessel capacity, by the
1980s a threshold had been reached. The dimensions of the Panama Canal
restricted ships to a capacity of approximately 4000 TEUs; these were the
panamax ships. With the establishment of rail services across North
America, the need to maintain the panamax size was reduced, and it is
significant that the first company to place an order for ships of greater
capacity was APL, the industry leader of the rail intermodal route. The
introduction of post-panamax ships was hesitant at first, but by the mid-
1990s vessel sizes expanded so that by 2005 the largest vessels in service
exceed 9000 TEUs. These ships are expensive, costing approximately $75
million each, and because as many as eight to ten may be required to sustain
a weekly service on a major trade route, the capital costs are exceptional
(Notteboom 2002). Furthermore, globalization has made it necessary for
shipping lines to provide services to all the major markets. These realities
have brought about an unprecedented period of consolidation and coop-
eration in the industry (Slack et al. 2002).
Since 1995 most of the major container shipping lines have entered into
strategic alliances and consortia to jointly maintain mainline services and
pool traffic. This has enabled the partners to provide more frequent services
with larger ships to the main markets than would have been possible by
acting alone, a factor that has important repercussions on land (see below).
At the same time, there has been a significant concentration in the industry,
in which North American shipping lines have played a central role (Brooks
2000). Since the 1990s there has been a spate of mergers and acquisitions that
have concentrated capacity in fewer actors. Two mega-mergers/takeovers
occurring in the mid-1990s involved the disappearance of the leading US

carriers. SeaLand, the pioneer in container shipping was taken over by
Maersk, a privately held Danish carrier, and APL was taken over by Neptune
Orient Line, a Singaporean company that renamed itself APL. By 2000,
there were no longer any major US container lines because in the meantime
companies had either failed or been taken over by the recently British-
registered CP Ships, a company that grew out of the Canadian conglomer-
ate, Canadian Pacific, such as was the case for Lykes (Alix et al. 1999).
A similar pattern of concentration has occurred in the world port
terminal handling business. Here, a number of corporations have emerged
since 1995 that account for over 35 per cent of global terminal handling in
2005. These companies include Hutchison (HPH), the Port of Singapore
Authority (PSA) and Eurogate. North America is the exception. None of
these companies has penetrated North America, mainly because of the
labor conditions and the strength of the longshoremen’s union. Instead, the
only major terminal handling company with an extensive presence in US
ports is the US-based Stevedoring Services of America (SSA) (Slack and
Fremont 2004).
By way of contrast, on the US West Coast many terminals have been
leased to shipping lines. In order to further extend control over their oper-
ations, a number of shipping lines have invested in port operations. This can
be seen as another example of how the carriers are becoming further
integrated in the logistics chain. Many of these terminals are operated as
dedicated facilities so that the carriers have the means to manage their oper-
ations in response to the arrival and departures of their ships. A further
variant in North America is the terminal managed by a terminal operating
company that belongs to a major shipping group. P&O Ports operates a
number of terminals in several US and Canadian ports, most of which were
obtained by the purchase of a local terminal company. APM is a similar
operator that is part of the Maersk group, which manages a number of ded-
icated terminals obtained at the time of the purchase of SeaLand (Slack
and Fremont 2004).
These new arrangements in the container shipping industry tend to con-
centrate traffic at fewer ports. A line that already has a dedicated terminal
will inevitably concentrate its services there. Shipping lines that are
members of a consortium will decide to focus their traffic at one hub. These
institutional arrangements are therefore focusing the massive increases in
global trade at a small subset of hub ports.
In the rail industry, similar trends have occurred. In 1975 there were
56 Class I railroads in North America. Today there are six (Larson and
Spraggs 2000). In the immediate post-deregulation period a series of
mergers and purchases were made to ‘save’ failing companies or extend
networks. These mergers were generally seen as positive because they gave
the new and larger companies greater scale economies (Brendt et al. 1993;
Chapin and Schmidt 1999). In the period 1997–98 the present six Class I
railroads were created as a result of a number of significant mergers. In
the western US, Burlington Northern merged with Atchison Topeka and
Santa Fe to create BNSF, and Union Pacific purchased Southern Pacific
to create UP. In the East, Norfolk Southern and CSX agreed to carve up
and assimilate Conrail, the company that was formed at the time of the
collapse of the Penn Central and was under federal government control.
The remaining Class I railroads are Canadian. They too have grown
through mergers, mainly to give themselves better access to the US.
Thus, Canadian National (CN) purchased Grand Trunk, which gave it
access to Chicago, and Illinois Central Gulf (ICG), which gave it access
to the Gulf of Mexico. Its Canadian competitor CP purchased the out-
standing shares of the Soo Line, which expanded its network into the
Midwest as far as Kansas City, MO, and the Delaware and Hudson
(D&H), which provides a link between Montreal and New York and
Philadelphia (Heaver 1993).
In 2000 CN proposed to merge with BNSF. Alarm bells sounded
throughout the industry and beyond. There was a fear that if this merger
were allowed to proceed the few remaining companies would be com-
pelled to merge too, resulting in an oligopoly. The regulator, the Surface
Transportation Board, turned down the application. This decision marks
a watershed because it represents a reversal of previous policies of non-
intervention in the industry. This does not mean that the process of
concentration has come to a full stop. In 2004, CN, for example, pur-
chased BC Rail, which was being privatized by the provincial govern-
ment, thereby strengthening its network to the northern port of Prince
Rupert, BC.
The Contemporary Scene: A Crisis of Capacity?
The overview of the development of land–sea intermodal transport sug-

gests an industry that has enjoyed considerable success. Certainly, the traffic
growth has been encouraging. But during the first few years of the new mil-
lennium there are growing signs of difficulty and there are at present a
number of important challenges confronting the industry. Some of these
challenges are being met and overcome, but others remain and represent a
cloud over the system (Mongelluzzo 2004).
There were some early signs of the problems that now confront the
industry. The mergers in 1998, especially the one between Union Pacific and
Southern Pacific, did not take place smoothly. Computer systems failed,
early retirement packages resulted in shortages of drivers and yard person-

nel, and the allocation of rail cars was mishandled resulting in critical
shortages in Los Angeles (Bernstein 2004). Several weeks of chaos ensued
that rippled throughout the system. Customers faced delays in receiving
goods, and the reliability of intermodal transport as a whole was brought
into question. This event demonstrated the fragility of an interdependent
system – its integrity is only as strong as its weakest link – and in the inter-
modal chain there are lots of links.
The longshoremen’s strike on the West Coast in 2003 shut down the port
system and again interrupted the chains. Shipping lines were forced to
redirect their ships or to wait offshore, creating an enormous backlog of
traffic. However, the fundamental challenge has come from the growth of
traffic, in particular the entry of China in international trade. The capacity
of the system to cope is being challenged across the network. The problems
with the growth of trade are being compounded by the concentration of the
system, both spatially and in terms of organization.
In the ports there are growing problems of congestion. Delays are occur-
ring with increasing frequency in ports from Montreal to Seattle. The major
bottleneck is Los Angeles/Long Beach, where as many as 30 ships were
waiting for berths at a time in 2004, and vessels were spending up to ten
days to be turned around (Mongalluzzo 2004). Labor practices are at the
heart of the problems, since the unions have successfully blocked the full
introduction of information technologies in order to protect the jobs of
checkers. The unions claim that the problem is with management for not
hiring enough workers to cope with the increased traffic. At the same time,
the terminal gates are not open 24 hours a day, so there is congestion at the
entry points during the restricted hours. Other problems are the links with
the rail terminals. Because intermodal rail yards require extensive sites,
many of them have been built in suburban areas that are frequently far from
the ports. The connection is very often made by truck haulage and with the
growth of traffic, road congestion between the terminals is a source of
concern for the communities involved as well as the intermodal operators
seeking to effect an interchange as quickly as possible.
The railroads are facing problems of many different types. Operational
problems are increasing, and average speeds are actually declining
(Bernstein 2004). Customer satisfaction too is decreasing (Mercer Manage-
ment Consulting 2004). Essentially the railroads were able to cope with the
earlier traffic growth because their system was underutilized. But because
intermodal traffic is focused along a relatively small number of corridors,
the recent expansion of traffic has begun to cause the system to suffer
difficulties. Many sections are single tracked, and so the question of how
to accommodate the number of trains each day has become a serious
operational problem. It is compounded by the differential speeds and train

lengths. A major headache for UP was its contract with United Parcel
Service (UPS) (Phillips 2004). This contract generated high revenues for the
railroad, but they suffered very heavy penalties if delivery times were not
met. The train, which left Los Angeles on Mondays, had to arrive in New
York by Thursday evening so that the parcels could be delivered by week’s
end in the New York metropolitan area. To ensure that this train met the
schedule, UP gave it priority and other trains were forced onto sidings to
permit its passage, which then led to delays across the network. Even where
double tracks exist, frequently the signaling is unidirectional, making it
impossible to utilize the second track in the opposite direction if necessary.
The problems of the railroads extend to the rail terminals. Because none
of the US Class I railroads has a transcontinental network, trains have to
interchange with another carrier. If this involves an entire train block this
is usually no problem because the locomotives can be exchanged in a freight
yard. However, if the containers are destined for several different cities, the
train will have to be broken up and the individual wagons delivered to the
rail yards of the other carriers so that new train blocks can be assembled.
Since most of the interchanges take place in Chicago, the most serious
problems are encountered there. Because rail interchange is slow, most
transfers take place by truck, and thus some 20 000 ‘rubber tire’ inter-
changes take place each day in Chicago (CREATE 2005). Smaller volumes
take place in other transfer cities such as Kansas City and New Orleans.
Finally, growing difficulties are being encountered in drayage. Because
trucks provide the pick up and delivery, they are an integral part of the
chain. Two sets of problems are evident. First, as noted earlier, there is a
growing shortage of drivers in North America, and the difficulty of recruit-
ing drivers is now a threat to the intermodal system. Second, as tracking
and tracing become important requirements the lack of information tech-
nologies in the trucks is a major lacuna. The intermodal operators see this
as a missing link in the information chain. The problem is that the inde-
pendent truck contractors have little incentive or inclination to invest in IT
systems.
Solutions?
Several of these problems have been evident for some time, and various
steps have already been put in place to try to address them. The best
examples are those involving interchanges. US ports have made a concerted
effort to provide on-dock rail facilities, such as Seattle and Charleston, and
most ports now have this option. In other ports the problem was the con-
nection between port terminals and rail yards. In the case of Los Angeles
and Long Beach there already were rail links to the main intermodal ter-
minals, some 30 km inland. The difficulty was than these links were at
grade, and ran circuitously through residential areas. The passage of trains
was slow, and because of the large number of level crossings, major dis-
ruptions across highways occurred. Most of the containers were trans-
ferred by road as a result, thereby adding some 20 000 truck trips per day
to the already congested highways. The solution was the Alameda corridor,
a dedicated freight rail link between the port and rail terminals, which is
below grade in most areas, so there are no disruptions to road traffic. It
is capable of handling 100 trains per day. The cost of the project was $2
billion, far beyond the means of either the railroads or the port authorities
(Luberoff and Walder 2000). While the industry did pay a contribution, the
majority of funding came from local public sources and a large federal con-
tribution. A user fee is charged on each container carried along the corri-
dor. Other ports, such as New York, are developing similar port connector
programs.
Comparable solutions have been developed to overcome some of the
problems of rail interlining. In order to reduce the number of rubber tire
interchanges the Chicago Metropolitan area has adopted an investment
package designed to improve the rail links between the ten major rail ter-
minals. The CREATE program is designed to remove grade crossings and
increase the capacity of rail connections (Chicago Regional Environmental
and Efficiency Program 2005). In this way rail interline connections can be
speeded up, which in turn benefits local communities by reducing the
number of truck-based cross-town connections. The industry and the public
are sharing the $1.5 billion cost. The railroads’ share is $212 million, which
is proportional to the expected benefits they will reap from the improve-
ment. Again, a large public investment has made the project feasible.
In the ports, efforts are under way to relieve congestion. Long Beach and
Los Angeles have hired 2000 new workers, and there are attempts to keep
the gates open longer, but these efforts are unlikely to overcome a problem
that can only deteriorate with the expected traffic growth. Few ports have
large amounts of physical space to add to increase capacity because of the
environmental constraints. Over the next five years, most ports will be at
saturation point (Mongelluzzo 2004). The only solution is to increase
throughput. US and Canadian levels of port efficiency are below those of
many Asian ports. Many terminals use chassis systems to store containers,
a system that reduces the number of times a container has to be lifted but
one which is very wasteful of space. Even where containers are stacked,
average heights are well below practices in other ports. Containers will have
to be cleared more quickly from terminals, which will mean that the free
time allowed customers would have to be shortened. Thus, US ports in
particular will have to undergo a major increase in efficiency and through-

put in order to meet future demands.
The capacity problems of the railroads are more difficult. The present
railroads inherited a large network that enabled them to develop and
expand their intermodal business. Investments were concentrated on
making the mainlines capable of handling double stack, purchasing the
rolling stock and equipping the intermodal terminals. The mergers brought
new corridors into the networks. In Canada the railroads cooperated on the
use of track in areas where each company had only a single track. Thus in
the Fraser Canyon, where the slopes make any link very difficult, CP track
was used in one direction and CN track in the other. The growth of traffic
is making double tracking essential, and signaling systems must be
improved. The Surface Transportation Board has recently claimed that the
industry is ‘revenue inadequate’ and cannot meet the financial requirement
(Frittelli 2004). This situation is giving rise to a big debate in the industry
(Jahanshahi 1998; Bitzan 2003; AAR 2005).
The railroads claim that they cannot meet the needs because of the unfair
competitive advantage of the trucking industry, which benefits from large
public subsidies in the provision of roads. They argue that if the govern-
ment wants to divert more traffic from the roads, then the railroads too
should receive infrastructure subsidies. This position is contested by some
of the traditional opponents of the railroad industry, especially the captive
shippers (companies that are served by only one railroad); they argue that
if public monies are spent on the railroads then access to the tracks should
be open. This is vehemently opposed by the railroads, who counter that the
success of the industry is based upon integrated ownership and that the
intermodal industry is competitive (AAR 2005). This debate is having a
serious dampening effect on investments. CP Rail has deferred its decision
to double its own track through the Fraser Canyon until it can get
confirmation from the Canadian Minister of Transport that there will be
no move towards opening the industry to other users.
AIR FREIGHT TRANSPORTATION IN NORTH

AMERICA: COMING BACK DOWN TO EARTH?
The century since the Wright Brothers’ first flight has witnessed the remark-
able diversification of air traffic. From the carriage of mail as early as 1911
to scheduled, premium-priced passenger services a few years later to a more
democratized airline industry in the early jet era, air transport has
expanded its scope in response to modern society’s ‘speed imperative’
(Kasarda 2000). The movement of freight by air is the newest chapter in
this story. While there was traffic in freight almost from the earliest days of
air transport, the volumes were very small for most of the twentieth
century. For instance, in 1947, US domestic air freight (including express),
measured in tonne-kilometers, was 230 times smaller than the correspond-
ing figure for 2003 (based on figures given in Wilson and Bryan 1949; BTS
2005). Air freight remained a very minor element in North American trans-
portation until the 1960s. International air freight is now critically import-
ant to North America’s international trade. And in turn, North America is
crucial to the global air freight industry. In fact, 62 per cent of worldwide
air freight tonne-kilometers are performed to, from or within the United
States alone (Clancy and Hoppin 2005).
Several factors have fueled the rapid growth of air freight since the early
1960s. First, on the supply side, the development of faster, larger, longer-
range aircraft reduced the real cost of air freight and enlarged its speed
advantage compared to alternative modes. The 1970 introduction of the
Boeing 747, an aircraft whose bulbous nose and internal dimensions were
designed specifically to cater to cargo, was particularly important in boost-
ing available capacity (Irving 1993). Second, the liberalization of air trans-
portation (as part of the more general postwar liberalization of trade)
effectively reduced the cost of air freight. For the US domestic airline indus-
try, real air freight yields per freight tonne-kilometer fell by 45 per cent
between 1960 and 2003 (based on figures in BTS 2005). Third, combination
airlines have focused much more attention on air freight as a way to bolster
revenue and have deployed resources (that is, freighter aircraft) to tap this
more vibrant sector of the air transport market. The concurrent increase in
capacity and competition have helped to make air freight capacity a com-
modity for which price is the only factor that matters in many markets.
On the demand side, too, there have been several familiar factors driving
the growth of air freight. The earlier-discussed trends toward time-based
competition and supply-chain management strategies that minimize inven-
tories have extended the appeal of the fastest mode for freight transportation
across a wider range of industries. Further, the attenuation of production
linkages has made suppliers, manufacturers, wholesalers and retailers more
keenly interested in the unrivaled capability of air freight to ‘shrink’ space by
shrinking time (Dicken 2003). Finally, the greater knowledge content of
manufactured goods has fostered higher value-to-weight ratios, increasing
the variety of ‘air-eligible’ goods.
Electronics and information technology goods, broadly defined, comprise
40 per cent of air freight shipments by tonnage and 75 per cent by value
(Butterworth-Hayes 2005), and cyclical fluctuations in demand for these
goods strongly affect prevailing air freight rates (Putzger 2004). Other impor-
tant categories of air freight include garments (particularly those with rapid
product cycles), perishables (from fresh cut flowers to live tropical fish), and
spare parts. But the range of goods carried by air extends well beyond these
categories. Wal-Mart, for instance, uses air freight not only for premium
seafood and cut flowers but also, when deliveries are behind schedule, for
low-value items (Kasarda et al. 2004).
The 1990s were a good decade for the air freight industry in North
America. Expanded global (but mainly Asian) sourcing by Canadian and
American manufacturers and retailers stimulated the rapid growth of air
freight demand. In particular, the huge increase in consumption of elec-
tronics and information technology equipment, spurred in part by the
explosive growth of the internet and the cell phone’s popularization, trans-
lated into hefty air freight loads (Scherck 2005). A more specific factor was
the fear of Y2K. Some computer experts predicted that programs designed
to assume that the first two figures in any year were ‘19’ would go beserk at
midnight on 1 January 2000. Those fears turned out to have been over-
blown, but in advance of Y2K, businesses and households spent lavishly on
new computer hardware and software, with much of that surge in output
moving by air.
Between 1990 and 2000, the average annual growth rate in the US for the
air freight (in revenue tonne-kilometers) was 5.2 per cent for domestic
traffic and 8.1 per cent for international traffic (BTS 2005). For Canada,
too, growth in air freight was more rapid in the 1990s; in fact, air freight’s
share (by value) in crossborder trade with the US and in international trade
with other countries peaked in 2000 (Transport Canada 2003).
The attacks of 11 September 2001, and subsequent sharp increase in
concerns about air freight security devastated the industry. But the linger-
ing fear of terrorism is only one of the constraints on the future growth of
air freight. In domestic markets, air freight has lost a substantial share
(about 8 per cent) of the expedited shipment market to ground parcel ser-
vices (Scherck 2005). Firms such as FedEx and UPS have expanded their
portfolio of services to offer time-definite ground services whose reliabil-
ity and lower cost have cut into the competitive advantage of air freight
services. Research indicates that in the US domestic market, 85 per cent of
second-day air shipments are delivered within 2000 kilometers of their
origin, a range over which ground services can offer guaranteed delivery
within three days (Scherck 2005). Interestingly, air freight is the only major
mode for which the average length of haul fell during the 1990s (BTS 2005)
as air freight supplanted slower modes over shorter distances. Now that
process may reverse itself to some degree. In fact, combination airlines
have contributed to the increased use of trucks for goods that might oth-
erwise have moved by air; by 2002, American and Canadian airlines oper-
ated ‘truck flights’ among more than 500 city-pairs in North America
(Boeing 2004). Nevertheless, the infrastructure and labor constraints that

burden the trucking industry may stem its displacement of air freight in
the future.
Intercontinental air freight to and from North America is expected to
continue to outpace the relatively mature domestic air freight markets
in the region (Boeing 2004). Over the period 2001–21, the Asia–North
America air freight market is forecast to post faster growth than any other
major market except domestic China and intra-Asia. Latin America–North
America and Europe–North America are expected to grow slightly faster
than the overall worldwide average growth rate of 6.4 per cent per year
(Boeing 2004), a rate at which air traffic will more than double in 20 years.
A key factor sustaining the anticipated growth of intercontinental traffic is
the greater scope for further liberalization overseas as well as the far more
rapid expansion of the ‘BRIC’ economies (Brazil, Russia, India and
China). These two factors came together in the July 2004 signing of a new,
remarkably liberal air services agreement between China and the US
(Harney and Roberts 2004). The agreement permits a fivefold increase in
the number of flights between the new countries, including 39 new weekly
freighter frequencies awarded to four US airlines by March 2005. Canada,
too, has recently signed a new agreement with China providing for a three-
fold increase in weekly frequencies (Lott 2005).
Finally, the rapid growth of Internet-based commerce, particularly
business-to-business (B2B) e-commerce, is expected to be a catalyst for
the future growth of the air freight industry (Lasserre 2004). Certainly
there are abundant examples of retail internet enterprises such as Dell, whose
ability to deliver within a time frame acceptable to consumers is contingent
upon heavy use of air freight. The much larger B2B trade over the internet,
which hardly existed when air freight’s share of North American transporta-
tion peaked in the late 1990s, is also expected to bolster air freight volumes in
the decades ahead, despite the improved competitiveness of time-definite
trucking.
Combination Carriers, Integrators, and All-freight Airlines
The dramatic opening of the Chinese market to US carriers augured by the

2004 agreement was motivated less by a sudden conversion to the merits of
unfettered competition than by the conviction that China needs the state-
of-the-art air transportation services that only major foreign carriers can
bring. The rapid diversification of China’s export manufacturing economy
and its integration into complex global production networks require the
development of commensurate transportation and logistics services. The
agreement allows US carriers to establish hubbing operations in China
beginning in 2007, and it is widely expected in the air freight industry that
FedEx or UPS or both will take up that offer.
FedEx and UPS are integrators, firms that integrate air and ground ser-
vices to provide a nearly seamless service to the customer (Lasserre 2004).
A critical difference between integrators and other air freight carriers is that
the former deal directly with customers rather than working through for-
warders. Forwarders are the intermediaries between shippers and airlines.
The integrators’ disintermediation of air freight services has been rein-
forced by information technology (IT) applications such as web-based ship-
ment tracking and similar tools to provide real-time supply chain visibility.
In seeking to become ‘one-stop’ shops for customers’ air transportation
and logistics requirements, the integrators have expanded geographically to
most major world markets and in terms of their product line to offer a
range of time-definite services for shipments well beyond their traditional
emphasis on express parcels.
FedEx and UPS rank in the top ten freight carriers worldwide (Table 2.8)
and are also the two largest freighter fleet operators. In 2004 FedEx
operated 344 jet freighter aircraft and UPS 265 (Air Cargo World 2005).
No other carrier comes close. These two carriers will be further distin-
guished from other cargo carriers when they begin flying the A380 freighter,
of which each carrier has ordered ten. FedEx was the launch customer for
the A380F and will take its first delivery in 2008. The A380F’s gargantuan
capacity (150 metric tonnes versus 122 tonnes for the popular Boeing
747–400F) and range (10 400 kilometers versus 8250) will be deployed prin-
cipally on capacity-constrained Pacific Rim routes, especially to greater
China (Butterworth-Hayes 2005).
An airline need not have freighters to be a major player in the air freight
industry as evidenced by the fact that the big three combination carriers in
the US (American, United, and Delta) together perform nearly as many
FTKs as UPS but without a single freighter among them (based on data
in Air Cargo World 2005). Worldwide about half of cargo capacity is pro-
vided by the bellyholds of passenger aircraft (Boeing 2004). The long-term
trend, however, has been for air freight demand to grow faster than belly-
hold capacity with a consequent steady increase in the share of freight
carried in freighters (Clancy and Hoppin 2005). The rise of the low-cost
carriers is also likely to affect the balance between freighters and passen-
ger bellyhold capacity. In the US, in particular, the success of the low-cost
carriers such as Southwest Airlines with their fleets based on the Boeing
737 or similar aircraft and, in response, the proliferation of high frequency,
increasingly long-range services by regional jets operated on behalf of
network carriers are likely to slow the growth of domestic bellyhold
capacity.
Table 2.8 Top 15 air freight carriers, 2003
Rank Airline Type Nationality Freight (tonne-km)

1 FedEx 1 US 13 943
2 Lufthansa 2 Germany 7 088
3 Korean Air 2 South Korea 7 066
4 UPS 1 US 6 751
5 Singapore Airline 2 Singapore 6 669
6 Cathay Pacific 2 China – Hong Kong 5 197
7 Air France 2 France 5 432
8 China Airlines 2 Taiwan 4 822
9 Japan Airlines 2 Japan 4 749
10 Cargolux 3 Luxembourg 4 429
11 Atlas 3 US 4 388
12 British Airways 2 United Kingdom 4 191
13 KLM 2 Netherlands 4 112
14 Northwest 2 US 3 006
15 El Al 2 Israel 2 800
Type: 1—Integrator; 2—Combination carrier; 3—All-freight operator.
Source: Air Cargo World 2005.
Moreover, shippers and forwarders tend to favor freighter space over

bellyhold space. The top 15 air freight forwarders (of which six are based in
North America) controlled 61 per cent of air freight in 2002 (Ott 2003), and
the rising level of market concentration in this dimension of the air freight
industry gives a handful of firms enormous power to determine the balance
between freighter and bellyhold capacity. These dominant forwarders favor
freighters for a variety of reasons including the mismatch in both spatial
patterns and time-of-day patterns between air freight demand and air pas-
senger demand (Bowen 2004). Moreover, cargo is more likely to be offloaded
from a capacity-constrained passenger flight than a freighter flight; this
disparity is important for forwarders and airlines providing integrated time-
critical supply chain services to major shippers (Conway 2004). The tighter
security procedures in place for freight on passenger flights versus freighter
flights is still another factor encouraging combination carriers to expand
their freighter fleets. In response to these factors, a growing number of car-
riers began operating freighter services in the past decade. Air Canada, for
instance, began operating freighter services to Frankfurt, Germany (carry-
ing a great deal of traffic in auto parts) in 2004 and began serving China
from several Canadian gateways in 2006 (Van Praet 2004; Lott 2005).
While the integrators and combination carriers account for the great
majority of air freight traffic to, from and within North America, the rise
of the air freight industry has been accompanied by new all-freight, non-
express airlines. Perhaps the most famous of these carriers historically was
Flying Tigers, but FedEx absorbed Flying Tigers in 1989 as part of the inte-
grator’s aggressive internationalization. Today, Atlas Air and Polar Air,
which together operated 51 B747Fs in 2003 (Air Cargo World 2005), led the
list of all-freight carriers in the US. These two carriers operate principally
on international routes, while other new entrants such as Kitty Hawk
and Astar have predominantly domestic networks. All Canada Express
performs a similar function in Canada. The top routes for Kitty Hawk
in 2004, for instance, attest to the role of all-freight carriers in linking the
NAFTA economies: Montreal–Dayton (the carrier’s hub), Guadalajara,
JAL–Laredo, TX, and Austin, TX–Montreal (based on data in the T-100
databank, available online at www.bts.gov).
The Geography of North American Air Freight Flows
Three important geographic features of air freight traffic are evident in

North America. First, air freight flows are more strongly concentrated than
air passenger flows. In the US, for instance, the top 20 links (by air freight
tonnage) in the domestic air transport system (Table 2.9) accounted for
18 per cent of total US domestic freight tonne-kilometers in 2004. In con-
trast, the top 20 links (by passengers) in the domestic air transport system
accounted for just 4 per cent of total US domestic passenger-kilometers
(based on data in the T-100 databank, available online at www.bts.gov).
Ironically, although the chief appeal of air freight is its greater speed versus
alternative modes, there is less pressure to move air freight than air passen-
gers directly from origin to destination. Accordingly, carriers funnel traffic
along fewer links. In particular, links to and from Anchorage, AK, are
heavily trafficked as that city’s airport serves as a critical consolidation and
distribution point for air freight between Asia and North America.
Second, and related to the last point, international air freight is strongly
concentrated in the Pacific Basin (Bowen 2004). In the US, Los Angeles,
Anchorage, and San Francisco rank among the top ten air freight gateways
(see Table 2.5). Even gateways away from the Pacific coast derive much of
their importance from Asian imports. For instance, 60 per cent (by weight)
of the air freight cleared at Chicago originates in Asia; for New York’s JFK,
the corresponding figure is 40 per cent. In Canada, Vancouver’s importance
is certainly derived from its proximity to Asian economies, but Toronto is
being developed as Air Canada’s principal freight gateway to and from the
Pacific Rim (Lott 2005).
Third, the hubs via which air freight flows move from origin to destination
are increasingly different from those that dominate the air passenger indus-
Table 2.9 Links in the US air transport system with heaviest freight flows,
2004
Rank Origin Destination Freight (tonnes)

1 Anchorage, AK Chicago-O’Hare, IL 135 900
2 Anchorage, AK Los Angeles, CA 101 400
3 Anchorage, AK Louisville, KY 100 900
4 Los Angeles, CA Honolulu, HI 74 100
5 Los Angeles, CA Memphis, TN 61 400
6 Newark, NJ Memphis, TN 60 900
7 Anchorage, AK New York-JFK, NY 60 000
8 Anchorage, AK Memphis, TN 59 100
9 Memphis, TN Newark, NJ 58 600
10 Memphis, TN Los Angeles, CA 55 900
11 Los Angeles, CA Indianapolis, IN 50 900
12 Chicago-O’Hare, IL Anchorage, AK 48 600
13 Louisville, KY Anchorage, AK 48 200
14 Indianapolis, IN Los Angeles, CA 44 700
15 Honolulu, HI Los Angeles, CA 41 800
16 Dallas-Ft. Worth, TX Memphis, TN 41 400
17 Memphis, TN Orlando, FL 41 000
18 Memphis, TN Miami, FL 40 800
19 Louisville, KY Philadelphia, PA 40 500
20 Memphis, TN Dallas-Ft. Worth, TX 40 200
Source: Based on T-100 databank, available on-line at www.bts.gov.
try, though there is still considerable overlap (Figure 2.4). In addition to the
well-known hubs operated by FedEx and UPS at Memphis, TN, and
Louisville, KY, respectively, other major air freight hubs in and near the Ohio
River valley include Wilmington, OH (the principal hub for DHL); Dayton
(Express.Net); Rickenbacker International Airport near Columbus, OH
(used as a secondary hub by FedEx and UPS as well as by carriers such as
Polar and Evergreen); and Fort Wayne (Kitty Hawk). While air cargo hubs
are found outside this area, its dominance reflects its advantageous position
relative to the traditional US Manufacturing Belt and the new manufactur-
ing region extending south in the Interstate 75/Interstate 85 corridor.
There are a number of advantages to operating an air freight hub at an
airport that is not simultaneously an air passenger hub. Costs (land and
labor) tend to be lower, there is greater flexibility in the takeoff and landing
slots, and the likelihood of supply chain crippling congestion is lower
(Lasserre 2004). Furthermore, a number of the airports cited above would
otherwise be very poorly utilized, and community interest in having a major
Anchorage 2004 throughput (tonnes)

3500 000
500 000
200 000
Vancouver
Seattle
Portland Dayton
Minneapolis-St. Paul Toronto Boston
Rockford Detroit New York -JFK
Toledo Newark
Oakland Chicago-O’Hare Philadelphia
San Francisco Denver Indianapolis Washington-Dulles
Cincinnati
Louisville Wilmington
Los Angeles Ontario
Memphis
Phoenix
Dallas-Ft. Worth Atlanta
Houston-Bush Orlando
Miami
Source: Authors’ calculations based on data accessed from www.yva.ca for Vancouver,
www.gtaa.com for Toronto, and Air Carrier Statistics, Form 41 Traffic, T-100 Database
(available at www.bts.gov for US airports).
Figure 2.4 Major air freight hubs in North America
airport operator counters the concerns caused by the predominantly night-

time operations of freight hubs.
Rickenbacker International Airport, in particular, is instructive for two
additional reasons. First, it is one of a growing number of former military
airfields enjoying new life as cargo hubs. As the defense establishments of the
United States and other countries continue to adjust to the realities of the
post-cold war era, many airbases have been closed. The airport infrastruc-
ture left behind has been an indirect subsidy to the air freight industry in
places such as Rickenbacker, Hahn Airport in Germany, and Subic Bay in
the Philippines.
Second, the biggest operator at Rickenbacker is FedEx, and the impor-
tance of the airport to the world’s top integrator is symptomatic of a shift
in its spatial strategy. Although air freight grew more rapidly at Memphis
than any other large airport in the US between 1990 and 2000 (BTS 2003),
FedEx has diversified its hub operations – not only to Rickenbacker but
also to its national hubs at Indianapolis, Fort Worth and Anchorage;

another national hub is planned at Greensboro, NC. Similarly, UPS is
developing secondary hubs at Dallas, TX; Ontario, CA; Rockford, IL;
Philadelphia, PA; and Columbia, SC (Chicago Sun-Times 2005).
Still other cities that have not attained the status of hub have benefited from
the development of traffic at secondary airports near more congested gate-
ways. For instance, Hartford-Bradley International Airport in Connecticut
has experienced substantial air freight growth due in part to airport and
highway congestion in the nearby New York City metropolitan area (Marks
2005). As in Hartford, air freight services have been a catalyst for the
internationalization of many North American metropolitan economies.
More generally, the growing number of cities with air freight hubs helps
to spread the economic development benefits that such hubs bring (Kasarda
et al. 2004).
CONCLUSION
The particularly rapid growth of international air freight during the 1990s
was among the factors that sociologist John Kasarda (2000) cited in assert-
ing that a ‘fifth wave’ in the long history of transportation-induced devel-
opment was beginning. The world’s first great commercial centers, he
argued, were based around seaports. Penetration of continental interiors
then made locations along rivers and canals increasingly important. The
third wave was defined by the railroad and the hubs it made great. The
fourth wave has been defined by the unprecedented freedom of the auto-
mobile and the truck. Now, Kasarda claims that the complementary trends
of globalization and time-based competition are ‘creating and shaping new
economic growth nodes, as gateway airports supplant seaports, rail, and
highway systems as logistical drivers of development and as primary job
and wealth generators’. There is no denying the importance of air trans-
portation, but as the foregoing survey of the key modes in North America
has shown, Kasarda’s fifth wave is too narrow. The modes of the past con-
tinue to matter today. Indeed, seaports, the drivers of his long-ago first
wave, are still critical influences upon patterns of development.
Furthermore, Kasarda’s emphasis upon the singular importance of one
mode in each wave also misses the significance of intermodalism. As
explained above, the dominant intermodal relationship is between rail and
sea freight, but trucking is also critical. The integration of air freight with
rail and sea freight remains negligible, in part because each of these modes
is oriented to different submarkets of the long distance transportation.
However, a recent private initiative in Texas points towards further modal
integration. Alliance is an airport north of Fort Worth, TX, that was begun
by Ross Perot in the 1980s as part of a sprawling mixed use development
(Taylor 1995). Kasarda (2000) cites Alliance as a primary example of his
fifth wave, but the development also illustrates the importance of inter-
modalism. BNSF has built a rail intermodal facility adjacent to the airport,
which is also located on Interstate 35 and which links Mexico with Canada.
An extensive cluster of logistics services has been established in the adja-
cent 3500-acre commercial park. An important air freight activity is the
import of automobile parts flown in from Japan and Korea and then dis-
tributed to Honda and Hyundai assembly plants by rail and truck. The
success of this facility and the traffic it has attracted suggest that further
integration between air and intermodal services are possible, where inter-
modal transport can offer the level of reliability and efficiency of BNSF
and where intermodal facilities can co-locate.
Alliance and the earlier discussed example of Rickenbacker International
Airport are representative of the growing importance of ‘inland hubs’ that
have captured some of the consolidation and distribution activities from
major coastal gateways (for example, New York, San Francisco) where
all modes converge (Hesse and Rodrigue 2004). Inland hubs, such as
Rickenbacker, have good accessibility with respect to the two modes whose
importance has expanded most over the past two decades: air freight and
trucking. A major attraction of inland hubs is their comparative freedom
from congestion and concomitantly the speed advantage they afford.
Nevertheless, the persistent importance of gateways such as Los Angeles
and New York and linkages such as that between Windsor and Detroit
attest to the limited degree to which the burgeoning traffic to, from and
within North America can avoid movement via the region’s principal hubs
and corridors. Preventing those conduits of commerce from becoming
chokepoints will require further creativity in financing new infrastructure.
But the inadequacy of current capacity is only one of the challenges facing
major transport facilities and the operators who use them. The prospect of
higher real fuel prices, labor shortages, the fear of terrorism, and the
financial precariousness that has accompanied deregulation could each
have important effects on leading modes, their relative importance, and
their spatial articulation in North American transportation.
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3. Intermodal freight transport in
Europe
Michel Beuthe
INTRODUCTION
During the past few decades, freight transport has been on the increase
throughout Europe for a number of well-known reasons: economic growth
in many countries, market globalization underpinned by trade liberalization
that allows economies of scale, technological progress and production spe-
cialization that also led to economies of scale, the development of central
distribution centres as ‘hubs’ that relay the global production process and
organize the spatial distribution over large areas and, finally, the relatively
low cost of transport in the organization of production and distribution.
The strong growth in freight transport is putting such a strain on the
various modal networks, particularly on rail and road networks, that at
certain points their capacity is no longer adequate. In addition, the very
strong growth in road freight transport causes pollution of various kinds
as well as congestion at the expense of private cars. It is also making
Europe’s roads more dangerous.
The problem is becoming more acute every year and is likely to be solved
only by using a range of remedial measures: better land-use planning of
economic activities, the construction of new infrastructure and a variety of
regulatory and pricing measures that may help to moderate traffic flows to
some extent and to induce a more efficient use of infrastructure by taking
into account the transports’ external costs. In that respect, these measures
could also channel freight towards modes and combinations of modes
with less environmental and social nuisance. However, these alternative
transport solutions may need restructuring and reorganization to provide
services that are competitive with road transport. This is particularly neces-
sary in Europe, which in some respects is still a mosaic of countries with
different legal and social institutions as well as different transport systems.
As will be seen, these differences are a source of heavy dysfunctions in inter-
national transports and particularly for intermodal alternatives that
require cooperation and tight coordination.
54
Intermodal freight transport in Europe 55
The concept of intermodal transport is somewhat fuzzy and may cover

different realities. In the European jargon emerging in the course of
arduous international negotiations, the most general concept of ‘multi-
modal’ transport is defined as the transport of goods by at least two
different modes regardless of the way it is organized. ‘Intermodal’ trans-
port is defined more restrictively as the movement of goods in one and the
same loading unit or vehicle, which uses successively several modes without
any handling of the goods themselves in changing modes. Finally, ‘com-
bined’ transport is an intermodal transport whereby the major part of the
European journey is by rail, inland waterways or sea, and any initial and/or
final leg is carried out by road over as short a distance as possible. At one
point in time that shortest distance was even limited to a certain percent-
age of the total distance or even to a number of kilometers, in order to
obtain some reduced taxes or other advantages. One important form of
combined transport is the railroad version, which was and still is the object
of many concerns and controversies between railways, road carriers and
national or European authorities.
It is very difficult to obtain reliable quantitative information about inter-
modal transport in Europe. The statistical sources are few and not coordi-
nated, so that different sources are counting in their statistics the same
containers or swap bodies without giving any information allowing us to
identify chains of modes or flows from origins to destinations. It is worth
mentioning that the very recent ECMT brochure ‘Trends in the transport
sector’ (2004) does not give any statistical information on intermodal trans-
port. This, however, matters very little since most of railway, inland water-
way and continental short-sea shipping is de facto multimodal, if not
intermodal. Moreover, the main concern should not be the promotion of
intermodality as such but the substitution as much as possible of alterna-
tive solutions using railways, inland waterways and short-sea shipping in
place of road transport. Thus, an examination of the separate statistics of
the modes already provides substantial food for thought in the field. The
following assembles these general statistics as well as whatever is available
about intermodal transport. Altogether, it provides a good view on the
present situation of freight transport in Europe and the challenges that
must be met in the future.
To be complete, it also gives some information about the present situ-
ation of air-freight transport in Europe. In most cases, air freight is first
transported by road to the airport and, afterwards, unloaded on trucks to
reach the final destination. In that sense but in a somewhat trivial way, air
transport participates in intermodal transport solutions, much like rail and
inland waterway transports. However, the corresponding road transport
is better characterized as simple distribution operations within Europe
rather than as intermodal transport. Distances involved are often too small
within Europe to justify real intermodal solutions with air transport. The
real problems of air transport in Europe are of a very different nature:
rivalry and mergers between airlines, bilateral licences of operations with
non-European countries, localization of airports and noise impacts.
Substitution or substantial intermodal cooperation between air transport
and the other modes can be envisaged only for special traffic. Actually, one
of the rare examples of a real intermodal setup involving air transport is
the passenger high-speed railway link between Brussels and the Paris
airport of Roissy, which Air France organized after canceling its air
connection between the Brussels and Paris airports. The next section never-
theless gives some analysis of the air-freight transport sector in Europe, and
the third section briefly comments on the air transport policy of the
European Union. Beyond these paragraphs, this chapter is not concerned
with intermodality with air freight transport, since it is not a very relevant
issue in Europe nor the focus of any transport policy.
The next section reviews the evolution and the present state of the
European Union policy on transport and particularly on intermodality.
Another section examines the obstacles met in Europe by transport
solutions combining different national networks and means. As part of the
concluding section a few considerations on the future perspectives of inter-
modal transport in Europe are offered. An appendix gives detailed infor-
mation on the modal splits for freight of each European country; another
one provides additional detailed information on the situation of freight
transport in several European countries.
TRENDS IN FREIGHT TRANSPORT IN EUROPE
General Statistics
The problems mentioned in the introduction can be readily understood by

considering the levels and evolution of freight transport by the different
modes in Europe. Table 3.1 shows their long-term evolution in the 15 coun-
tries constituting the European Union until 31 December 2004. In tonne-
kilometres over a period of 32 years, the data show a modest increase of
inland waterways and pipelines transport and a vigorous growth of both
continental short-sea shipping and road transport while railway volumes
decrease. Nevertheless, note that the short-sea shipping growth has tapered
off since the year 2000.
In short, over the period 1990–2000, total freight transport growth
amounted to 31 per cent, but road transport growth was 35 per cent.
Table 3.1 Transport in EU-15 by mode (in 1000 million tonne-km) and
average annual change (%)
Year Road Rail Inland Pipelines Short-sea Total

waterways
1970 489 282 103 64 472 1410
1980 720 290 106 85 781 1982
1990 976 255 107 70 923 2332
1991 1010 234 107 79 955 2386
1995 1124 222 115 82 1070 2613
2000 1319 250 128 85 1270 3052
2001 1344 241 126 87 1254 3051
2002 1376 236 125 85 1255 3076
1970–80 4.0% 0.3% 0.3% 2.9% 5.2% 3.5%
1980–90 3.1% 1.3% 0.1% 1.9% 1.7% 1.6%
1990–2000 3.1% 0.2% 1.8% 2.0% 3.2% 2.7%
1995–2002 2.9% 0.9% 1.2% 0.4% 2.3% 2.4%
Note: Inland transports over EU’s territory; intra-EU traffic for sea transports. The lists of
EU-15 and EU-25 countries are given in Appendix 1.
Source: EU energy and transport in figures, European Commission (2004).
Table 3.2 Modal split EU-15
Year Road Rail Inland Pipelines Sea Total

waterways growth (%)
1970 34.7 20.0 7.3 4.5 33.5
1980 36.3 14.6 5.3 4.3 39.4 40.7
1990 41.9 10.9 4.6 3.0 39.6 17.7
1995 43.0 8.5 4.4 3.1 41.0 12.9
2000 43.2 8.2 4.2 2.8 41.6 18.1
2010 47.4 6.8 3.5 2.5 39.8 27.8
EU target 44.7 8.4 4.2 3.0 39.8
Source: European Communities, (2004); European Commission’s white paper on transport

policy (2001).
Table 3.2 illustrates the consequences of these diverging evolutions in terms

of modal market shares. It also gives the forecasted market shares for the
year 2010 as reported in the European Commission’s 2001 white paper on
transport policy. If the current trends are maintained, road transport
would increase by 41 per cent, while the overall transport growth would be
at the level of 28 per cent. As a consequence, road transport would further
increase its market share in 2010, and all the other modes would lose some
of theirs. Given the situation in terms of pollutants emission, congestion
and accidents on the roads, and the prospects of an even worse situation in
2010, the European Commission proposed a set of policies for curbing this
unfavourable evolution and reaching a better equilibrium between modes.
The latter is defined by the target market shares given in the last line of
Table 3.2.
The Commission calls for the development of cleaner engine technology,
better spatial planning of activities and residences, and new infrastructures.
It also wishes to promote a modal shift to rail, inland waterways and short-
sea shipping with better infrastructure, more efficiency and competition,
road regulation, external costs pricing, and subsidies to combined trans-
port. However, the pace of reform is very slow as it requires lengthy nego-
tiations between countries and multiple lobbies. Moreover, an agreement
on some reforms is only a starting stage: building infrastructures, changing
laws and institutions, and so on take a lot of time. In the meantime road
transport is growing rapidly, and one can be certain that the target defined
by the Commission will not be met.
Tables 3.3 and 3.4 give similar data and evolution for the 25 countries
making up the European Union at the present time. Here again a strong
expansion of road transport appears and a decrease in rail, though over a
shorter period. No comparable data are available for short-sea shipping. In
terms of market share, road transport accounts for 72 per cent, which is
Table 3.3 Transport in EU-25 by mode (in 1000 million tonne-km) and
average annual change (%)
Year Road Rail Inland Pipelines Total

waterways
1995 1231 359 120 105 1815
1996 1260 358 117 110 1844
1997 1313 378 124 110 1926
1998 1382 369 127 117 1996
1999 1435 357 127 117 2035
2000 1486 374 132 119 2111
2001 1516 358 130 124 2128
2002 1554 354 129 120 2158
1995–2002 3.4% 0.2% 1.1% 2.0% 2.5%
Note: Road transports by vehicles registered in the country.
Source: European Commission (2004).

Table 3.4 Modal split EU-25
Year Road Rail Inland Pipelines

waterways
1995 67.8 19.8 6.6 5.8
1996 68.3 19.4 6.3 6.0
1997 68.2 19.6 6.4 5.7
1998 69.3 18.5 6.4 5.9
1999 70.5 17.5 6.2 5.7
2000 70.4 17.7 6.2 5.6
2001 71.3 16.8 6.1 5.8
2002 72.0 16.4 6.0 5.6
Table 3.5 Modal split in Eastern Europe and Baltic States
Year Road Rail Inland waterway

1980 25.5 71.1 3.3
1985 24.8 72.1 3.1
1990 30.6 66.0 3.4
1995 46.6 50.8 2.6
2000 53.2 44.4 2.4
2003 57.3 40.4 2.3
Note: The countries included in this table are the new EU members (less Malta and
Cyprus) Albania, Bulgaria, Bosnia-Herzegovina, Croatia, Romania, Serbia and
Montenegro, FRY Macedonia.
Source: Trends in the transport sector (1970–2003), ECMT-OECD (2005).
slightly less than the 76 per cent share of road in the EU 15 countries when
setting aside short-sea shipping volumes. Nevertheless, road transport
increases faster in the new member countries so that it will soon obtain the
same market share as in the 15s. An even stronger similar trend relative to
the Baltic States and further East European countries can be observed
(Table 3.5). Here the data show the very fast development of road transport
and the collapse of the traffic by railways, which actually had a privileged
status before the political thawing between Western and Eastern Europe.
Finally, Appendix 1 provides a more detailed view on the modal market
shares in the 25 members of the European Union and illustrates how trans-
port conditions can differ between the European countries.
AIR FREIGHT TRANSPORT
Air transport is an important producer of transport service which increas-

ingly serves to stimulate regional and national economies and the ways in
which they are integrated with the broader global economy. In addition to
passenger air transport, air freight transport has become vital for many
firms which rely on rapid procurement and delivery as well as handling
quality and security. Moreover, air freight is an important component in
supply chains and for just-in-time (JIT) production systems. In particular
air cargo, which includes the carriage of mail and packages, is a growing
industry that provides services to a variety of commercial and industrial
sectors.
In 2003 the European air freight industry was challenged by the Iraq war,
SARS scares, the weakness of the global economy and ongoing security
concerns (Trepins 2004). As a result of measures taken by air carriers and
airports in Europe to reduce costs and improve efficiency, the first signs of
recovery came at the end of that year. Lufthansa, transporting about 1.6
million tonnes of freight in 2003, is among the leaders in Europe and has
emphasized its development of the US market. Air France, another leader,
reported nearly 3 per cent growth over the previous period as did British
Airways World Cargo. Of interest too is the fact that the Eastern Europe
air cargo market is set to take off with Poland, Hungary and the Czech
Republic taking the lead.
By its cost and nature, air transport is justified only for the transport of
high-value goods and over very long distances. Air transport markets can
be summarized as in Table 3.6 where they are regrouped on a continental
basis. The data clearly show that the main flows are forming a triangle
between North America, Europe and Asia. But, the table also shows that
the share of the intra-Europe flows is very small relative to flow volumes
elsewhere. Indeed, the European population and the industrial activities are
rather densely spread over the European landmass, and freight transports
are mostly made over rather short distances. Moreover, the progressive
opening of frontiers and the liberalization of road transport within Europe
has also strongly favoured international trucking. Actually, airlines
propose many ‘truck-flights’ by road in order to complete their service
range on shorter distances.
The numbers given in Table 3.6 are global numbers including the two
main categories of air-freight transport: general and express transport. The
‘general’ category groups the activities of the airlines such as Lufthansa
and Air France and some movements by integrators such as DHL or UPS.
The airlines transport freight either in the bellies of regular passenger
flights or in full freight flights. The express category includes couriers and
Table 3.6 Relative importance of the air freight markets in 2003 (% of

freight tonne-km)
North America 11.5 North America to/from Latin America 3

Europe 0.5 Europe to/from North America 9.8
Asia 10.2 Asia to/from North America 26.2
Africa to/from Europe 2.7 Asia to/from Europe 19.8
Latin America to/from Europe 3.6 Middle East to/from Europe 2.8
Other flows 9.9
Source: Airbus global market forecast (2004–2023).
express freight services as well as express transports by integrators. The

tonne-km volume of this category represents about 11 per cent of the total
international air freight, but it has been expanding at a much faster pace
than the general air freight. Actually, in contrast with the general freight
sector, which has been contracting within Europe, the express sector has
been growing at a rate of more than 10 per cent per year over the last
decade.
Air freight traffic in Europe is concentrated in a relatively small number
of airports (Table 3.7). The top ten EU freight and mail airports recorded
a volume of more than 8 million tonnes in 2004 representing 71 per cent
of the total freight and mail carried by all EU-25 airports. However, the
top four airports (Frankfurt, Amsterdam, London Heathrow and Paris/
Charles de Gaulle) represented almost half of the total EU-25 freight and
mail transported by air. These hubs are developing as cargo hubs by
adjusting their infrastructure. Frankfurt, one of the biggest cargo airport
in Europe, increased its traffic by over 11 per cent in 2003 and offers logis-
tic services at its ‘CargoCity South’. Paris/Charles de Gaulle has a new air
cargo logistic center and serves as hub to leading integrators (for example,
FedEx). A World Cargo Centre is located at London Heathrow airport.
Amsterdam benefits from the Air France/KLM alliance; its cargo traffic
increased by nearly 9 per cent in 2003. The significant growth in freight
transport led to a sharp rise in the use of full-freighters. This trend was
also due to reduced demand for passenger transport after 2001, which
induced a smaller number of passenger flights and the use of smaller air-
planes, so that the freight capacity in bellies of passenger planes decreased
and was replaced by more dedicated cargo flights. This development of
full-freighter service with their lower operating cost is also a factor sus-
taining the growth of air cargo traffic. Amsterdam and Frankfurt
now have a majority of cargo flying on freighters – 56 per cent of volumes
at Amsterdam and 52.4 per cent at Frankfurt – and the top ten cargo
Table 3.7 Cargo and mail loaded and unloaded in major European airports
(1000 tonnes)
Airport Country 1995 2000 2003

Paris-CDG FR 824 1610 1724
Frankfurt DE 1297 1710 1650
Amsterdam NL 978 1267 1354
London-Heathrow GB 1043 1402 1300
Luxemburg LU 286 501 657
Brussels BE 427 687 586
Köln/Bonn DE 276 442 531
Liège BE 8 270 374
Madrid ES 230 338 340
Kobenhavn DK 310 419 336
Milan-Malpensa IT 126 301 320
Zurich CH 417 305
East Midlands GB 83 194 251
London-Gatwick GB 232 338 234
Istanbul TR 234 231
London-Stansted GB 93 183 207
Roma-Fiucimino IT 257 201 173
München DE 65 148 163
Dublin IE 60 120 134
Stockholm-Arlanda SE 104 154 131
Milan-Bergamo IT 99 127
Vienna AT 93 135 127
Manchester GB 51 122 127
Athens EL 98 110
Paris-Orly FR 276 121 106
Source: European Commission, 2004.
carriers at Amsterdam now are all freighter operators. Nevertheless, large

passenger airports still provide the advantage of a large belly freight
capacity which contributes to their relative attractiveness. Comparing the
top ten list of airports for passengers and for freight, it can be noted that
the top four airports are the same but with different rankings. Another
airport appearing on both lists is Madrid/Barajas. However, four rela-
tively smaller airports in terms of passenger transport appear in the top
ten airport list for freight transport: Brussels/National, Luxembourg,
Köln/Bonn and Liège. These airports have developed as cargo distribu-
tion hubs profiting from smaller passenger transport congestion and very
good connections to main road networks. In addition, Brussels/National,
Figure 3.1 Origins and destinations of air freight flows; the shares of
national, international intra-EU-25 and international extra-EU-25
Köln/Bonn and Liège profit from the presence of cargo express com-
panies, as well as of large forwarder warehouses and distribution centres
in their hinterlands.
Regarding the origins and destinations of flows, the shares of national,
international intra-EU-25 and international extra-EU-25 in terms of air
freight transport at the ten main EU-25 airports reveal some interesting
patterns (Figure 3.1). The share of national transport is small (with the
exception of Madrid/Barajas), and those of international intra-EU and
international extra-EU are very different between the airports considered.
For six out of the ten airports (Amsterdam/Schiphol, Frankfurt/Main,
London/Heathrow, Luxembourg, Milano/Malpensa and Paris/Charles
de Gaulle), international extra-EU freight transport is dominant. The
tonnage of international extra-EU freight transport was over one million
tonnes for Amsterdam, Frankfurt/Main and London/Heathrow, just fewer
than one million for Paris/Charles de Gaulle, half a million for Luxemburg
and a quarter of a million for Milano/Malpensa. London Heathrow was
the top EU-25 airport in terms of freight transport to/from North
America (almost 508 000 tonnes), and Amsterdam was the top airport for
freight transport to/from Africa (144 000 tonnes). Frankfurt/ Main was,
however, dominant in terms of freight transport to and from Asia and
Table 3.8 Top ten European airlines in cargo traffic (in millions of freight
tonne-km), 2004
Airline Traffic Share Cargo – all service (%)

Lufthansa 8024 23
Air France 5370 22
British Airways 4864 14
KLM 4732 13.6
Cargolux 4645 13.3
Alitalia 1392 4
Swiss 1124 3.3
Iberia 9648 2.82
SAS 7066 2
Source: Association of European Airlines (2004).
Australasia as well as to and from the rest of Europe, with 771 000 and
38 000 tonnes respectively. Madrid/Barajas registered the highest share of
national transport among the ten most important airports. When consid-
ering domestic freight transport, this airport benefits from its central posi-
tion in Spain, making it by far the most important airport of the country.
However, the tonnage registered as national transport at Madrid/Barajas
(75 000 tonnes) was similar to that at Frankfurt/ Main and less than the
106 000 tonnes for national transport at Paris/ Charles de Gaulle.
The national flag airlines of the airports are also among the most import-
ant cargo carriers. The data in Table 3.8 reveal the dominance of Lufthansa
among the European carriers and for all airlines shows the share of cargo
to all services. Apart from the four dominant carriers and Cargolux, the
cargo percentage is quite small. The relative importance of these carriers in
international transport compared to the top world cargo carriers is shown
in Table 3.9. Indeed, as expected, their domestic traffic is small compared
to volumes realized by the main American and Chinese carriers. It is also
interesting to observe in Table 3.10 that European-based forwarders are
at the top of the world list: DHL, Panalpina, EXEL, Kuehne Nagel,
Schenker and Expeditors. Note that there have been several recent mergers
in this sector, most notably the buying of EXEL by DHL. The main hub of
DHL is in Brussels airport , but is soon to be moved to Leipzig. TNT, which
is the logistic arm of the Dutch Post, is based in Liège, and the European
hub of UPS is in Köln-Bonn; FEDEX’s hub is in Paris-Roissy. The cargo
operations of the national flag carriers are naturally based in their own
national airports.
Table 3.9 International cargo traffic of the top airlines (1000 tonne-km),
2004
Korean Air Lines 8164 Air France 5384

Lufthansa 8028 British Airways 4771
Singapore Airline 7143 KLM 4733
Cathay 5876 Cargolux 4670
China Airlines 5642 ...
Federal Express 5595 ...
EVA Airways 5477 Alitalia 1393
Note: Air France and KLM have recently merged, and their cargo operations are under a
unique management.
Source: Air Cargo World and IATA.
Table 3.10 Top world air forwarders market shares, 2002
DHL-Danzas DE 3.9% Schenker-DB DE 2.2%

Panalpina CH 3.8% Expeditors Intl. EI 2.2%
EXEL GB 3.6% EGL US 0.9%
Nippon Express JP 3.1% UPS US 0.6%
KuehneNagel CH 2.7% UTI US 0.3%
Source: htpp://www.splfreight.com.
Strategic Developments
As part of a basic strategy to improve flows and profitability, air carriers are
creating alliances in order to develop unified management systems for their
cargo divisions and to effect closer cooperation on freight operations. For
example, Air France and KLM are creating a joint cargo unit with the aim
of controlling the management network, marketing and sales, although each
airline will continue to manage their own day-to-day operations. The two air-
lines operate mainly at Amsterdam/Schipol and Paris/ Charles de Gaulle, but
as a result of their cooperation unit they will benefit from a dual-hub strat-
egy, combining the respective base benefits. The Air France-KLM Group
believes the future of European air traffic will be built around four hubs.
Their joint association (European Cargo House) means that the French and
Dutch flag carriers will control two of them – Paris and Amsterdam. The
combination of the two carriers is starting to be felt in the cargo world with
various carriers planning closer cooperation on freight operations.
Freighter operators seem to be drawn to Amsterdam and Frankfurt in

particular, spurning the lower charges and easy availability of slots at other
all-cargo airports. One explanation is that in the case of Amsterdam, extra
runway capacity is drawing traffic. Following the official opening of its fifth
runway in 2003, the airport now has a wealth of slots. Uniquely in Europe
its new runway was designed for night movements, adding between 27 000
and 32 000 slots a year, a 20 per cent increase. Frankfurt on the other hand
has no such advantage as its proposed fourth runway is mired in contro-
versy as a result of a nearby chemical plant near the path of the runway.
However it has achieved strong business and popularity among air carriers.
This is due not to the runway situation but rather to the convenient cargo
village and the well-developed surrounding area. On the outskirts of the
airport both Amsterdam and Frankfurt are experiencing a building boom
as a series of huge forwarder houses rise around them. In the last year and a
half, Frankfurt’s Cargo City South has seen Yusen Air and Sea, Panalpina,
Kuhn Nagel, Dachser, DHL Danzas and Nippon Express all open facil-
ities in the logistics zone. Simultaneously Amsterdam has realized a new
cargo facility associated with Exel. This building boom among forwarders
at Amsterdam but especially Frankfurt is strong evidence of the increased
tendency of logistics operators to consolidate their traffic into one or two
key European hubs. They have understood that focusing cargo onto key air
hubs builds up critical mass and gives leverage over airlines. Focusing on
hubs not only gives forwarders buying power but also allows them to better
control the supply chain and better manage capacity (Conway 2004).
As forwarders increasingly centralize, airlines are bound to follow.
Airbridge Cargo is a good example. Russia’s first 747 freighter airline orig-
inally planned to fly exclusively out of Luxembourg to Moscow and onward
to China. But the power of the strength of the forwarder facilities in
Frankfurt proved too strong, and on arrival of its second aircraft it began
five weekly services from Frankfurt, leaving only three in Luxembourg.
Similarly, Polar Air Cargo left Liege for Amsterdam, which offers cheaper
trucking, logistics costs and fuel, but also put Polar services close to the big
forwarder facilities located in the airport’s ring (Conway 2004).
However, this concentration on large hubs also creates problems of land
scarcity, congestion on the road network and noise, particularly during the
night. Environmental concerns are on the increase in Europe and may con-
strain to some extent the development of large hubs. This is a factor which
already played to the advantage of some smaller airports like Liège,
Luxemburg and Leipzig.
Air cargo is enabling the transshipment of a variety of goods and pro-
vides a way in which peripheral points can be more deeply integrated to the
global economy. This is especially true in Eastern Europe. Cargoes continue
to diversify as a result of the growth of high-value and specialized products

where speed of delivery, security and safety is important (newspapers and
medicines). Perishable goods, most especially seafood, fruit and flowers are
a booming business. Air freight has indeed contributed to the globalization
of the Netherlands’ flower industry and also permitted many lower income
countries (notably in South America and Africa) to market their products
in Europe and, via integration activities, in other markets. Finally machin-
ery parts and high tech components are among the most important cate-
gory of goods moved by air freight. More recently, the express carriers
(FedEx, UPS, etc.) through their direct supply of services have worked as a
competitive stimulus for the more traditional postal systems. Their inte-
grated transport systems combined with employment of communications
networks have clearly also fostered the growth of E-commerce.
INTERMODAL TRANSPORT
In the course of the many reforms and negotiations which took place over
the years around the reorganization of the European transport markets,
precise definitions were needed to ensure that people of different national-
ities really understood each other in discussions and negotiations. Agreed-
upon definitions for ‘multimodal’, ‘intermodal’ and ‘combined’ transport
already have been given in the introduction. More detailed concepts were
also clearly defined, such as ‘piggybacking’, which is a combined railroad
transport, and the ‘rolling road’, which carries complete road vehicles on
special low-floor wagons. Also, one distinguishes ‘accompanied’ transport,
where the driver of a road vehicle travels along in the train or ferry, and
‘unaccompanied’ transport, where road vehicles or part vehicles are carried
on another mode without their driver.
These are the basic definitions in common use nowadays, but their exact
content progressively evolved over time following the development of new
technical solutions and the liberalization of transportation in Europe
(Wenger 2001). That was particularly the case for combined railroad trans-
port. Indeed, from the start this formula was seen as a particular modality
of road transport that was organized by firms created by road carriers.
These carriers of combined railroad transport formed an international
association in 1969, the ‘Union Internationale des Sociétés de Transport
Combiné Rail-Route’ (UIRR), to coordinate and promote their activities
as well as to lobby and negotiate with the railways and public authorities.
The railways’ public monopolies did not view these initiatives favourably as
they came from their competitors, and, until the early 1970s, only accepted
transport road trailers as a combined transport operation; swap bodies
were not allowed on trains. Moreover, railroad combined transport did not
include the transport of containers, which was considered as a combination
of sea and rail operations, an activity controlled inland by the railways
through affiliated firms such as ICF and CNC. Later, the railways started
to compete with the combined transport firms for the transport of swap
bodies. Hence, until the liberalization of the European transport markets
in the early 1990s, the competitive relationships between the railways and
the combined transport firms experienced different phases with a certain
degree of needed cooperation mixed with competition on the same markets
and also some attempts at formal market sharing. These were soon forbid-
den by the European Commission, which saw them as contrary to the
European Community treaty provisions on competition. Nowadays, all
these restrictions have been abandoned, and railways as well as road carri-
ers and inland waterways operators pitch in to provide all kinds of trans-
port solutions.
As early as the beginning of the 1970s, several European countries tried
to encourage intermodal transport by taxes on road transport and subsi-
dies for specialized vehicles and handling platforms. The first intervention
of the European Union in this matter was a 1975 directive which exempted
the road transport parts of combined transport from international road
transport quotas under the condition that road transport distances of
initial and final legs were made as short as possible. Indeed, at that time, the
amount of road transport made by one country’s carriers in another
country was normally restricted by bilateral quotas. This authorization did
not mean however that the carrier of an exporting country could operate
the final leg with its own means or that a carrier from the importing country
could do it by pulling the foreign trailer with his own tractor! These limit-
ations were lifted only in the early 1990s, when transport markets started to
be liberalized.
Some additional roadblocks were also put in the way of intermodal
transport. These were progressively lifted in the course of market liberal-
ization. Examples include many controls at the national boundaries,
tedious identification of containers at frontiers, restriction on the use of
private wagons, and so on. Specific measures were also taken to support
intermodal transport, such as the authorization of road combined trans-
port in Germany when other truck traffic is forbidden during weekends.
Again in Germany, starting in 1972, a tax exemption was introduced for
heavy road vehicles used in combined transport. Such an exemption was
made compulsory by a European directive in 1992, but six European coun-
tries introduced in 1993 a ‘Eurovignette’, which is a yearly fixed tax on all
trucks using the country roads or superhighways. De facto, it took the place
of the previous national taxes.
Efforts were (and are still) made in several countries to enlarge the gauges
of tunnels in order to allow the transport of road vehicles by rail, and sub-
sidies are currently given to railways for the ‘rolling road’ operations. The
road vehicle length and total load allowed in combined transport were
progressively increased. Nowadays, they are set at 18.75 m and 44 tonnes
respectively, compared with 40 tonnes for usual trucking. There is presently
intensive lobbying for increasing these limits for all trucks. Finally, in 1991,
the railways were officially permitted to provide combined transports.
However, many obstacles still remain for intermodal transport solutions.
The next section gives an overview of the European Union efforts and
policy towards a better organization of freight transport and intermodal-
ity, while a later section examines in detail the numerous remaining obsta-
cles in the way of efficient freight transport solutions.
The following figures and Table 3.11 show the available data of inter-
modal and combined transport. Figure 3.2 shows the regular increase of
combined railroad transport in Western Europe as declared by the railways.
Over the period 1991–2003 it increased at an average annual rate of 4.7 per
cent, which is much faster growth than the overall performance of railways.
The absolute level of the transported tonnes has a very ambiguous
meaning, since the same tonnages must have been recorded several times on
successive networks in international traffic. However, the trend shown by
250 000
200 000
150 000
100 000
50 000
0
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Note: EU15 Switzerland and Norway.
Source: UIC’s annual report (2003).
Figure 3.2 Combined railroad transport in 1000 tonnes

Table 3.11 Railroad combined transport by UIRR firms in tonnes-km

and by means
Year National Internat. Total Number of Semi- Rolling Total

(mio tkm) (mio tkm) (mio tkm) boxes trailers road (1000s)
(1000s) (1000s) (1000s)
1994 7606 17 077 24 682 1057 220 253 1529
1995 7250 17 720 24 970 1079 224 312 1615
1996 7583 19 584 27 167 1161 207 344 1711
1997 8334 21 527 29 862 1333 185 346 1864
1998 8308 21 926 30 234 1335 166 382 1883
1999 7846 20 742 28 588 1260 154 406 1821
2000 8156 24 330 32 486 1333 172 460 1964
2001 7217 24 663 31 880 1300 171 466 1937
2002 8047 25 027 33 074 1367 152 464 1983
2003 7671 26 366 34 037 1449 152 460 2061
Note: In equivalent TEU, the volume handled by the UIRR’s firms in 2003 amounted to
4 738 366. To that number, one should add in 2003 the volume made by CNC, a new French
UIRR member: 103 436 TEU in national traffic, and 459 038 TEU in international traffic.
Source: UIRR’s Annual Reports.
these data is quite meaningful since the same bias is maintained over the
successive periods. Naturally, the performance is not the same in all coun-
tries. In particular Austrian and Italian combined railroad transport has
increased more than elsewhere. Some additional bits of information about
a few countries are given on pp. 91–99.
The data given in Table 3.11 concern the activities of the UIRR’s firms
that specialize in combined transport; they are expressed in tonnes-km and
number of vehicles. Note that the average load of a unit was 25 tonnes in
international traffic and 20 tonnes in national transport; the average dist-
ances were, respectively, 800 and 550 km. The overall average annual
growth rate comes out at the 3.6 per cent level, but it reaches 4.9 per cent in
international traffic. Nevertheless, it amounts to only a small portion of the
overall rail traffic. The comparison of data in Tables 3.1 and 3.11 shows
that the UIRR’ firms traffic was only 14 per cent of the total volume made
by the railways.
Information about container traffic (not included in Table 3.11) is given
in Figures 3.3 and 3.4. Figure 3.3 relates to the volumes transported by
INTERCONTENEUR-INTERFRIGO (ICF), the operating arm of the
main European railways, and its affiliates; they are given in numbers of
equivalent 20-foot containers (TEU), which have a 16 tonnes capacity. It is
seen that the total volume of containers of maritime and continental
2 500000
2 000000
1 500000
ICF maritime
TEU
ICF continental
ICF+affiliated
1 000000
500000
0
89
90
91
92
93
94
95
96
97
98
99
00
01
02
03
19
19
19
19
19
19
19
19
19
19
19
20
20
20
20
Years
Source: ECMT.
Figure 3.3 Containers transported by ICF and affiliated firms 1989–2003
origins transported by ICF and its affiliated firms has increased over the
period 1989–2003, even though it has been tapering off over the last few
years. On the other hand ICF’s volumes of both continental and maritime
origins have decreased over the years. Note that in 2003 the average trans-
port distance of maritime containers was 996 km, although it was 1320 km
for the containers of continental origin. There are also some other opera-
tors in the sector of maritime containers: Figure 3.4 gives an estimation of
the total tonnages of maritime containers transported over the same period
of time. In contrast with Figure 3.3, it presents a continuous expansion of
maritime containers transport, hence showing the loss of market share of
ICF railway operations.
Altogether, on the basis of the 2003 figures that are available and what is
known about the loads per unit and average distances, we can roughly esti-
mate that the total railroad combined transport of all kinds does not
amount to more than a quarter of the European railways’ activity
(CNT 2005). That means the relative share of intermodal transport in total
transport in Europe is very small indeed. The fact is that despite subsidies
of various kinds railroad intermodal transport can be competitive
only on rather long-distance corridors that have important flows, because

of the additional cost of transferring the loading units, the additional
organizational tasks and the need of a sufficient service frequency. On short
distances intermodal transport is definitely more costly, but even on longer
distances it is often more expensive, as shown by the RECORDIT project
(Gruppo CLAS 2002). Only the consideration of external social costs can
give it an advantage over road transport.
Another important handicap is that many inter-modal services have only
one departure per week, whereas the successful ones are operating on cor-
ridors with massive flows that allow a higher frequency and more efficient
rail operations with block and shuttle trains from point to point. They also
cut down the delivery times to destination (INRETS, IQ-Report, 2001).
Corridors with difficult profiles can be particularly successful, like those
from/to Northern Europe to/from Italy across the Alps, or from/to the
Benelux countries to/from Sweden and Spain. Recently some of the
European railways have focused their efforts on these massive flows from
point to point and abandoned part of their costly hub-and-spokes opera-
tions. Another development is the operation of special point-to-point
trains for the transport of specific commodities, such as the regular ‘banana
trains’ from Belgian harbours to cities in Germany and the Kraft Foods’
‘coffee train’ from Bremen to Berlin.
These new orientations may mean that in the future the numerous smaller
flows may be excluded from railroad combined transport. Finally it should
550
500
450
400
350
300
250
200
150
100
50
0
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
Source: ICF annual reports.
Figure 3.4 EU15 maritime containers

be recognized that the reliability of railroad intermodal transport is often

questionable. Note, however, that railroad intermodal transport solutions
are much more competitive for the transport of maritime containers
because their transfer cost from/to the boats is about the same whether the
containers are loaded or unloaded from or to trucks, barges or railcars. In
addition to other factors such as road congestion and other environmental
considerations, this is the reason many harbours are striving to improve
their hinterland rail connections in the context of a competition among har-
bours for a bigger share of the international containers traffic.
The following tables give information about specific traffic at important
crossings of natural obstacles: the Alps, the Pyrenees and the Channel. In
Table 3.12, one observes again the very strong increase of road traffic
through the Alpine tunnels, which more than doubled over the period
1985–2003 while rail transport increased only by 47 per cent. Most remark-
able is the increase of road traffic through the Swiss tunnels despite policies
designed for containing trucking through Switzerland. The same phenom-
enon of trucking increase can be observed in Table 3.13 for the Pyrenees
crossing. Its strong increase also reflects the progressive integration of the
Spanish economy within the European economic sphere. The Channel
crossing is an altogether different story that cannot be told in detail here
because the competition in this case is between the sea ferries to and from
Table 3.12 Traffic through the Alps
Year Rail traffic (million tonnes) Road traffic (million tonnes)

Swiss Austrian French Total Swiss Austrian French Total
tunnels tunnels tunnels tunnels tunnels tunnels
1985 14.0 4.7 7.5 26.2 2.7 14.3 12.3 29.3
1990 17.9 5.5 7.2 30.6 4.2 13.6 21.8 39.6
1995 18.0 8.4 8.0 34.4 6.6 20.0 25.8 52.4
2000 20.6 8.7 9.4 38.7 8.9 25.4 25.8 60.1
2001 20.6 10.7 8.6 39.9 10.4 25.0 25.7 61.1
2002 19.0 10.5 8.6 38.1 10.5 25.8 25.4 61.7
2003 19.9 10.7 7.8 38.4 11.6 27.0 25.2 63.8
1985–2003 average annual growth rate (%)
2.0 4.7 0.2 2.2 8.4 3.6 4.1 4.4
– – – Number of heavy goods road vehicles
– – – 1990 733 925 1279 2937
– – – 2003 1291 1650 1521 4462

Table 3.13 Crossing of the Channel and Pyrenees
Year Channel tunnela Pyrenees Crossingb

Shuttle Through-train Rail Road
(1000 vehicles) (1000 tonnes) (1000 tonnes) (vehicles per day)
1995 391 1 411 – –
1996 519 2 361 – –
1997 268 2 925 4 800 13 266
1998 705 3 141 4 400 14 765
1999 839 2 865 4 200 15 846
2000 1 133 2 947 4 600 18 050
2001 1 198 2 447 4 200 19 183
2002 1 231 1 464 4 100 18 697
2003 1 285 1 744 – –
Source: a European Commission (2004) and b UK Department for Transport;

Observatoire des trafics au travers des Pyrénées, Ministère de l’Equipement, France.
the UK and the tunnel. Until now, it has not been a very successful project.
The traffic of passengers is still hampered by the delays in completing a
high-speed link on the British side. As far as freight is concerned, the
tonnage going through the tunnel amounts to only 2 million tonnes, only
about 3 per cent of the total trans-Channel tonnage, whereas 11 million
tonnes had been forecast. This weak performance results partly from a non-
competitive setup between the EUROTUNNEL consortium and the
French and British railways, the financial difficulties of EUROTUNNEL
and contractual high tolls to be paid by the railways until 2006, but it is also
the result of the strong competition offered by the sea ferries.
The European Transport Policy for Freight Transport
It is not possible to understand the present situation of transport in Europe

and the problems of competition and coordination between modes without
a minimum knowledge of its past organization and the way it was progres-
sively reformed towards more competitive freedom and efficiency. Until at
least 1985, transport was organized on a strict national basis and controlled
by the state in all European countries. The railways were ‘public enterprises’
and the fluvial navigation was tightly regulated though with more competi-
tive freedom on the Rhine. Competition within the road sector was limited
to the respective national territories with some price controls. International
transport was organized through bilateral or international conventions. The
Rome treaty of 1957, which instituted the European Common Market, had
declared that all obstacles, including custom taxes and quantitative restric-
tions to the free circulation of people, services and capital should be abol-
ished. It also advocated that a common transport policy should be set up for
promoting the common market development. Actually nothing was done in
that respect so that the European Parliament referred the matter to the
European Court of Justice, which declared in 1985 that the European
Commission was deficient in its transport policy. At that point, the transport
policy began to move and the first steps towards liberalization were taken.
Road transport policies began with the implementation of quotas which
were allocated to foreign carriers, and these were progressively extended
over the years. In 1990, prices of road transport between countries became
free, and in 1998 carriers were allowed to operate domestic transport in
other European countries within some time constraints. In the meantime
many common norms were decided in matters of technological standards,
road taxation, social conditions and environmental impacts. As to com-
bined transport, a directive of 1992 abolished all constraints by quotas and
administrative authorizations, ordered reduced taxes on combined trans-
port vehicles and allowed combined transport road carriers to provide the
initial and final road transport legs in another country. In 1998 some
financial support was granted to initiatives with respect to combined
transport. Since 1998 many directives were taken to set up a level playing
field of competition in matters of professional qualification and licences,
social and safety conditions as well as common rules and standards for tolls
and environmental pollution.
A 1991 directive prescribed that railways be made legally and financially
independent of public authorities, that their accumulated debt be paid off
and that financial accounts be separated between the management of infra-
structure and transport operations. The directive also imposed the opening
of networks to international combined transport and to international
groups of railways. In 1995 additional rules were set for the granting of rail
licences and slots on the networks. However, these directives had hardly any
effect on the real level of competition.
Inland waterway navigation markets were opened in two steps, nation-
ally by a 1991 directive and internationally by another directive in 1996.
The latter imposed a full freedom of contracting and pricing in 2000.
Previously, in Benelux and France for example, prices were administratively
set, and short-term freight contracts allocated following a queuing system
(Beuthe and Jourquin 1994). Supporting measures also were taken to
modernize the fleet and harmonize technical and professional norms.
Maritime transport was also liberalized in two steps: in 1986 all
European boats could freely transport freight between any European har-
bours and foreign countries; in 1989 transport between European harbours
was opened to all European boats. There still remains an exception in

favour of the maritime conferences organizing transport between Europe
and foreign countries in matters of prices and capacity sharing. Again,
many measures were taken in matters of technical and safety matters.
Air transport was liberalized in three successive steps, first relaxing some
rules concerning air fares for passengers and cooperation between airlines
in 1987, then beginning in 1990 additional relaxation of restrictions were
implemented for European airlines and were extended to freight operations.
The third ‘package’, in 1992, gradually introduced the freedom to provide
air services within Europe so that in 1997 national airlines were allowed to
operate a route within another state. Full freedom to set air fares was also
granted at that time with some minor provisions for a control of the ade-
quacy or fairness of the fares by the public authorities. Various regulations
were also successively set up concerning slots and charges in airports,
ground handling services, and so on in order to guarantee an adequate level
of competition. Most of them aim at the passenger operations, but their
principles also apply to freight transport. More generally, in the framework
of its policy of fair competition within the common market, the European
Commission rather tightly controls State aid to airlines and airports. There
is no specific provision concerning intermodality with air transport.
The present transport policy of the European Commission was detailed
in the white paper ‘European transport policy for 2010: time to decide’ of
2001. The general aim was to progress further towards a real common
market in transportation services to contribute to production efficiency,
economic growth and sustainable economic development by a better
balance between modes and to effect decreased congestion. Indeed, while
the GDP of the 15 countries making up the European Union (at that time)
grew at an annual rate of 2.3 per cent between 1980 and 1990 and at a rate
of 2.1 per cent between 1991 and 2000, freight transport in tonne-km
increased by 1.6 and 2.7 per cent respectively. At the same time, road freight
transport increased at an annual rate of 3.1 per cent, thus increasing its
market share from 36.3 to 43.2 per cent. Considering the 38 per cent pro-
jected increase in freight transport over the period 2000–2010, with a likely
increase in road freight transport of 50 per cent (plus a 24 per cent increase
for passengers), it became obvious that severe road congestion should be
soon expected. Moreover, such a road traffic expansion would generate
strong additional social costs in terms of pollution, accidents, noise and
spatial destruction in many regions with a high density of population and
industrial activity. It became urgent to propose new solutions and policies.
Thus, additional measures were proposed and implemented in 2001. A ‘first
package’ of measures aimed at railways had to be implemented by 2003. It
included mainly:
1. separate management of rail infrastructure and transport operations,

in order to promote a fair competition between several railways using
the same infrastructure;
2. separate accounting for rail freight and passengers operations, in order
to avoid cross-subsidies;
3. technical measures to promote transport by entirely new rail operators
(licences, safety controls, infrastructure tariffs, slot allocation), and to
standardize operational procedures;
4. opening of the main links of the European rail network to interna-
tional freight transport.
A second package of measures imposes a full liberalization of interna-

tional freight transport by the year 2006 and of national freight transport
by 2007. It also contains additional measures to further competition and to
develop an efficient rail transportation market. Reports on the European
transport policies as well as the last ‘white paper’ on transport policy can be
found on the Web site: http://europa.eu.int/comm/transport/index_en.html.
The Commission tried unsuccessfully to introduce competition in harbour
services. Indeed, in many European harbours loading and unloading
operations can only be made with local unionized labour. Trade unions
strongly opposed the proposal which would allow the boats’ crews to take
over some of the work. A proposed directive on harbour operations and
financing is still currently in the negotiation stage. In order to promote short-
sea shipping as an alternative to other inland transports, the Commission is
supporting several projects in favour of this type of transport.
Many additional directives also aim at a better organization of road
transport in matters of safety, professional qualification, technical norms,
and so on. The problems of harmonization of tolls and restrictions on
weekend transport are still under discussion.
Inland navigation also receives some attention particularly for the imple-
mentation of compatible information systems. The Commission also
authorized several schemes designed for promoting this mode, such as pro-
grammes subsidizing the building of waterways walls and quays along
waterways but also subsidies to transport of containers, renewal of motor
engines and communication equipment on barges.
In general, the European Commission is intent on promoting inter-
modality as a means to substitute inland waterways navigation, rail trans-
port and short-sea shipping combined with road transport to direct road
transport. To that effect, it decided to promote more efficient technical solu-
tions and the improvement of transport networks including the develop-
ment of short-sea routes and to financially support some intermodal
initiatives directly through the PACT and MARCO POLO European
programmes or through authorizations of national public authorities’

interventions.
Concerning the technical solutions, the Commission is currently trying
to promote a set of standardized European Intermodal Transport Units,
for example, containers and swap bodies that would be adjusted to the
widely used EURO-pallets standards (ISO 1200/800 and 1200/1000) and
provide a maximum loading capacity as well as more efficient loading/
unloading procedures. The swap bodies would be made stronger and stack-
able so that they would require less storage space and could be lifted from
the top corners like containers.
Indeed, the much used maritime IS0 20-foot and 40-foot containers have
an internal width that limits the number of pallets. For instance, a 20-foot
container can take only ten (1200/1000) pallets, whereas a conventional semi-
trailer can take 26 such pallets. Also, the external length of maritime con-
tainers does not fit the loading platforms of pallet-carrying vehicles; most of
them cannot carry two ISO 20-foot containers (or one 40-foot). Neither is
the height of maritime containers appropriate for the European road gauge.
The carrying capacity (tonnes) of ISO 20-foot containers is insufficient. The
heterogeneity of swap bodies and containers complicates and slows loading
and unloading operations; it also induces a lower rotation of loading units.
On the other hand stronger stackable swap bodies would be heavier and
more expensive, and a new module would decrease the capacity of some
boats and/or require some costly adjustments and new investments. The
research of a module that would be compatible to pallet dimensions, length
of authorized vehicles and carrying capacity of European roads as well as
maritime practices and boats’ configurations, railway wagons, and contain-
ers used in the USA, has not been successful up to now, as could be expected
given the many conflicting interests involved. The fact is that there is no
perfect solution meeting all constraints. Some transport operators tend to
argue that it is preferable to leave the matter to the market. Recently, for
example, the use of 45-foot pallet-wide containers compatible with
European norms is increasing in short-sea shipping; there are versions fitted
with side curtains and others with refrigeration, and new boats are built to
their specification. Is it possible, however, to improve the efficiency of the
whole logistic chain without defining better common norms for the future?
Another technical endeavour is the programme GALILEO to support
the development of a satellite radio-navigation system which would,
among other goals, provide a useful support to the control and manage-
ment of transport, particularly for tracking multimodal transports.
The European Union policy for remedying bottlenecks and improving
the networks is mainly focused on rail infrastructure, as 75 per cent of the
projects concern rail transport. It also includes four sea roads still to be
developed. Details on these projects can be found on the European

Commission Web site: http://europa.eu.int/comm/ten/transport/projects.
The following programmes directly relate to combined transport:
1. High-speed and larger capacity line between Berlin, Germany and

Verona, Italy through the Alpine chain for both passengers and freight.
2. New ‘Betuwe’ line dedicated to freight transport across The
Netherlands from Rotterdam to the German border.
3. New high-speed line for both passengers and freight between Lyon,
France and Trieste, Italy across the Alpine chain and Northern Italy.
4. Several projects in Spain and Portugal to improve rail tracks, road and
harbour facilities and to improve the connection with the French net-
works.
5. Improvement of the North–South rail in Ireland (Londonderry–
Belfast–Dublin–Cork).
6. The fixed rail/road link between Sweden and Denmark, and improve-
ment of the connecting rail and road lines in the two countries (com-
pleted).
7. The UK West coast main line with higher speed and capacity between
Glasgow/Edinburgh and Liverpool–Birmingham–London.
8. High-capacity rail link across the Pyrenees from France to Spain
(under study).
9. Combined transport/high speed line between Stuttgart, Germany and
Vienna, Austria.
10. Improvement of the Danube’s navigability in Germany.
11. Fixed rail/road link between Denmark and Germany (under study).
However, these projects are extremely costly in both time and money so
the implementation is very slow. The Commission’s budget can only allow
a 20 per cent contribution to the costs, and most countries are currently
under severe budgetary constraints. This problem has led to two ideas:
involving private partners in these projects, and devising a more systematic
pricing of road usage, the proceeds of which could help finance transport
infrastructures. The first idea obviously is worth trying but may be difficult
to implement in many cases, particularly after the losses incurred by private
stakeholders in the Channel tunnel venture. The second idea is also difficult
to implement in the present context of tight public budget and high tax-
ation rate in most European countries.
Indeed, taxes on the use of transport infrastructure already exist in forms
that vary from one country to another. In every country there are not only
relatively high taxes on fuels but also taxes on car and truck purchases, plus
additional taxes are assessed on a yearly basis. In France the financing of
superhighways was made with tolls. Italy, France, Spain, Portugal and
Greece impose motorways tolls on trucks which vary with the number of
axles (on average 15 cents per km). Some other countries have imposed a
fixed tax on trucks per time period for the right to use the road network
(Eurovignette), as in Belgium, The Netherlands, Denmark, Sweden and
Germany. However, the proceeds of these taxes traditionally are not
specifically invested in transport infrastructure (with the exception of
France for the motorway tolls) but are an important contribution to the
overall budget of the states. Considering the tight budget situation of most
of the European countries, it is rather difficult to specify that taxes be ded-
icated and directed toward transport infrastructures. Actually, such a prac-
tice is forbidden by law or constitution in some countries such as Belgium.
Nevertheless, starting on the first of January 2005, Germany abandoned
its Eurovignette and introduced the so-called LKW-Maut, which imposes
a tax on trucks of more than 12 tonnes. The tax averages 12.4 cents per km
but varies with the distance, the number of axles and the engine pollution
rate. For the trucks equipped with a special computer, the tax is automat-
ically computed via the truck’s tachograph and a GPS system. It also can
be paid over the internet or with cash or credit cards. As a political coun-
terpart, it has been decided that the proceeds will be invested in additional
infrastructure for all modes.
Switzerland, which is not a member of the European Union but an
important North–South transit country, previously restricted road freight
transport over its territory to trucks of 28 tonnes maximum. After an
arduous negotiation with the European Union, this restriction has been
progressively eased, and 40-tonne trucks have been allowed since the begin-
ning of 2005. In compensation Switzerland introduced taxes varying
according to weight, pollution rate and distance. The tax amounts to 2.88
Euro cents per tonne-km for high polluting trucks (EURO 0), but it is only
2.15 cents for the better EURO 3. For a 40-tonne EURO 0 truck crossing
Switzerland (250 km) the tax is 192 EURO, whereas it amounts to 143
EURO for a EURO 3 truck. Two-thirds of the proceeds are allocated to the
building of two tunnels crossing the Alpine chain. A more or less similar
system also exists in Austria for vehicles of 3.5 tonnes and more; it amounts
to 22 cents per km in average and varies only with the engines’ pollution
rate. An assessment of the Switzerland policy was proposed in Demilie
et al. (1998) and Beuthe et al. (1999).
It is likely that similar road taxation systems will be adopted by other
European countries in place of the current practices, not only for trucks but
also for passenger cars. Given recent technological progress, it may even
become a standard system tracking all vehicles over all the main roads in a
country and not only on motorways. The obvious advantage of such a
system is that it taxes all users in proportion to their travelling distance over
a country’s network regardless of their nationality and of the country in
which they buy fuel.
Such an evolution is positively viewed by the European Commission,
which, aside from the financing of infrastructure, sees it as an appropriate
device for implementing a taxation system which would price the road usage
according to the social cost. The latter includes not only the direct cost for
the user but also the costs that each user is causing to other users, the so-called
marginal external costs such as the loss of time induced by congestion during
peak hours, the uninsured costs of additional accidents, the losses caused by
the generated pollution (medical and environmental costs) and the traffic
noise inconvenience as well as road wear and tear caused by heavy trucks.
Actually such a concept of taxation could very well be extended to all modes
so that a fair competition between modes could be developed that would take
into account all the social costs of the different types of transport. It certainly
would be in line with the Commission’s general economic policy of promot-
ing fair competitive practices throughout the European Union space.
A fair attempt at estimating such external costs of road, rail and inland
waterway traffic in Belgium can be found in Beuthe et al. (2002). The
chapter also estimates the impact on modal shares that would be produced
by a taxation policy incorporating these external costs. Given that the exter-
nal costs of trucking are much higher than those of other modes (five times
as high in Belgium), a simulation of freight traffic on the Belgian networks
assuming such a taxation structure produces a sizable change in modal
shares; that is, a strong decrease of trucking and higher modal shares for
both rail and inland waterways transport results. This result strongly sug-
gests that the implementation of a similar pricing structure for all modes
would go some way towards the Commission’s goal of a more acceptable
modal split. It will not surprise the reader that the general issue of harmon-
izing the pricing of various modes has been, and still is, the object of
difficult negotiations among members of the European Union.
Remaining Obstacles to Intermodal Transport in Europe
Despite all the progress realized over the last few decades in terms of liber-
alization, development of common norms and rules, and improved infra-
structure, there remains a large number of obstacles to an efficient working
of transport and particularly of intermodal transport.
Given their limited geographical network, all alternative modes are gen-
erally dependent on road transportation for additional transport legs to
and from the shipment origins and destinations. This involves additional
costs, time losses and tight logistic organization. These difficulties may be
compensated to some extent by lower transport costs for the combination

with rail, inland navigation or short-sea shipping, at least for large size ship-
ments over longer distances. However, these modes encounter additional
organizational difficulties which are specific to each mode.
As far as rail transport is concerned, the following handicaps at the
present time must be mentioned:
1. Most of the railway lines are used for both passengers and freight
trains and, for the allocation of slots, priority is generally given to pas-
sengers trains.
2. In most cases, freight transport benefits very little from management
autonomy; the operational needs of locomotives and drivers are taken
from a common pool where passenger trains come first in priority.
3. There is no homogeneity of technical standards across European
countries in control/command and signalling, telematic applications,
traffic operation and management, including staff qualifications for
cross-border services, so that locomotives and conductors may have
to be changed at the national frontiers. The railway track gauges may
even be different, which requires a transfer of goods or an adjustment
of the wagons’ gauges. Despite their obligation to implement the
planning of common technical standards (Directive 2001/16/EC), few
countries have given an adequate response to that need.
4. Labour management and rules vary from one country to another;
drivers are tied to relatively small geographic areas so that they must
be changed several times on long transport corridors.
5. From their state enterprise tradition and monopoly, railways’ man-
agements still tend to privilege an analysis of means towards prere-
quisite operations rather than an analysis of market demands and
results. Focusing their attention on their own network, they have a
difficult time integrating their operations in logistic chains. This is
particularly true for international transport, as transport operations
and responsibility are successively taken over by different railways.
However, it is also true that management is not given much leeway by
the states for their investments and even for some of their operations.
6. Labour organization and status, inherited from state enterprises,
lacks flexibility; rail workers are strongly unionized and are not ready
to lose out in the course of railway reform. Hence, frequent strikes in
some countries are the source of a poor reliability of service as well
as of a substantial inertia towards needed reforms.
7. The profile above the rail tracks (rail loading gauge) is often limited by
the size of the tunnels and bridges; also, most of the lines are equipped
for electrical traction with limited height of catenaries (between 5.6
and 4.9m above rail in Germany). These features definitely forbid the
double stacking of containers but also limit the size of all loading units
transported by rail. On the European networks, the gauge’s height is
between 4.28 and 4.65m above the rail but because of the tapering of
the tunnels’ profile, this in itself is not enough to allow the loading of
trailers with a 4m height at the corners even with special low floor
wagons. On some important combined transport corridors, the gauge
now has been widened to permit such transport. The present goal fixed
by the International Union of Railways is a gauge of 4.65m height and
3.08m width at the ceiling. The development of special wagons with
low floors or with recessed pockets to accept the wheels of semi-trail-
ers (pocket wagons) somewhat attenuates these difficulties. However,
the latter wagons are more costly. Note that generally there is a total
weight maximum limit of 40 tonnes per vehicle.
8. The rolling road concept is handicapped by the number of vehicles
which can be placed on a train. Until now, no rolling road solution
has been proven profitable. The few existing cases of such operations,
such as the crossing of the Alpine chain, are heavily subsidized by
public authorities. Recently, the rolling road between Italy and
Austria has been abandoned following the suppression of a system of
‘eco-points’ penalizing trucking through Austria.
9. The transport of trailers represents only about 14 per cent of the
international railroad (non-accompanied) combined transport traffic.
Progressively it has been replaced by the more convenient and less
costly transport of containers and swap boxes.
10. The length and loading of trains vary from country to country
according to the characteristics of local infrastructure, for example
750m and 1200 tonnes in France, but only 400m and 800 tonnes in
Spain. Again, these features increase the cost of rail transport.
11. Other technical handicaps are wagons of multiple designs for con-
tainers of varying length, poor tracking of wagons and shipments
(particularly at the international level), slow rotation of wagons and
slow and costly marshalling of trains.
12. Naturally the loading and unloading of intermodal units to and from
trucks correspond to a loss of time and additional costs, likewise the
shuttling of wagons and the exchange of loading units from one train
to another. The efficiency of these operations is poor in some terminals.
13. Altogether all these factors lead to more costly rail transport, low
commercial speed compared to direct road transport, unsatisfactory
reliability and poor communication with the clientele. This is partic-
ularly the case for international shipments. In addition to the IQ
report (INRETS 2001), interesting papers by G. Aberle, S. Bologna,
T. Fowkes and Ch. Nash (ECMT 2004) provide ample documentation

on this topic.
Inland navigation also has some handicaps for integrating into logistics
chains in multimodal or intermodal transport solutions:
1. Inland boat operators are generally weakly organized and reluctant to

cooperate with other operators; often, they are the owners of one boat
on which they live with their family. Hence, they are not well integrated
into logistic chains, and, until now, they have not been able to partici-
pate in an effective tracking system of shipments.
2. Inland navigation transport does not propose many regular services
between specified origins and destinations. This is an obstacle to
handling smaller shipments.
3. Locks are often closed at night and during the weekends. Over some
parts of the networks, navigation may be forbidden on Sundays.
4. In many harbours, loading and unloading inland navigation barges do
not receive any priority. With the expansion of transport through har-
bours and the saturation of some facilities, the handling of inland navi-
gation traffic is delayed and time losses are incurred. Tariff for loading
and unloading containers in harbours and terminals is higher than for
other modes (up to 30 per cent higher in harbours).
5. However, the tariffs of inland waterway transport are lower. Hence,
intermodal inland waterway transport of containers to and from har-
bours is still cost competitive with trucking for distances above 95 km
from an inland terminal. Given the congestion in harbours and their
high storage costs, cheaper inland terminals at a lesser distance can also
offer competitive services (Macharis and Verbeke 2004). Actually,
many river terminals are being developed nowadays as relay hub
centres for the main gate harbours along the Le Havre–Hamburg
range, like Duisburg (DE), Lille (FR) and Liège (BE).
6. The relatively slow speed of the mode is not a real problem for many
shipments, and the competitive character of the inland navigation
sector should enable it to provide fairly flexible services to the clientele.
However, the large capacity of barges leads to a lower cost only for
large-size shipments.
Short-sea shipping also meets some organizational problems:
1. Small harbours often are not efficient: they lack space and good inland
connections, and they are expensive because volumes are not impor-
tant enough and there is no competition for the supply of services.
2. Administrative procedures in harbours are complex and more difficult

than for inland transport with intervention of customs controls, and
they are different in each harbour.
3. Information technologies are not well developed.
4. The services offered by this mode are not well known, except by ship-
pers of large quantities of ponderous goods over long distances (for
example between Benelux and Spain) or when it is the only available
alternative.
5. As a result, intermodal transport that includes a maritime segment is
judged as noncompetitive below a 1000 km distance, except when
there is no real alternative, such as between the United Kingdom
and the continent. Actually, in some such cases, efficient short-sea
transport has been devised for some commodities and roll-on/roll-off
operations.
FUTURE PERSPECTIVES
The strong expansion of both passenger and freight transport in Europe

has created problems such as congestion on the road network, increasing
amount of pollution, and noise and accidents. Considering the European
Commission’s stated policy of promoting a shift of freight transport from the
road transport towards inland waterways, railways and short-sea-shipping,
the main question is whether such a policy could meet with any degree of
success, for example by the development of intermodal transport solutions.
There are basically two main levers that can be applied to obtain some
results in that direction: a policy to improve the quality of services and a
pricing policy. The first one is very complex because it requires a large
number of initiatives: the building of additional infrastructure for solving
some bottlenecks and ruptures in the networks and for providing add-
itional links for dedicated transport, institutional changes in the market
organization and cultural changes in the management of operations in addi-
tion to a multitude of practical operational solutions. A list of initiatives
that the European Commission would like to implement for that purpose
has been given above, as well as a very long list of problems that should be
solved for a higher-quality performance by the modes competing with road
carriers. However, changing institutions and cultures is a very long process,
particularly when many different countries are involved; moreover, financial
resources are not available for building or rebuilding the necessary infra-
structure and equipment in the near future. In any case, the latter could only
be a very lengthy task considering all the bridges, tunnels, rail sidings
and gauges, wagons and locomotives, barges and vessels, communications
equipments, and so on which will have to be built, installed or modified all

over the European space.
One should insist though that all these problems should not deter policy
makers from advocating substantial improvements in transport services in
terms of reliability, frequency, security, speed and flexibility. Indeed the
quality of services is an important factor in transport managers’ decision
making. Numerous people involved in the transportation field have insisted
on that factor, and some research results have identified the importance of
that factor (IQ report, INRETS 2001). Our own current research on the
basis of a Stated Preference experiment (Beuthe et al. 2003, 2005; Bouffioux
and Beuthe 2005) indicates that the importance placed on the choice of a
transport solution by the above quality characteristics versus the transport
cost amounts to around 40 per cent on average, much of which is attributed
to transport duration and reliability of deliveries.
In any case, there is at least one reason to be optimistic on that score: the
liberalization of transport, and particularly of rail freight transport, is well
on its way to completion. In 2006 national railways and new entrants pene-
trated markets that hitherto were protected so that reforms of operations
and attitudes will impose themselves as unavoidable under the pressure of
competition. Unhappily, even if the liberalization will induce some private
financing into the more profitable operations, it will not be enough to com-
pensate for the constraint of weak public finances.
The second lever – that is, a more competitive pricing of transport solu-
tions alternative to trucking – could partly result from the reforms bearing
on the quality of services. Indeed, many reforms outlined above should also
lead to a higher productivity and, therefore, to lower cost of production.
This happened in the USA and United Kingdom when railways were lib-
eralized and reorganized. However, beyond that effect, a voluntary pricing
policy will much depend on the political willingness to implement a pricing
system that would take into account not only the full direct cost of trans-
port but also the external costs for all modes and for both passengers and
freight transport. This is quite a challenge, particularly in the context of the
European Union’s mosaic of countries. However, regardless of the way a
more favourable competitive position is obtained, the question remains
whether it would be effective for reaching better-balanced modal shares.
This is a subject of controversy, the issue of which depends on the impact
that price variations of the different modes can have on transport demands.
The concept of price elasticity is a measure of these impacts as it measures
the percentage variation of demand resulting from a 1 per cent variation of
price. Some estimates of elasticities are available in the international trans-
port literature. However, they vary much according to the country, the esti-
mation methodology and the transported goods. According to a review of
literature by Oum et al. (1992) the modal demand elasticities with respect to
their own price variation can be as low as 0.08 and as high as 3.5 (in absolute
value) for rail freight and as low as 0.14 and as high as 2.96 for freight truck-
ing. Quinet (2003) provides additional estimates based on French research,
which are lower than 1. Some of these elasticities are estimated over time
series and naturally take into account price adjustments made by competi-
tors as well as changes in technology or locations; some others are estimated
over cross-section data at one point of time. The spread of these results
should not come as a surprise because the char-acteristics of the demand
vary with the goods to be transported, the confi-guration of the network,
and so on. No general conclusion can be drawn from those numbers.
However, more recent estimates have been obtained by W.M. Abdelwahab
(1998), who estimates elasticities with respect to own price as well as elast-
icities with respect to other modal price variations. These estimates are cal-
culated on cross-section data and take into account some quality attributes
of transport services, such as losses and damages as well as reliability of
delivery. Estimating first elasticities of the probability of a mode choice,
he finds that both ‘own-price’ and ‘cross-price’ elasticities are comprised
between 1.44 and 1.88 for trucking and between 1.54 and 1.75 for rail trans-
port. This means that the probability of choosing a mode is more than
proportionally affected by the corresponding price variation. A similar com-
putation indicates that choice probabilities are not significantly influenced by
a transport time variation, with the important exception that the choice of
trucking is strongly impacted by the rail transport time. Abdelwahab also
estimates market demand price elasticities, which are found to vary
significantly across commodity groups and geographic territories: trucking
price elasticities vary between 0.749 and 2.5, most of them being above 1,
likewise rail elasticities vary between 0.96 and 2.53. Cross-elasticities are of
the same order of magnitude. These results suggest that there is a good
potential for a transport pricing policy in many industrial sectors.
Furthermore, Beuthe et al. (2001) derived direct and cross-elasticities
from a spatial network analysis of freight transport in Belgium. Based on
given transport flows between origins and destinations throughout Europe,
their estimates measure the percentage impact on the modes’ demands
resulting from a mode cost variation. The main results are that the own-
price elasticities of rail and waterways transport as well as their cross-price
elasticities with respect to road prices are generally higher than one, even
for distances shorter than 300 km. Again, there is a wide spread of values
according to the types of transported goods. Nevertheless, these findings
confirm Abdelwahab’s results that in many industrial sectors shippers are
likely to respond effectively to policies that would affect the relative costs of
the different modes.
Hence, we may think that in the context of a policy designed for pro-
moting a modal shift in favour of railways and inland waterways transports
a taxation policy that would price the differential external costs of the
various modes could be proved effective, at least for the transport of some
commodities. However, such a reform necessarily should be implemented
across all European countries in order to keep a fair level of competition.
That means that it will not be forthcoming in the near future but only
through lengthy negotiations over perhaps more than a decade. Indeed,
each country has its own structure of taxation, and tampering with it
always represents a political challenge. It is likely that it will be achieved
only very progressively through successive converging adjustments because
no country will be able to keep on with autonomous policies in a context
of increasing economic integration of Europe and expanding trans-
European traffic, which will force reforms under the threat of networks
congestion and increase pollution.
Thus, the liberalization and integration of European markets lead us to
some degree of optimism, but progress will be tedious and painful through
numerous negotiations, contestations and intense lobbying. It will also
require a substantial amount of financing, which is the main roadblock at
the present time.
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APPENDIX 1 YEAR 2002 MODAL SPLIT BY

COUNTRY FOR FREIGHT IN
TONNE-KM (%)
Country Road Rail Inland waterways Pipeline

Austria 51.3 29.7 4.9 14.0
Belgium 70.0 12.9 14.3 2.8
Denmark 74.1 7.7 – 18.2
Finland 74.4 24.8 0.8 –
France 77.8 14.0 2.3 5.8
Germany 69.7 14.5 12.8 3.0
Greece 98.1 1.9 – –
Ireland 96.1 3.9 – –
Italy 86.3 9.1 0.1 4.5
Luxembourg 77.3 15.2 7.5 –
Netherlands 44.9 4.4 44.2 6.5
Portugal 87.0 13.0 – –
Spain 89.3 6.4 – 4.3
Sweden 62.6 37.4 – –
Great Britain 84.1 10.0 0.1 5.8
EU-15 75.5 12.9 6.9 4.6
Cyprus 100.0 – – –
Czech Rep. 70.7 25.6 0.9 2.8
Estonia 31.3 68.7 – –
Hungary 59.9 27.2 5.8 7.1
Latvia 22.4 54.7 – 22.9
Lithuania 42.2 38.5 – 19.3
Malta 100.0 – – –
Poland 52.1 32.5 0.8 14.6
Slovak Rep. 66.4 30.8 2.8
Slovenia 59.8 40.2 – –
EU-25 72.2 16.3 6.0 5.6
Source: European Communities, 2004.

APPENDIX 2 SHORT ADDITIONAL NOTES ON

SOME EUROPEAN COUNTRIES
Belgium
In 2002, 70 per cent of the tonnes-km over the Belgian territory was made
by trucking, 12.9 per cent by rail, 14.3 per cent by barges and 2.8 per cent
by pipelines. From 1980 to 2002, rail t-km decreased by 9 per cent, inland
waterways t-km increased by 37 per cent, while road transport increased by
140 per cent.
Most of railroad intermodal transport is controlled by the national rail-
ways (SNCB), either through ownership of operators (89 per cent of IFB,
45 per cent of TRW), or as an agent of ICF, the international intermodal
operator of the European railways. Together, they have transported about
1.4 million TEU in 2002, mainly in connection with the Belgian harbours
(Antwerp, Zeebrugge, Ghent and Ostend). This traffic is distributed
through a set of national and international terminals organized around
hubs. However, this organization is progressively abandoned and replaced
by direct trains from point to point in Europe. The international logistics
branch of the national railways (ABX), which mainly focuses on road
transport, has been set up as an ‘independent’ subsidiary.
There is a project for restoring a more direct rail link between Antwerp
and the Ruhr area in Germany, but, as it would compete with the Dutch
Betuwe line (built for Rotterdam harbour) and would cross the Dutch ter-
ritory over a few kilometres, it has been delayed for years by international
negotiations.
The Belgian harbours are also connected to many river terminals (some
of them multimodal) along the waterways in Belgium, The Netherlands,
Germany along the Rhine, and in the north of France. Many of these ter-
minals are also linked to the railways networks. Given the roads’ conges-
tion, transportation of containers by inland waterways is expanding, and
it is a policy of the Belgian authorities to promote the development of such
terminals along the waterways. This is particularly the case of the Flemish
Region which set up a successful programme for subsidizing the building of
river walls and quays to the tune of 80 per cent, under some conditions of
guaranteed volume of shipments.
Altogether, in Antwerp’s harbour about 63 per cent of the handled loading
units are carried by trucks, 28 per cent by barges and 9 per cent by rail,
whereas in Rotterdam’s harbour, Antwerp’s main competitor, 48 per cent of
the loading units are transported by road, 35 per cent by barges and 17
per cent by rail. Note that the Port Authority Singapore group (PSA) recently
became the majority owner of HNN, one of the main service operators
of Antwerp harbour, so that it now controls about 80 per cent of the con-
tainer traffic in Antwerp. PSA is also present in Zeebrugge and Rotterdam.
Antwerp currently is strongly extending its containers handling capacity.
One should also mention an expanding roll on/roll off short-sea traffic
from Belgian harbours, particularly in Zeebrugge which specializes in cars
handling. The latter are loaded/unloaded on trains or trucks according to
their origin or destination. It is worth noting that it is estimated that 40 per
cent of Antwerp’s harbour volume is related to short-sea traffic.
France
The market share of road transport was 77.8 per cent in 2002; rail had 14 per
cent, inland waterways only 2.3 per cent and pipelines 5.8 per cent. Rail t-km
in 2002 were 27 per cent lower than in 1980, inland waterways decreased by
24 per cent, while road transport increased by 67 per cent. Railroad com-
bined transport represents about one quarter of the total rail freight volume,
but that is only about 5.2 per cent of the total t-km in the country. While rail
transport’s volume steadily decreased over the period, combined railroad
activity has grown relatively fast, since it doubled its volume between 1985
and 2002. However, this is not as fast as the overall European performance
of the UIRR’s member firms, which tripled their volume over the same
period. One reason of that lesser performance is that combined transport in
France did not benefit as much as in other countries from the expansion
of international maritime container traffic, which was absorbed to a large
extent by the Northern range harbours, mainly Hamburg, Antwerp and
Rotterdam. Actually, in France, the international traffic of railroad com-
bined transport does not amount to even half of the national traffic.
Other factors also played a role in that lesser expansion. They are typical
of some obstacles mentioned in the previous section: a focus on national
traffic by the national railways, repeated strikes, lack of reliability, limited
gauge of some lines, control by the State with political and budgetary con-
straints, as well as the dominance of railways-controlled operators. Indeed,
the main operators of intermodal transport are: CNC, NOVATRANS,
FROIDCOMBI, all controlled to a large extent by the national railways
(SNCF). TRANSFESA (controlled by the Spanish national railways)
and IFB (controlled by the Belgian national railways) operate also in
France, as well as ICF, the international maritime containers operator of
the European railways. Another handicap is the preference given to
national operators in the process of restructuring railways operations and
the lack of diligence given to the needs of foreign operators, with the result
that transit through France is somewhat hampered and alternative trans-
European itineraries are chosen (CNT 2005).
Note that in the meantime combined transport on rivers and canals was
doubled between 1996 and 2002, despite the fact that the share of waterways
transport from/to French harbours reaches only 5 per cent. In this sector,
dynamic initiatives have been taken over the last few years not only by mari-
time operators and some harbours (Marseille, Dunkerque, Le Havre, and
terminals in Paris, Lyon and Lille), but also by important shippers.
Recently, the rail strategy for freight has been to reduce the operations of
single wagons and to focus on massive flows with more reliable direct com-
bined transport trains over a distance of at least 600 km, with a better
and more reliable service, and higher prices. NOVATRANS will focus on
inland transports only, whereas CNC will specialize on harbour traffic. ICF
now is also focusing on direct long distance trains, and is abandoning the
costly and inefficient concept of flows centred on a hub where wagons are
transferred.
As in other countries, the French government is subsidizing the develop-
ment of logistic platforms and terminals. Among other assistance, it also
authorizes the use of 44 t trucks for the road legs of maritime containers
transport, and grants a reduction of the taxes on heavy-duty trucks used in
combined transport.
Altogether, the share of combined transport by all modes over the
French territory did not amount to more than 5 per cent in 2002. Available
statistics can be found in the ‘Ministère des Transports’ Web site: http://
www.transports.equipement.gouv.fr, which also gives a link to the Rapport
Matheu on intermodal transport in France.
Germany
In 2002, road transport had a market share of 69.7 per cent in t-km, rail
had 14.5 per cent, inland waterways 12.8 per cent, and pipelines 3 per cent.
Over the period 1980 to 2002, rail transport strongly decreased by 40 per
cent, inland waterways transport increased by 25 per cent, while road trans-
port doubled its volume.
Railroad combined transport by the Deutsche Bahn amounts to 11.7 per
cent of its total rail freight tonnage, 2/3 of this intermodal tonnage corres-
ponding to international transport (import, export and transit). Between
1995 and 2002, this traffic increased by 10 per cent. The main flows are from
the Scandinavia, Benelux and Germany to/from Italy. The flows between
the Eastern countries and Germany are developing.
Combined transport with barges handles about 1/3 of the tonnage by
combined transport with rail. Most of it corresponds to international traffic,
but it represents only 5.8 per cent of the total tonnage transported on inland
waterways. Between 1995 and 2002, this type of transport doubled.
There is some fuzziness in the German statistics, which include a cate-

gory of combined maritime transport, parts of which are operated inland
by water, road and rail. And, it does not distinguish short-sea shipping from
intercontinental shipping. As such, it amounts to about double the com-
bined transport by rail and barges. Between 1995 and 2002, this traffic
increased by 49 per cent. Short-sea shipping within the Baltic sea and to/
from the European Western coast will be steadily developed in the future.
Quite a few important combined transport operators in Germany are
working and cooperating under the umbrella of the Deutsche Bahn’s
STINNES, its cargo subsidiary. It is the case (naturally) of STINNES
Intermodal, KOMBIVERKEHR, a UIRR member, TRANSFRACHT,
specialized in maritime containers, POLZUG, a collaboration with the
Polish railways, METRANS, specialized in maritime containers transport
to/from Tchequia, Bahn Tank Transport, specialized in transports of
fluids, RAILOG and MarCo, both focused on flows to/from Italy, and ICF,
the European railways venture for maritime containers. TRANSFRACHT
and KOMBIVERKEHR are mainly focusing on massive flows with com-
plete trains from point to point.
There are also some private operators, like European Rail Shuttle, a joint
venture of maritime operators (Maersk, Sealand and P&O and Nedlloyd),
EUROGATE Intermodal, boxXpress, NeCoSS, rail4chem, RAG Bahn
und Hafen, and CONNEX Cargo Logistics.
Besides some advantages granted to combined transport (tax reduction
for combined transport road vehicles, authorization of 44 t trucks and
driving during weekend and holidays), the German authorities have several
programmes of subsidies to combined transport: for Deutsche Bahn’s
public platforms (up to 90 per cent of the investment cost), for private plat-
forms (up to 80 per cent), for platform equipment (up to 50 per cent), for
operating costs of new platform (up to 30 per cent during 3 years), and for
rail links to industrial plants (according to the traffic generated).
Greece
In 2002, road transports had a market share of 98.1 per cent, and rail only
1.9 per cent. From 1980 to 2002, trucking practically tripled, while rail
transport decreased by half. The Greek rail network is not extensive because
of the mountainous profile of the country and the short distances over the
Greek territory. Many harbours have no rail connection. Naturally, there is
an important traffic by sea ferries between the Greek islands, but that is only
the result of geography. No substitution of mode could be envisaged on that
traffic. The real intermodal operations are by roadrail combined between
Salonica and Sopron (Hungary) by ICF, the roll on/roll off trucks traffic
across the Adriatic Sea to/from Italy, and the short-sea operations in the
Mediterranean Sea. The corresponding trans-European traffics were not
very important until now.
There are plans to improve the rail network, to build rail connections to
harbours, and to develop regional intermodal platforms.
Italy
In 2002, road transport had a market share of 86.3 per cent calculated in
t-km, rail had only 9.1 per cent, inland waterways 0.1 per cent, and
pipelines 4.5 per cent. In the same year, rail t-km were 11 per cent higher
than in 1980, inland waterways t-km’s were stable, while road transport
increased by 61 per cent.
The rail domestic traffic is operated by TRENITALIA, the national
Italian railway. However, with the liberalization of rail transport in Europe,
the international traffic from/to the North of Italy towards the rest of
Europe progressively became a competitive market. The traffic with
Germany is now dominated to a large extent by RAILION, the German
freight operator of STINNES (Deutsche Bahn), which buys traction ser-
vices from Swiss and Italian private firms, and by the Swiss HUPAC, which
will buy much of its traction in 2005 from the Swiss Federal railway (CFF-
SBB). Note that most of that traffic is carried by road from its origin or to
its destination in Italy.
One factor which contributed to that situation is the fact that imports by
rail in Italy are about double that of exports. Hence, foreign shippers dom-
inate the market; many wagons and loading units return empty from Italy.
The proportion is smaller for intermodal traffic (57 per cent as against 43
per cent). More than half of that traffic corresponds to swap-bodies, about
a quarter is made of trailers and complete road vehicles (rolling road),
whereas containers do not make more than 20 per cent.
The market of maritime containers rail transports from/to USA and
Asia, is subject to the competition between the Northern range harbours
(Hamburg, Rotterdam and Antwerp) and the Italian harbours. Given the
limited capacity of Italian harbours and the powerful organization of the
Northern harbours supported by the railways’ INTERCONTAINER and
strong international maritime groups (MAERSK, P&O NEDLLOYD,
PSA, and so on), the Northern range harbours still dominate that market.
They are all engaged or planning sizable increases in their container hand-
ling capacity. Rail transport is also feeding maritime containers into Italian
harbours for exportation; but is largely used for repositioning empty con-
tainers in Italy, whereas loaded containers are carried by road to their final
destination.
Noteworthy is the development of short-sea routes by the Italian sea

operator GRIMALDI in the Mediterranean between Valencia, Barcelona
and Toulon on the one hand and Italian harbours on the other hand; also
between these Italian harbours and Tunis and Malta.
Poland
Freight transport by rail is relatively important in Poland reaching a market

share of 32.5 per cent in tonnes-km, road transport has 52.1 per cent,
inland waterways obtain only 0.8 per cent and pipelines 14.6 per cent (in
2002). However, from 1980 to 2002, the volume (t-km) transported by rail
drastically decreased by 65 per cent, the volume of inland waterways also
decreased by 50 per cent, while, between 1995 and 2002, road transport
increased by 46 per cent.
Most intermodal transport is made with containers. Such operations
amount to 88 per cent of rail intermodal traffic, whereas swap bodies take up
11 per cent. Nevertheless, intermodal traffic of containers is still of marginal
importance in Poland: in 2002, only 1.76 per cent of the total t-km was made
by rail, 1.78 per cent by road, and 4.55 per cent of tonnes handled by har-
bours. This traffic has been increasing rather rapidly over the period
1992–2002: 18.2 per cent annually by rail, but 29.3 per cent by road, while
total rail transport in tonnes-km was decreasing by 2 per cent annually, and
total road transport was increasing by 3.3 per cent. In 2002, the containers’
tonnage transported by rail and by road was about equal. Most intermodal
transport is international with a dominance of imports, so that half of the
containers return empty from Poland. Transit represent about one quarter of
the total container traffic. Gdynia is the main harbour for container traffic;
its main terminal, which handles 86 per cent of containers maritime traffic
of Poland, is controlled by a Philippine corporation. The total number of
containers handled in Polish harbours is rather small up to now, about
300 000 TEU (GUS 2004). Subsidies to intermodal transport are very small.
The two main operators of railroad combined transport are the cargo
division of the national railways (PKP), and POLZUG, for traffic between
Germany and Poland.
Portugal
In 2002, road transport had 87 per cent market share in tonnes-km, as

against 13 per cent for the rail, if short-sea shipping is not taken into
account. Over the period 1980–2002, trucking increased by 47 per cent in
tonnes-km, while rail doubled its traffic. About half of road transport
by vehicles registered in Portugal is international, mainly with Spain.
Intermodal transport solutions have not received much attention until now,
but the development of short-sea shipping to/from Northern Europe is
presently considered.
Spain
In 2002, 89 per cent of tonnes-km in Spain was made by trucking, 6.4 per
cent by rail, and 4.3 per cent by pipelines. No freight was transported by
inland navigation. From 1980 to 2002, the volume in t-km of road activity
increased by 235 per cent, while rail activity increased by only 4.1 per cent.
Pipeline transport increased sizably by 159 per cent. Railroad combined
transport makes about 30 per cent of the total rail tonnage.
Railroad combined transport is de facto controlled by the national railways’
operators: RENFE (Spain), Combiberia in which NOVATRANS (France)
and Kombiverkehr (Germany) have participations, and TRANSFESA, in
which RENFE and SNCF also have participations.
Sweden
In 2002, the market share of road transport in tonnes-km was 62.6 per
cent, whereas rail took 37.4 per cent, not taking into account short-sea
shipping. Over the period 1980–2002, trucking increased by 49 per cent,
while rail increased by 21 per cent. Taking into account short-sea shipping,
the share of road is reduced to 42 per cent, the share of rail diminishes to
22 per cent, whereas short-sea shipping obtains 36 per cent. Given the
lengthy configuration of the country, and its surrounding by sea, inter-
modal solutions are numerous by rail and by ferries within Sweden and
with the ‘Continent’. As an example the train and short-sea supply chain
of paper products from Sweden to Zeebrugge (Belgium) with specialized
containers (capacity 79 tonnes): trains bring the containers to Göteborg
(Sweden) where they are loaded on boats for Zeebrugge; there, these con-
tainers are shipped by train to various countries of continental Europe, or
by ferries to the UK; some smaller shipments are distributed by trucks.
Switzerland
The traffic across the Alpine chain in Switzerland is 34 per cent made of
railroad combined transport, including 4 per cent by ‘rolling roads’, 30 per
cent of conventional trains and 36 per cent of trucking. Eighty per cent of
combined railroad transport corresponds to transit. One rolling road
crosses the Simplon, the other one the Gothard. Together, they transport
about 70 000 trucks from a total of 1.4 million.
As a part of its environmental mobility policy, the Swiss confederation

heavily subsidizes the operations of railroad combined transport, as well as
investments in terminals. Conventional rail transport is progressively losing
market shares, while combined transport is rather on the increase. The
present level of taxation on trucking does not seem to much affect road
transport. Demilie et al. (1998) provide a discussion of the taxation levels.
The Swiss group HUPAC is active in the international transit of
Switzerland with shuttle trains from the Northern harbours to Italy and to
Poland.
The Netherlands
In 2002, the market share of road transport was 44.9 per cent (in tonne-
km), whereas, the share of rail was 4.4 per cent, the share of inland water-
ways navigation was 44.2 per cent. Pipelines transport had a 6.5 per cent
share. From 1980 to 2002, road transport volume increased by 79 per cent;
in comparison, rail volume increased only by 27 per cent, inland waterways
navigation by 22 per cent, and pipelines transport by 19 per cent. The very
large share of waterways transport is the result of a very dense waterways
network, but also of the intensive use of the Rhine for shipping from/to the
harbour of Rotterdam to/from Germany.
A new rail line is constructed that will link Rotterdam to Germany. It will
be dedicated to freight transport and should enhance the competitive
position of Rotterdam harbour. The investment cost turns out to be much
higher than forecast, partly because of additional expenses linked to envi-
ronmental concerns. The access rights to the line are presently discussed
and may be rather high.
Note that the main containers terminal in Rotterdam, ECT, is controlled
by the group Hutchinson Port Holdings of Hong Kong.
United Kingdom
In 2002, British railways took a market share of only 10 per cent of the total
tonnes-km transported in the country, trucking had 84.1 per cent, inland
waterways only 0.1 per cent and pipelines 5.8 per cent. From 1980 to
2002, rail t-km modestly increased by 5 per cent, inland waterways t-km
decreased by 66 per cent, while road transports increased by 73 per cent.
Over a total amount of 18.73 billion tonnes-km by rail in 2002, it can be
estimated that combined railroad transport was at the level of 4 billion.
Much of it is in connections with harbours. No figures are published on
intermodal transport by road in connection with short-sea shipping.
However, in 2002, the harbour of Felixstowe handled 2.75 millions TEU,
Southampton 1.28, Tilbury 0.57 and Liverpool 0.54 million. Several

schemes exist for subsidizing rail transport and particularly combined rail
transport: ‘Freight Facilities Grants’ for financing investments in inter-
modal equipments, ‘Track Access Grants’ for subsidizing firms that switch
freight from road to rail (and would not otherwise), and the ‘Company
Neutral Revenue Scheme’ for subsidizing the operational costs of contain-
ers’ traffic. Beyond these subsidies, intermodal transport operators (private
and privatized) have made important investments in railroad terminals,
locomotives, and equipments. It looks as if the quality of intermodal ser-
vices has reached a satisfactory level in many cases, but the higher price is
often an obstacle.
Note
Main sources are: EU Energy and Transport in Figures 2004, European

Communities (2004), Trends in the Transport Sector, ECMT, OECD
(2005), the UIRR’s Annual Reports, H.Wenger (2002), the CNT’s dossier
n7 sur Le transport intermodal en Europe, and several special reports by the
transport journal Le Lloyd. I am grateful to members of the ‘Observatoire
des politiques et des stratégies de transport en Europe’, organized by the
French ‘Conseil National des Transports’ (CNT) and M. Savy, for some of
the information contained in this section.
PART II
Globalized trade and logistics: European

and North American perspectives
4. Globalized trade and logistics:
North American perspectives
Jean Paul Rodrigue and Markus Hesse
GLOBAL PRODUCTION NETWORKS
World trade has become a network of cross-border arbitrage on differentials

in labor availability, wages, interest rates, exchange rates, prices, saving rates,
productive capacities, liquidity conditions and debt levels.
(Liu 2005)
Introduction
Recent contributions by Dicken et al. (2001) and Coe et al. (2004) have raised
the issue of emerging global production networks (GPN) that have been
established as a consequence of innovations in information and communica-
tions technology and of the increasing degree of global economic and social
integration coined as globalization. GPN emerged to cover major parts of
the globe, very dynamically in countries recently integrated to the new geog-
raphy of global production. This is particularly the case for the Far East
where initial settings occurred in Korea and Taiwan, but have expanded to
locations such as China, India and Indonesia. In the western hemisphere, the
US–Mexican border region or parts of the European periphery (for example,
Ireland, Scotland) and more recently in the middle-east of Europe have also
seen developments. As Dicken (2003) pointed out in his seminal ‘Global
Shift’, the establishment of GPN no longer occurs only in traditional, natural
resource-based and labor-intensive branches such as the apparel industry but
also in highly competitive, modern industries including electronics and com-
puters (including components), machinery and automotive.
Indeed, there is a global shift in the making for GPN both in their sectors
of operation and in their geography. It seems to be long ago that manu-
facturing branch plants have been founded in the context of a new interna-
tional division of labor, which devotes assembly lines and their operation
to developing countries, due to cheap labor and a much lower degree of
regulation compared to the so-called developed world, whereas the
103
104 Globalized trade and logistics
value-creating activities such as research and innovation, product design and

marketing were being kept in home countries and home markets of global
corporations. The more recent character of GPN implies that both subcon-
tracting and production-related services are fragmented and being shifted
toward what was formerly being called the periphery. This is even truer for
core service industries such as data processing, software development, call
centers, and so on. Particularly due to the benefits and opportunities pro-
vided by information technologies, GPN indicate that economic globaliza-
tion is reaching a degree of global integration unknown before and the
impacts of which are difficult to assess fully.
Furthermore, GPN are likely to shape not only global economic processes
but also regional development, because the global network is embedded in
local and regional geographies. Coe et al. (2004) are putting some emphasis
on this point: it is a close interrelationship rather than a dichotomy between
‘the global’ and ‘the regional’ that is emerging out of GPN. They conceptual-
ize regional development as ‘a dynamic outcome of the complex interaction
between territorialized relational networks and global production networks
within the context of changing regional governance structures’. Because
global relations are taking ‘place’ in concrete locales, they are fostering
regional development, and the material linkages that connect the different
scales are provided by logistics. Yet these global relations are also likely to
create a certain dependence of actors and processes in such places on decisions
made in the corporate headquarters, possibly far away from the region that is
affected by them. Such characteristics make GPN quite difficult a subject from
the perspective of policy and planning, that is, regional development.
GPN and Supply Chain Management
During the 1980s and 1990s, and accelerated by the globalization of manu-
facturing, logistics has been transformed into the more comprehensive
mode of supply chain management (SCM). The framework of SCM is
based upon both new information and communications technologies and
also changing habits of corporate management, for example the elimination
of inventories and the integrated management of the chains. Thus a major
requirement for the global expansion of production networks has been built
upon logistics. Sturgeon (2002) provides a comprehensive overview of new
forms of production organization and how the provision of logistics ser-
vices is involved in this. A major paradigm behind the model is called
‘modular production’, which means that production is driven by the con-
tract manufacturing and a vertically disintegrated and horizontally inte-
grated management of value chains. This modular form of manufacturing
network happens against the background of organizational change (see
Globalized trade and logistics 105
Nelson and Winter 1982). It comprises both small and large firms, small and
large geographical scales, and it aims at creating a large number of products
within few processes, in order to receive maximum revenue through
economies of scale (Sturgeon 2002: 477).
Logistics is becoming a key unit within this production system, because it
has to provide for the agility (flexibility) of any module and the interaction
of all modules in the entire network. The imperative of flexibility is not only
considered organizational but also geographical. Thus a major shift has
occurred in how and where commodities and their components are being
assembled, manufactured and distributed. Innovations along major chains
were also responsible for the emergence of new services such as third- and
fourth-party logistics providers, a specialized branch that is committed to
integrating the functions of freight transport, warehousing, logistics and
physical distribution. These services often tend to be subcontracted out of
the firm. The shift in logistics is an outcome of changes in patterns of pro-
duction and consumption that are, in turn, likely to shape logistics and freight
distribution (for example, just-in-time or just-in-sequence manufacturing,
e-commerce, and so on).
In order to describe the transformation (or deconstruction) of the firm
and the modularization of manufacturing, Suarez-Villa (2003) emphasized
the emerging network logic of the modern economy and coined the term
‘techno-capitalism’. It is also being used as an interpretative scheme, a par-
adigm for analysing structural changes that are primarily driven by infor-
mation technologies and globalization. Network building, devolution of
hierarchies and speed are the main characteristics of contemporary
economies. The implications for transportation are a rising demand for
shipping and delivery, particularly of smaller units in a higher frequency,
an increasing importance of time, reliability or even speed, and also new
infrastructure requirements both in terms of flows and in terms of nodes.
GPN and Global Distribution
As consequence of the ongoing process of developing globalized production

networks, distribution is required to complement the manufacturing process
and to carry the final product to the market. Thus GPN depend upon a
global distribution network (Capineri and Leinbach 2003). The functional
and geographical integration of GPN is based upon the core components of
the distribution network, as there are flows (information, money, commodi-
ties, vehicles) nodes (ports, airports, railyards) and, all bound together, net-
works. It is in fact the global distribution system, consisting of firms, modes
and infrastructure, which makes GPN a functioning entity. Following a
somewhat traditional perspective on the character of freight transportation,
distribution is derived from the demand of the production system. This

means that the amount of freight transport and its spatio-temporal perform-
ance is a function of the place and time of manufacturing and the necessity
for timely delivery to the customer.
To recognize the more developed role of distribution systems and their
interaction with production, distribution is becoming ‘structural’ (see Hesse
and Rodrigue 2004; Rodrigue 2005). This means that the need for precise
placement of consignments to the point of sale may further influence the
way production systems are being operated or where they are located. This
new notion of logistics and distribution as a relevant factor for production
(and not the other way around) is quite different from the importance of
transportation infrastructure for economic activity expressed by classical
location theory. It is not only simple infrastructure provision that makes
firms go to a certain area but the ability of regions and cities to cope with
the extraordinary demand for flexible, timely and cost-efficient physical dis-
tribution. As far as distribution is becoming critical at major transport
nodes, firms seeking new manufacturing locations may in the future favor
locations that offer a competitive environment that combines labor, services
and other resources with good access to markets and transport corridors.
Keeping this contention in mind, freight transport is undoubtedly a
means and an outcome of GPN. This is also true for global trade, given the
fact that trade is an early expression of what can be regarded as globaliza-
tion. Before GPN were evolving, international trade increasingly con-
tributed to the amount and the nature of physical distribution, because
world exports have grown much faster than world production. This is indi-
cated, almost constantly for decades, by average annual growth rates of
world production and world trade (global imports and exports), the latter
growing much faster than the former (Dicken 2003: 35). With the upcom-
ing activity of transnational corporations (TNC) and thus the process of
global integration via GPN, not only final products are being shipped from
core to periphery and vice versa, but also raw materials and components.
More than 40 per cent of America’s imports are from the overseas sub-
sidiaries of its corporations. It is obvious that the associated demand for
transport is growing. In this respect, globalization can be considered a
major framework condition of goods exchange, carrying freight along the
‘rivers of trade’ (McCray 1998), which means that there are major corridors
through which the global freight flows are being directed.
GNP and Regionalization
Free trade agreements such as the North American Free Trade Agreement
(NAFTA) or the European Single Market have also contributed substantially
to the emergence of global flows, because they provided a basic and fairly
homogeneous regulatory framework upon which foreign direct investments,
TNC-activity and thus GPN have expanded. Deregulation was not only
directed toward markets in general but also to the transport industries in par-
ticular, in the US during the 1980s, in Europe and the UK mostly during the
1990s. Transport deregulation is subject to controversy, targeting salaries,
labor or standards or safety issues. Also, the associated access of foreign firms
to open markets earned criticism both by unions and by many medium-sized
firms (compare to the dispute on Mexican truck drivers serving US markets
or related activities of Eastern European firms in Western European coun-
tries). In fact transport deregulation has contributed to significantly lower
transport costs and thus made the spatially extended manufacturing envi-
ronment more tangible. More recently, and thus indicating further extension
of globalization, global service providers have emerged. They operate world-
wide trucking fleets, shipping capacity, container terminals, and so on, thus
re-directing freight flows and shaping the global map of distribution again.
North America, as a pole of the global economy, has been particularly
impacted by the dynamics of GPN in terms of the nature of its production,
consumption and distribution.
In 2001, 15 countries alone accounted for 77 per cent of the value of
US-merchandise trade (USDOT 2003: 2). One-third of this trade was
with Canada and Mexico as part of NAFTA. Due to strong growth in
NAFTA and Asian Pacific trade relative to that with Europe, the share of
trade passing through border crossings and freight corridors with Canada
and Mexico and with West Coast ports has increased, as has related con-
tainer and intermodal traffic. Specifically, the North American west coast,
as a gateway, is being influenced by increasing trade flows originating
from the new manufacturing poles in East Asia and arriving at its con-
tainer ports. These goods flows are destined for the final points of con-
sumption all over North America through an inland freight distribution
system.
Changes in the labor force are a good indicator of the reorganization of
the North American production network. While non-farm employment
increased from 109.5 to 131.5 million between 1990 and 2004, manufac-
turing employment dipped from 17.7 to 14.3 million. The service (non-
producing) sector was the major contributor to employment growth,
climbing from 85.8 to 109.6 million jobs for the same period. Transportation
and warehousing also grew remarkably, from 3.5 to 4.3 million jobs
(USDOL 2005). While the economy shows important signs of ‘dematerial-
ization’ its increasing consumption function, accounting for close to 70 per
cent of the GDP, underlines a growing need to trade and to organize freight
distribution.
NORTH AMERICAN TRADE AND LOGISTICS
The North American system of freight transport and logistics is develop-

ing as an outcome of changes in trade and industries, regional distribution
of growth and the particular ratio of import and export in the economy. In
1998, the US transportation system carried over 15 billion tonnes of freight
valued at over $9 trillion (FHWA, Office of Freight Management and
Operations 2002; see Table 4.1). Domestic freight movements accounted
for nearly $8 trillion of the total value of shipments. There are expectations
about how freight distribution will unfold in the future. By 2020, the US
transportation system is expected to handle cargo valued at nearly $30 tril-
lion. Herein, the truck moved 71 per cent of the total tonnage and 80 per
cent of the total value of US shipments in 1998. The motor truck carried
the majority of both local distribution and interregional freight flows.
Water and rail also had a significant share of total tonnage, but they
accounted for much smaller freight values. Air freight moved less than 1 per
cent of total tonnage but carried 12 per cent of the total value of shipments
in 1998. Domestic freight volumes are expected to grow by more than 65
per cent, increasing from 13.5 billion tonnes in 1998 to 22.5 billion tonnes
in 2020. The forecast suggests that the air and truck modes will experience
Table 4.1 US freight shipments by tonnes and value, 1998, 2010 and 2020
Mode Tonnes (million) Value (billion $)

1998 2010 2020 1998 2010 2020
Domestic
Air 9 18 16 545 1308 2 246
Highway 10 439 14 930 18 130 6 656 12 746 20 241
Rail 1 954 2 528 2 894 530 848 1230
Water 1 082 1 345 1 487 146 250 358
Total 13 484 18 820 22 537 7 876 15 152 24 075
International
Air 9 16 24 538 1198 2 284
Highway 419 733 1069 772 1724 3 131
Rail 358 518 699 116 248 432
Water 136 199 260 17 34 57
Other 864 1 090 1 259 NA NA NA
Total 1787 2 556 3 311 1444 3 203 5 904
Grand total 15 271 21 376 25 848 9320 18 355 29 980
Source: FHWA, Office of Freight Management and Operations (2005) includes

international shipments that moved via pipeline or by an unspecified mode.
the fastest growth. Domestic air cargo tonnage is projected to nearly triple
over this period, although its share of total tonnage is expected to remain
small. Trucks are expected to move over 75 per cent more tonnes in 2020,
capturing an even larger share of total tonnage. Volumes moved by the rail
and domestic water modes are also projected to increase over the forecast
period, although they will not be likely to increase their market share.
International trade accounted for 12 per cent of total US freight tonnage
in 1998 and is forecast to grow faster than domestic trade, projected to
increase by 2.8 per cent annually between 1998 and 2020, nearly doubling
in volume. The performance of the freight system as indicated by these
numbers bears major challenges to infrastructure, gateways and other
issues internal and external to the transportation system.
It is, however, hazardous to make long-term projections concerning
freight transport as there are many factors at play that could change the
environment in which it operates. The projections depicted above are very
likely to be inaccurate for many reasons. Future freight demands are often
predicted in a rather linear fashion and do not account for economic cycles
that are composed of periods of growth and recession. The development of
a globally oriented production and distribution system is likely to
significantly change the assumptions made for these scenarios to include a
greater share of long-distance international traffic handled at major gate-
ways. Further, the current substantial and likely long-term increase in
energy prices, especially oil, is likely to completely derail estimates made in
1998, at a time when oil prices were still low.
North American Trade Gateways
Transport systems are subject to remarkable geographical flexibility even if

many of their infrastructures are fixed. Flows, origins, destination and the
modes used can change rather rapidly, particularly in a global economy
regulated by global production networks. Gateways remain a relatively con-
stant component in the global space of flows. They can be seen as semi-
obligatory points of passage linking the global with the regional and the
local. Gateways come in three major categories linked with the mode of
entry, whether land, maritime or air. Land gateways commonly have a
simple transit function with some nearby logistics and manufacturing
activities, particularly when there are significant wage and/or regulatory
differences. The maquiladoras exemplify this situation along the US-
Mexico border, where manufacturing takes place on the Mexican part and
logistical activities managing this freight take place on the US part. The
US–Canada border shows a different dynamic as the gateway in this case is
simply a point of transit for medium/long-distance truck traffic (some rail)
between manufacturing and consumption areas. The border region itself,

even near gateways, has not seen a significant accumulation of logistical
activities, particularly because the Canadian and American economies are
already fairly integrated and the bulk of the Canadian economic activities
is located within 150 km of the border anyway. Air gateways are linked with
an important metropolitan area and with regional air/road connections.
They tend to have more inland locations as they are not bound to strong
transshipment constraints but to the rationale of moving air freight as close
as possible to its final destination. Maritime gateways are large terminals
with strong high-capacity inland connections (rail and road). Due to con-
gestion and lack of space for logistical activities near maritime terminals,
the emergence of satellite terminals or inland freight distribution centers
(DCs) appears to be a significant trend, well developed in Europe but
emerging in North America.
Trade and physical flow imbalances are clearly reflected at major
American modal gateways (Figure 4.1). Almost all the gateways – land,
maritime and air alike – are characterized by traffic imbalances where
inbound traffic far exceeds outbound traffic. This is particularly the case
for maritime gateways linked with long-distance international trade with
Europe and more specifically Asia. The West Coast is notably revealing and
is the most imbalanced both in the concentration and the direction of
the traffic. Inbound traffic accounts for about 80 per cent of all the traffic
handled by ports. The ports of Los Angeles and Long Beach, CA handled
75 per cent of the total freight dollar value brought in through the West
Coast. NAFTA land trade gateways tend to be more balanced, but still
reflect a negative flow. A similar pattern is observed for air gateways. What
also characterizes North American gateways is their high level of concen-
tration in a limited number of gateway systems; a set of modal gateways
within a relatively defined region that acts as a functional system linking
that region to international trade (Table 4.2).
Three major gateway systems, each including several modal gateways,
account for more than a third of the value of international trade: Southern
California, New York/New Jersey and Detroit, MI. Two are the Atlantic
and Pacific main entry points of American trade, and the third (Detroit)
underlines the functional integration of the American and Canadian
economies along the Montreal, QC/Toronto, ON/Detroit corridor.
The emergence of these large gateway regions does not preclude growth
in smaller gateways. An emerging pattern involves the location of mega-
distribution centers, particularly in retailing, close to ports that were tradi-
tionally of smaller size. This process coincides with the de-industrialization
of the United States, making the retailing sector increasingly dependent
on foreign production and imports. Thus, locations near international
Land Gateways Exports Exports Air Gateways Exports
Port Gateways
Imports Imports Imports
Port of Blaine
Port of Seattle 53 69
51
Seattle-Tacoma Intl.
Port of Pembina
Port of Tacoma Port of Sweetgrass
Port of Champlain-Rouses Pt.
Port of Portland
Port of Alexandria Bay

JFK Intl. Airport
Port of Huron Boston
Logan
Port of Buffalo-Niagara Falls Airport
Port of
Cleveland New York
Chicago Port of Newark
San Francisco Intl. Airport
Philadelphia
Philadelphia
Intl. Airport
Port of Detroit Port of Baltimore
Port of Oakland
Los Angeles International Airport
Port of Norfolk Harbor
111
Port of Otay Mesa Station
Atlanta
Port of Los Angeles
Dallas-Fort Worth
Port of Calexico-East Port of El Paso
Port of Nogales Port of Charleston
Port of Long Beach
Port of Savannah
Port of Beaumont New Orleans Port of Jacksonville
Port of New Orleans
Port of Laredo
Port of Houston
Port of Morgan City Miami Intl. Airport
Port of Corpus Christi
Port of Brownsville-Cameron Port of Port Everglades Port of Miami
Port of Hidalgo
Figure 4.1 Major modal US gateways, 2003

Table 4.2 Major North American gateways
Gateway Gateways Total Imports/exports

system share (%) ($ billions) 2003
Southern Port of Los Angeles, Port of 15.2 226.5 74.8
California Long Beach, Los Angeles
International Airport, Otay
Mesa (Port of Entry)
New York/ JFK International Airport, Port 10.7 142.2 70.9
New Jersey of New York/New Jersey
Detroit Detroit (Port of Entry), Huron 8.3 86.9 77.2
(Port of Entry)
Source: BTS (2004) America’s Freight Transportation Gateways,

http://www.bts.gov/publications/americas_freight_transportation_gateways/
gateways tend to become more important, but accessibility and land require-
ments induce major retailers to look for more suitable alternatives than the
existing and heavily congested gateways. For instance, Savannah, CA, has
attracted in recent years many new major distribution centers (for example,
Target, Home Depot, Wal-Mart, and so on), namely because of available
land nearby the port and uncongested access to the inland along the strate-
gic I-95. Growing imports from China are the main driver of this change.
Maritime and Air Cargo Systems
The North American port system illustrates a concentration of container

traffic in a limited number of ports and clusters (see Figure 4.2). The share
of containers handled by the five largest ports has remained unchanged for
the last 20 years at around 55 per cent, underlining the cumulative advan-
tages of capital investment in container handling facilities and access to
the hinterland. The system is articulated along port clusters, representing
a set of ports oriented along a coastal corridor such as Vancouver, BC–
Portland, OR and San Francisco, CA–Los Angeles along the West Coast
and New York/New Jersey–Hampton Roads, VA, Charleston, SC–
Jacksonville, FL and Palm Beach, FL–Port Everglades, FL along the East
Coast (de Langen 2004). All those clusters are connected to a North
American land bridge and also include small but growing Canadian and
Mexican components. However, inland freight distribution is challenging
the relationships between many ports and their hinterlands and represents
one of the most acute freight transportation problems (Notteboom and
Rodrigue 2005). Congestion and delays at West Coast ports are forcing
St. John's
Vancouver
Fraser
Everett
Seattle Saint
Montreal John
Tacoma
Halifax
Portland
Portland(ME)
Albany Boston
Toronto
New York/New Jersey
Baltimore
San Francisco
TEU (2003)
Oakland Wilmington Philadelphia
Less than 100 000
Richmond(VA)
100 000 to 300 000
Hueneme Hampton Roads
Long Beach 300 000 to 1 million
Los Angeles Wilmington(NC)

San Diego 1 million to 2 million
Charleston
Ensenada Savannah
113
Mobile Fernandina More than 2 million
Houston Gulfport Jacksonville
New Orleans Canaveral
Lake Charles Tampa Palm Beach
Freeport Manatee
Miami
Port Everglades
Mazatlan San Juan
Tampico
Progreso
Altamira Ponce
Puerto Morelos
Manzanillo
Veracruz
Lazaro Cardenas
Salina Cruz
Figure 4.2 Traffic at major North American container ports, 2003

many maritime shippers to consider alternatives for their inland distribu-

tion. For instance, Hutchison Port Holdings has plans to build a major con-
tainer port at Ensenada, BCN, just 110 km south of the California border.
This new facility, which could handle more than 1 million TEU yearly,
would require the construction of a rail link to Yuma, AZ, bypassing the
congested southern Californian transport system. Ports along the southern
East Coast façade (Charleston–Jacksonville range) also anticipate higher
volumes because they have additional transshipment capacity and uncon-
gested hinterlands. Further, the potential enlargement of the Panama
Canal could expand the Gulf of Mexico ports because maritime shippers
would benefit from economies of scale in addition to the untapped port
capacity.
North America accounted for about 37 per cent of all global tonnes-
km of freight carried by air transport, 25 per cent of which occurs region-
ally. Air freight reveals a system dominated by inland hubs along the
Illinois–Ohio–Kentucky–Tennessee axis (Figure 4.3). The choice of these
hubs is logical because they correspond to a demographic (market)
central location in the North American air freight system, a fact under-
lined by the decision of major air freight providers to locate their hubs
along this axis. Thus, they are neither origins nor destinations for air
freight, and their function is mainly one of transshipment as hubs in their
respective distribution systems (for example, UPS for Louisville, KY, and
FedEx for Memphis, TN). The majority of other airports act as con-
ventional points of origin or destination for air freight, the nature and
function of which is related to the local economy. What has also been
remarkable is the steady decline in average line hauls since 1990, from
1389 miles to 973 miles in 2001. This is partially explained by the setting
of a hub-and-spoke freight distribution system forcing the convergence
of air freight in a few hubs with shorter hauls even if the amount of
tonnes-km increased.
Road and Rail Freight Systems
Road and rail freight transport systems account for 28.4 and 38.8 per cent
respectively of all the tonnes-km carried in the United States. Their import-
ance resides primarily in linking the gateways with the American produc-
tion and consumption system. With containerization, road and rail systems
are increasingly interacting and becoming interdependent. Compared with
Western Europe, American rail freight account for a larger share of total
tonnes-km than road, mainly attributed to the longer distances involved
but also to systems designed to handle larger loads and able to support dou-
blestacking services. Both modes are articulated along corridors with
SEA
BFI GEG
PDX
MSP MHT
SYR BOS
BOI BDL
ROC
FSD ORD BUF
RFD TOL EWR
SLC JFK
PHL
FWA CLE PIT
OAK RNO MDT
OMA DSM IND DAY
DEN BWI
SFO
MCI CVG IAD
SJC
STL SDF RIC
LAX
115
LAS
ONT GSO RDU
ABQ BNA
TUL CLT
PHX MEM ATL
HSV CAE
SAN
DFW
ELP
SHV
IAH JAX
MSY MCO
Tons of Landed Freight (2003) AUS
Less than 400 000 2 million to 4 million SAT
TPA
400 000 to 800 000 FLL
800 000 to 2 million

More than 4 million MIA
Figure 4.3 Tonnes of landed freight at major American Airports, 2003

average hauls of 485 and 862 miles respectively, underlining their respective
range in freight distribution.
Major road freight corridors form a mesh-like structure where the inten-
sity of circulation expresses the hierarchy of distribution within the
American urban system (see Figure 4.4). For instance, while the I-95 along
the East Coast appears to have a continuous flow, most of the movements
involve medium-distance trucking of a few hundred kilometers at most.
Latitudinal truck flows are, however, long distance-based because they link
different economic regions of the continent. There are also the so-called
NAFTA corridors, mainly between Michigan and Texas. Again, even if
such corridors involve long-distance freight flows, there are specific
distance-based market areas. Northbound flows from Mexico and the
southbound flows from Canada decrease as the distance from their respec-
tive borders increases. The equilibrium point where Canadian and Mexican
freight flows do not go much further is around the Tennessee/Kentucky
range.
Rail freight has experienced a remarkable growth since deregulation in
the 1980s (Staggers Act) with a 77 per cent increase in tonnes-km between
1985 and 2003. A significant share of this transformation concerns the
emergence of long-distance rail freight corridors. Figure 4.5 depicts that
rail freight is articulated along major latitudinal corridors linking the two
major gateway systems of North America, Southern California and New
York/New Jersey via Chicago. The major gateways are part of a land bridge
and mini-bridge system, fulfilling the requirements of long-distance conti-
nental freight distribution. Rail freight transportation has also undergone
the containerized revolution; container traffic represented approximately
79.6 per cent of all rail intermodal moves. The linkage of gateways with
their hinterland could not have occurred otherwise, so rail, along with
trucking, has become a dynamic element of North American freight dis-
tribution, able to offer time-sensitive services.
CHALLENGES TO NORTH AMERICAN FREIGHT

DISTRIBUTION
This section addresses challenges to the freight and logistics system, with
respect to both functionality and efficiency as well as the sustainability issue.
It also presents an analysis of federal and metropolitan freight policies that
have emerged during the late 1990s/early 2000s to cope with the growing
demand for freight distribution, given that infrastructure supply, arterial
capacity and public tolerance of freight traffic burden appears limited.
117
Daily Truck Volume (1998)
Less than 2000
2000 to 7500
More than 7500
Figure 4.4 Daily truck volume, 1998

Fraser
Vancouver
Tacoma
Seattle Halifax
Montreal
Portland
Minneapolis
Chicago New York/New Jersey

Salt Lake City
Oakland Baltimore
Wilmington
Kansas CIty
Hampton Roads
Long Beach
Charleston
Los Angeles
Savannah
118
El Paso
Jacksonville
Houston New Orleans
Miami
Port Everglades
Altamira
Major Container Port
Major Rail Freight Distribution Center
Manzanillo Veracruz
American Landbridge
Canadian Landbridge
Mexican Landbridge
Figure 4.5 The North American land bridge

Trade Imbalances and Regional Division of Labor
The most important factors behind the reorganization of freight trans-

portation are related to the macro-economic conditions of the global
economy. Logistics and freight distribution are bound to this environment,
which is quite volatile and unpredictable. Two factors are of particular
relevance for North American freight distribution:
1. The growth of freight being carried both in tonnes and tonnes-km has
placed additional demands on the capacity of modes and terminals to
handle them; and
2. Imbalanced freight movements, the outcome of a global reorganiza-
tion, is leading to disequilibrium in the division of labor, trade, pro-
duction and consumption.
The case of China is by itself impressive; just 10 years ago it would have
been difficult to forecast the current and still growing role of China in the
global geography of production, not just for low costs and labor-intensive
goods but increasingly for technological products. In the last decade alone,
China accounted for about 25 per cent of the global growth of GDP impos-
ing a major shift in global freight flows. Comparative advantages are shift-
ing rapidly, leading to de-industrialization in North America and Europe
and a re-industrialization of Pacific Asia. It is interesting to notice that
China was accounting for a third of the world’s output around 1800. The
current situation can be seen as a reordering of the global geography of
production to preexisting historical conditions.
While this global shift has been taking place trade flows have become dis-
located, creating an array of challenges for the freight transport industry
such as empty travel and inbound delays at gateways. Under normal cir-
cumstances, this imbalanced situation would have corrected itself with a
recession in the United States, leading to a new equilibrium as consumers
would have curbed their consumption of foreign goods. However, an intri-
cate game of financial leverage came into play between the indebted United
States government and consumer and its creditors. This has created a
unique situation that conventional international trade theories do not
grasp effectively. To simplify the situation, Asian capital gained from
export-based development was recycled in American securities (T-bills,
bonds and equities), which in conjunction with an accommodative interest
rate policy of the Federal Reserve led to an inflation of American assets,
especially real estate. Consumers, because of cheap capital and a growth of
the paper value of their residential assets, indulged in debt-financed spend-
ing on imported goods. To put it bluntly, home equity loans were taken to
pay credit cards used to buy cheap imported (Chinese) goods. Commodities
flow dominantly in one direction while capital flows on the other. China has
now begun a process of acquisition of strategic North American assets
related to resources and manufacturing.
It is unclear at this point how this unstable situation will unveil. Economic
history dictates that all asset inflations are eventually corrected. The most
likely outcome is a decline in consumption and a recession that could last a
decade as America’s staggering public and private debt is paid back, repudi-
ated or inflated away through reckless monetization. In such a context, inter-
national trade would stabilize and even decline as demand drops. However,
a significant change in the origins and destinations of trade is unlikely
because it would require a very significant drop in the value of the US dollar
to start to make the American economy competitive from an exchange rate
perspective. Production costs are so low in China that even if the US dollar
was to depreciate by an additional 50 per cent (it has already lost about 30
per cent of its value compared to a basket of currencies such as the Euro
since 2000) and/or the Chinese currency was allowed to appreciate, it would
not have much of an impact on the comparative advantages of China. The
global labor arbitrage continues unabated, and nothing short of strong pro-
tectionist policies would prevent a long-term trend toward global wage equi-
librium. Average wages in North America, compounded with inflation, have
not increased in more than a decade while wages in developing countries are
steadily increasing. In the long run, by 2015–2020, American wages are likely
to be on par with several developing countries such as China and India.
The current balance of payments is a clear indication of the worsening
disequilibrium in which the United States is caught in spite of the system-
atic decline of the US dollar over the last four years. In 2004, it stood at
$665 billion and reached $760 billion in 2005. Such figures reveal a freight
distribution structure which is dominantly inbound. The only way out of
this imbalance is a recession, a growth in savings and higher interest rates.
The staggering negative trade balance is reflected in physical flows that
have followed accordingly in their imbalances, which have increased rapidly
between 2000 and 2004 (Figure 4.6). Particularly, there is an acute US–Asia
imbalance in container flows in which containerized exports have not kept
pace with imports. The outcome is rate imbalances as it costs more per
twenty-foot equivalent unit (TEU) for westbound flows than for eastbound
flows, making freight planning a complex task for container shipping com-
panies. Thus, production and trade imbalances in the global economy
result in imbalances in physical flows and transport rates. Eastbound trans-
Pacific rates are lower than westbound trans-Pacific rates, substantiating
the argument of the lack of competitiveness of the American economy and
its inability to take advantage of this benefit.
2004 11.8 4.3 8.4 5.6 1.8 3.0
2003 10.2 4.1 7.3 4.9 1.7 2.9
2002 8.8 3.9 6.1 4.2 1.5 2.6 Asia-USA

USA-Asia
Asia-Europe
2001 7.2 3.9 5.9 4.0 2.7 3.6
Europe-Asia
USA-Europe
2000 5.6 3.3 4.5 3.6 2.2 2.9 Europe-USA
0 5 10 15 20 25 30 35
TEUs
Figure 4.6 Containerized cargo flows along major trade routes, 2000–2004
(in millions of TEUs)
Congestion, Land Use and Connectivity – a Metropolitan Perspective
Global production and distribution networks are connected to local places,

where the transshipment of consignments, the unloading of freight or add-
itional logistics services are performed. The connectivity of all components
of the network at various spatial scales makes it both global and regional.
Depending on the accessibility and functionality of such locales, network
organization and efficiency can become critical once congestion takes place,
leaving limited additional capacity or unreliable usage (delays). This is par-
ticularly visible at the major North American gateways of international
freight flows discussed above. According to the tremendous growth of these
metropolitan regions (in terms of population, employment, gross domestic
product) and as a consequence of structural and spatial changes, freight
transport in core areas is complicated by congestion, scarcity of infrastruc-
ture and sometimes even labor (for example, Southern California). The
American West Coast is facing serious difficulties for inland freight distribu-
tion. Trans-Pacific container shipments often have to wait several days at
ports such as Los Angeles/Long Beach because of the lack of terminal
capacity, labor availability and the ability of inland shipping, mainly truck-
ing, to handle such volumes. Rail capacity is the major strategy to mitigate
the problem, although it is also the object of many challenges. There is a lack
of on-dock rail facilities in many West Coast ports, delaying intermodal

transfers. A call for ‘Freight capacity for the 21st Century’ is increasingly
being felt (TRB 2003a, b).
Figure 4.7 reveals several chokepoints of the American road transport
system, corresponding to major gateways, metropolitan areas and corri-
dors of freight circulation. A volume to capacity ratio higher than 0.7 rep-
resents a serious level of congestion on a road segment and may incur
systematic delays and disruptions. Thus, strategic segments of the North
American freight distribution system have a high congestion level, requir-
ing logistical adjustments such as modal shifts.
The New York/New Jersey Metropolitan Region is one of the country’s
major platforms of goods exchange. This is due both to the significance
of the Port of New York and New Jersey for international trade and to
the concentration of millions of customers in the metropolitan region
(Chinitz 1960; Yaro and Hiss 1997; Strauss-Wieder 2001; Rodrigue 2004).
Warehouses and distribution centers were once concentrated in and around
New York City, close to the port, to airports and a certain number of the
customers. Over recent decades, the core region is suffering from congestion
on all major roads and bridges, a problem exacerbated by the local geogra-
phy. Hinterland access is more and more becoming critical. As a conse-
quence, distribution is increasingly being pushed out of the core region
toward the periphery. The New Jersey Turnpike (I-95) functions as the back-
bone of this movement. Competitive distribution land markets emerged in
Northern New Jersey. A more recent market has emerged along the I-80 in
eastern Pennsylvania, where several DCs are taking advantage of cheap
land and corridor-based accessibility. This spatial movement is important
not only for the regional land use structure but for the entire system of
freight transportation in New York/New Jersey: Port and airports are still
major import and export gateways, but a majority of goods handling and
transshipment takes place at the regional periphery. This locational mis-
match generates a high volume of freight (truck) traffic through New York
City and weakens the competitive position of the New York/New Jersey
Port. Freight issues are subject to a wide range of planning activities under
the auspices of the Port and government agencies in New York and New
Jersey, for example, a statewide freight plan in New Jersey and respective
frameworks (Parsons Brinckerhoff-QD 2004).
In the case of the San Francisco Bay Area, the East Bay has been the
traditional industrial and distributive ‘hub’ of the region. The core East
Bay Area around the city of Oakland, CA, and Alameda County offers
excellent access to all major locations in the region. This includes the old
industrial corridor along the I-880 Freeway, the bridges connecting the
East Bay with the San Franciso Peninsula, and the freeways to the Central
123
Volume to Capacity Ratio (1998)
Less than 0.7
0.7 to 0.9
More than 0.9
Figure 4.7 Volume to capacity ratio of road transportation, 1998

Valley, connecting the region with the rest of California (via Freeway I-5).
The Oakland area also offers intermodal access, that is, the container port
(Port of Oakland) and the Oakland International Airport. Warehouses and
DCs were traditionally concentrated along the I-880 and close to both
international hubs, particularly at the Port of Oakland, which serves as the
fourth largest container port on the US West Coast. The port is situated in
close proximity to the city center, is scarce of traffic access and also of land
(not only for loading operations but also to store empty containers, and so
on). Due to the increasing competition among the West Coast hubs and the
dominance of both the San Pedro Bay ports and the Port of Seattle/
Tacoma, WA, the future role of the port is questioned. In response to rising
congestion, increasing land prices and agglomeration costs, distribution
firms recently tend to move to the Central Valley, located 50 to 70 miles east
of the Bay Area. The Central Valley, traditionally a rural area based on
agriculture and agroindustrial businesses, is going to attract distribution
investments to a large extent. The locational preferences of distribution
and warehousing firms are based on circulation, particularly improvements
for access to the freeways I-205, I-580, and I-5, availability of rail-lines,
proximity to ports and to airports. Real estate prices and the housing
market in the Bay Area also play a role in explaining the increase of the
respective Central Valley’s appeal as distribution activities are priced out of
central areas. Freight transport, infrastructure capacity and land use will
remain important issues over the next years. The Metropolitan Transport-
ation Commission (MTC), as the region’s responsible planning body, has
initiated the development of a regional goods movement study (Cambridge
Systematics et al. 2003).
In the greater Los Angeles area the picture is quite mixed due to the
unproportionally high amount of manufacturing in core areas of the
region compared to other metropolitan regions. Despite this, the distribu-
tion pattern seems similar. Older distribution sites are located close to the
ports of Los Angeles/Long Beach and north of them (North Long Beach,
South Central LA). Because both ports together comprise the highest
amount of container loads in North America and have experienced a
tremendous growth of shipments over the last decade, limitations in capac-
ity are evident. Firms are facing problems of congestion, land availability
or, more recently, labor shortages that have hindered the transshipment of
container freight. This quote quite eloquently states the problem viewed
from freight shippers:
Even when they finally reach the docks, those ships probably will wait for as
many as four shifts before being assigned labor. And the containers they unload
may sit for several days once they leave the ship because railroads are under-
equipped and understaffed. Trucking isn’t much better: Fewer motor carriers are
frequenting West Coast ports because they burn so much time and fuel waiting
for containers. (Byrne 2005)
A major effort to improve landside access to two of the nation’s busiest

seaports is the Alameda Corridor freight rail expressway, opened in April
2002 (USDOT OST 2002). The Alameda Corridor, an almost $2.5 billion
project funded by private and public investments, connects the ports of Los
Angeles and Long Beach to the rail yards near downtown Los Angeles and
the national railroad network. The project consolidates 90 miles (145 km) of
branch rail tracks into one 20-mile (32 km) railroad expressway and elim-
inated about 200 street-level railroad crossings, thus allowing trains to travel
more quickly and easing highway traffic congestion. The Alameda Corridor
is one item within a larger collection of measures to improve the freight
system developed by the regional Metropolitan Planning Organisation
(SCAG 2005). Although the Alameda corridor triggered a lot of expecta-
tions, the project is facing a slow start. Among the many reasons for this
shortcoming, are the significant share of the traffic being locally bound and
the difficulty rail transport has to compete over short distances due to higher
transshipment costs.
There are other ways in which logistical firms are adapting, including
moving the distribution centers toward inland areas. This is also true for
the Los Angeles area. Further development occurred mainly at places in
Los Angeles County such as Vernon, Commerce or City of Industry
(SCAG 2001). More recently, Ontario, CA, is developing as a modern
distribution hub in the inland, combining locational advantages of open
land, freeway access, and proximity to air freight (Ontario International
Airport). At the intersection of I-15/I-60 freeways, a major node of ware-
housing and DC land uses is emerging. More recently, developments are
moving even further beyond the Greater Los Angeles area. One of the
largest DC in the American West is operated by the Swedish furnishing
retailer IKEA at Tejon Ranch in Kern County, CA, a newly developed
industrial park that was established on former farmland. The site is located
near Bakersfield, CA, almost 70 miles (112 km) north of Los Angeles, at
California Highway 99 and I-5 intersection. The DC is 1.85 million square
feet in size and serves all IKEA’s Western North America Distribution,
from San Diego, CA, to the West of Canada. Kern County gives a good
example of the fact that the strong development of the distribution
economy is going to transform ‘hill county’ into ‘industrial hub’ (Newman
2004).
Because distribution is increasingly planned and operated on the basis of
nationally designed networks, due to scalar changes and the premise of cost
reduction by economics of scale, appropriate locations come into favor that

serve as hubs for such networks. Respectively, as a consequence of both
congestion at gateway locations and long-distance accessibility served by
the interstate highway system, so-called ‘inland hubs’ are becoming more
and more important, where primarily road and air freight is consolidated.
One of the most famous examples for this is the evolving national DC
cluster across the Ohio River Valley (OH/IN/TN). It is one of the new DC
areas that are mainly affiliated with the interstate network and air cargo
facilities, not with the traditional port gateways. The DC cluster along the
Ohio River Valley, particularly following a corridor from Ohio and Indiana
to Tennessee, hosts warehousing, trucking, freight forwarding and air cargo
activities to a large extent. Such development has been additionally fostered
by the growth of the new economy:
The ‘first generation’ e-fulfillment providers are gravitating towards the pre-
ferred location for a single, centralized distribution facility, the greater Ohio
River Valley, namely the states of Ohio, Indiana, Kentucky, and Tennessee.
Industrial markets such as Columbus, OH, Indianapolis, IN, Hebron, KY
(Cincinnati, OH) and Louisville, have seen substantial demand from these users.
(Abbey et al. 2001: 15)
In 1997, more than 150 distribution centers larger than 50 000 ft2
(15 000 m2) were located in the city of Columbus. Both inventory and
absorption rates in the Columbus industrial real estate submarket belong
80 per cent to warehousing (source: SIOR database 2001). The reasons for
the tremendous growth of this region as a major distribution location are
manifold. Besides the long tradition of the Midwest as a preferred manu-
facturing location (with certain distribution experience and competence),
these locations are ideally suited to serve major markets both on the East
Coast and in the Midwest. Columbus is within a ten-hour drive of 50 per
cent of the North American population. In general, 60 per cent of the
entire US population can be reached by overnight truck services along the
corridor between Northern New Jersey and Indianapolis. In terms of logis-
tics, the location is characterized by major interstates and a freeway inter-
section (I-70, I-72), rail connections and intermodal terminals, and two
airports, among them Rickenbacker International Airport. Large invest-
ments of single firms have also to be taken into account, triggering ‘leader-
follower’ impact chains. Among recent corporate investments were the
DCs established by Emery Worldwide (Dayton, OH), Lowe’s Home
Improvement (Allen, OH), UPS (Louisville) and FedEx (Memphis). It is
no coincidence that this growth is spurred by air freight carriers and inte-
grators, firms who are among the winners of the structural change. At the
same time, the road and air-based distribution systems cause a variety of
problems and planning challenges that have to be addressed in the region.

A respective set of responses is being developed by the Mid-Ohio Planning
Commission (University of Wisconsin-Madison 2005).
The Chicago, IL metropolitan area is the most important inland hub in
North America: Chicago serves as the nation’s primary consolidation and
de-consolidation center for carload and intermodal freight, because it func-
tions as a network endpoint for both eastern and western railroad carriers.
Surprisingly its role tends to be overshadowed by maritime gateways such
as Los Angeles/Long Beach and New York. Chicago is also the nation’s
largest rail-to-rail interchange point. For instance, about 50 per cent of all
American rail freight transits through Chicago, accounting for 500 freight
trains per day carrying more than 2.5 million tonnes. All the class I rail car-
riers in the United States are present in the region, reinforcing Chicago as
the nexus of America’s inland freight distribution. The Chicago metropol-
itan area handled the largest amount of containers in North America,
about 14 million TEU in 2004, placing it behind only Hong Kong and
Singapore in terms of containerized throughput. This staggering amount
of freight involves large distribution facilities, including 200 truck termi-
nals carrying more than 400 000 truckloads each day. In fact, about 47 per
cent of the industrial real estate in the metropolitan area is devoted to the
function of warehousing and distribution. Because of the large number of
railroads operating into and out of Chicago, numerous classification yards
were built to accommodate the interchange activity taking place there.
Such a high concentration of freight traffic is creating congestion problems
as the rail system is unable to accommodate additional transcontinental
traffic. One of the most acute problems concerning rail is that it is not well
separated from road traffic, implying that the two systems impede one
another with a multitude of grade crossings. Besides this, the Chicago
region is one of the few places in North America that has a long-standing
experience in addressing freight related issues, collecting data and develop-
ing plans for improving the system. More recently, a comprehensive met-
ropolitan freight-planning framework has been developed to facilitate
coping with these challenges (Reebie Associates et al. 2004).
A Freight and Logistics Policy Framework at Metropolitan and

National Levels
The enormous growth of freight shipments and the associated transport

needs have caused a wide range of problems and conflicts that are primar-
ily visible in metropolitan and urban regions. These problems are due both
to capacity and acceptability constraints of the current distribution system,
of which the former is generally accepted as a serious challenge to policy
and planning. In contrast, sustainability of freight transportation is (still)

subject to minor consideration, because economic interests are often ranked
much higher than social or environmental goals (Black 1996, 2001). Yet air
pollution, noise emissions and the degradation of infrastructure (roads,
bridges), mainly caused by heavy-duty vehicles, happen at a certain cost for
environment and society – not to mention the extraordinary demand for
space at major gateway locations for warehousing, vehicle operations, trans-
shipment, or the storage of empty containers.
Judging from the perspective of policy and planning, freight transport
and logistics is an increasingly important issue, and it also represents a
target extremely difficult to manage (compare with respect to intermodal-
ity (Slack 1998) and regarding nodes and networks (Priemus 2002)). This
is due to the cost-sensitive character of freight transport subject to corpor-
ate management and decision making, which is different from passenger
transport where decisions are mainly made by individuals, following more
than just cost-based rationalities. Freight is both an outcome and a com-
ponent of highly abstract network architectures that are not necessarily
open for external management, for example, for governance in the public
interest or in response to local issues. Freight transport remains in private
interests that seek to maximize system-wide utility. Finally, the potential
degree of any planning intervention depends upon the regulatory frame-
work which has been changing significantly over the last two or three
decades, thus driving freight growth through shrinking barriers for trade
and transport, falling freight rates and a highly competitive environment in
the logistics service industries.
If we take a closer look at the regulatory framework and the physical
operationality of the freight distribution system, the current situation
appears quite contradictory, with de-regulation and market liberalization
on one hand, in order to allow for accelerating freight flows, and increas-
ing constraints due to infrastructure bottlenecks, urban density and scarce
land on the other hand. As a consequence, there is a remarkable contrast
between the fluidity of flows and the inertia of the physical infrastructure,
even if we acknowledge the rising significance of information flow and
managerial competence. Because transportation systems, particularly
infrastructure and land supply, cannot accommodate the growing amount
of freight traffic, the question is how the associated problems might be
solved in future, with much higher transportation volumes in addition to
the performance of the current systems.
To answer this question, it makes sense to look back and raise the issue
of how municipalities and transportation planning authorities have tackled
these problems in the past (see Banister 2002). In general, transportation
planning has long been focusing on passenger transportation and did not
extensively develop plans and strategies for distribution. In many cases,

distribution has been considered an undesirable land use at the local level,
at least in economically prospering regions (in others, logistics firms have
been welcomed for the sake of certain economic benefits, such as jobs, local
tax revenues, and so on). Planning activities with respect to truck transport
and rail freight have been undertaken only recently, compared to passenger
transportation and the respective tradition of modeling, traffic counting,
and so on. Regarding the way freight distribution and logistics have been
covered by policy and planning, different stages can be distinguished:
During the 1960s, freight was not been particularly addressed by trans-
portation planners, except the fact that port development in general repre-
sents a primarily freight-related issue. Planning practice in the 1970s/1980s
was likely to pay more attention to freight yet mainly followed the trad-
itional guidance of ‘predict and provide’, focusing on measures that were
devoted to widening and expanding the infrastructure network. Since the
1990s, the issue of intermodality emerged as a generally accepted paradigm
for policy and planning. Whereas the deregulation of transport markets has
substantially lowered the degree of government intervention, to some extent
air quality policies have been introduced as new regulation tools, for
example, addressing emission standards. At the end of the 1990s and early
2000s, there was a substantial increase in freight-related activity at both met-
ropolitan and national levels. As a result of the accelerated growth of freight
transport and the rising degree of conflict, urban economists, transporta-
tion planners and the trade sector now share a rising interest in freight issues
(Eno-Foundation/The Intermodal Association of North America 1999).
This will help to make freight and logistics more efficient and more accept-
able, by integrating freight into planning schemes and frameworks and also
by offering training and education capacity.
Regarding both capacity and sustainability constraints of the current
freight system, there is a need for developing a balanced framework of
policy and planning measures that consist of more than just adding to infra-
structure. It comprises generic policy approaches (with respect to energy,
climate change, infrastructure policy and modal share), intermodality as a
key tool, and also balancing the freight sector with community demands,
for example, with respect to traffic generation or neighborhood issues of
inner-city distribution centers (see TRB 2003b). Regional examples such as
the Seattle/Tacoma ‘FAST Corridor’, the Alameda Corridor or other ini-
tiatives in the metropolitan regions named above underline attempts to
divert freight in a firmly established national trucking market. Although on
paper these initiatives appear quite reasonable and promising, the existing
distribution system takes time to adjust. So the modal shift they were
designed for may take much longer than expected, whereas in the meantime
road freight transport is growing further. Case studies may even provide
evidence to suggest that attempts at freight planning are not that useful
unless coming from the private sector or at least in close cooperation with
it. For example, the Port Inland Freight Distribution Network of the Port
Authority of New York and New Jersey has also shown a rather slow start
with much less traffic than expected in spite of subsidies and incentives.
Thus modal shift strategies, either planned or left to market forces, are
facing substantial inertia reflecting accumulated investments, routes and
management practices.
A sound strategy for policymakers will be to favor freight distribution
systems that are able to cope with changes, particularly those that are not
exclusively business related. Surprisingly the issue is more of adaptability and
flexibility, which reflects what freight distribution systems have become, than
anticipation. A national freight policy should mainly be articulated first at
distributing case studies, good practice and policy experience to attract busi-
ness and planning communities to put freight on the agenda, to collect data
and develop strategies, and only then should plans be implemented.
A second issue is to identify strategic locations where transport invest-
ment is required to ensure adequate and reliable freight transport systems.
They often correspond to congestion bottlenecks. Once these high priority
locations are identified and adjustments made to satisfy various interests,
private investments should be secured by guaranteeing protection against
short-sighted local nimbyism through the rationale of national strategic
importance. On the one hand, local opposition has been one of the most
powerful forces that has impaired the development of transport systems. In
California, things have even gone to the extreme; their philosophy is to build
absolutely nothing anywhere nearby anything, which partially explains the
growing difficulties freight distribution is having along the West Coast. On
the other hand, corporate activity in logistics and distribution still lacks
more sustainable and responsible modes of management that are becoming
increasingly accepted in major parts of the manufacturing industry.
Energy and North American Freight Distribution
Finally, the issue of energy is certainly starting to change the environment in

which global and particularly North American freight distribution evolves.
This system is particularly vulnerable to petroleum price increases, specifi-
cally due to a high reliance on trucking and air freight to support time-based
distribution. In addition, North American logistics and freight distribution
operates on the assumption of low energy costs, and most investments in
logistical infrastructures were made in such a context and with expectations
that they would remain within a specific range. The rapid development of the
logistics industry in the 1990s was based on the assumption of very low
energy prices, implying that energy considerations were limited in the
planning and operation of freight distribution. The long-term trend of rising
oil prices, the convergence of supply, distribution and refining constraints
will make an undeniable mark on the economic sustainability of the trans-
port industry and force substantial adjustments. Among those, a shift to
more energy-efficient modes can be expected, notably toward rail. However,
rail freight transport systems are already fairly congested, notably along
long-distance east-west corridors. Substantial investments will be required in
rail infrastructures to insure an efficient and low energy-intensity inland
freight distribution. This system could be complemented by coastal and
fluvial barge systems, much in the line with Western Europe. A better usage
of existing resources will take place, notably in terms of existing capacity and
locations, inciting innovations in the management of distribution. Intense
productivity pressures will be placed on existing transport capacities, espe-
cially trucking. Location and accessibility, traditional components in cost-
based assessments of transportation, will see renewed focus. Balances
between modes, locations, times and costs are to be reexamined to mitigate
growing mobility costs with the timely requirements of distribution. A
reverse trend in logistics may take place with several customers willing to
trade more time for lower costs. Significant entropic forces have been
unleashed in freight distribution, making the issue of environmental sus-
tainability less relevant.
CONCLUSION
North American freight distribution is adapting the major macro-
economic changes linked with globalization, namely an acute division of
production. In turn, efficient transport systems have made this modern,
large-scale and network-oriented mode of production possible. Both
respective interrelations are contributing to an increasing amount of
freight transport. This development is causing new challenges, particularly
between major gateways and inland freight distribution systems. Among
the problems identified are imbalances in freight flows, congestion at points
of transshipment and the difficulties of inland freight distribution to
accommodate additional long-distance flows. Regarding the supply side of
freight transport services and infrastructure, the state and the future oper-
ability of infrastructure is becoming one of the most critical issues because
at least in major metro regions, a simple expansion of infrastructure and
thus a traditional widening-bottlenecks policy is restricted by a range of
political problems and fiscal constraints. In this context, an interesting
question is whether there will be a certain reorientation on the global

manufacturing and distribution map that reflects the rising degree of risk
within the global transport network architecture. The more restricted
transportation infrastructure and efficiency becomes, the more attractive it
will be to search for options of reorganisation and regionalization.
In the foreseeable future, the biggest momentum toward higher efficiency
and sustainability of the distribution system will be provided by rising
energy prices. Achieving major modal shifts from road and air freight
toward rail and shipping modes could make the entire system more trans-
port and energy efficient, so this is one of the strategies usually being devel-
oped as a response. Yet under current circumstances, both supply and
demand side operations and requirements may impede the needed
flexibility of shippers and thus the desired change within transportation
systems. However, rising transport and logistics costs will be the greatest
stimulus among any other measures to reorganize the way materials flow
and goods are delivered. This will trigger a phase of investment in real pro-
ductive assets to guarantee future economic growth. The reliability of
freight transportation infrastructures and operations is likely to be one of
the top priorities.
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5. Globalized trade, logistics and
intermodality: European
perspectives
Dirk Henstra, Cees Ruijgrok and Lori Tavasszy
This chapter describes megatrends that are shaping international trade,

logistics organization and (multi)modal transport in Europe. It focuses on
impacts on the European context, both from the peculiarities arising from
the European unification process and the European transport policies but
also taking into account the highly fragmented transport market that tries
to cope with the increased level of congestion, the threat of increasing taxes
and fuel prices as well as the ever increasing service requirements.
The main message of this chapter is that there is an increasing need for
consolidation and collaboration in supply chains resulting in hybrid multi-
echelon networks using multiple routing options. The principles behind
the design of these networks are clarified, and the way these networks can
be implemented in a multimodal context is presented through a descrip-
tion of the multimodal transport market in Europe as well as by giving a
number of examples that clarify the way these networks can operate. The
present trend of increasing transport costs because of internalization of
external costs and higher fuel prices will strengthen the possibilities for
using slow modes of transport in combination with fast modes, when
necessary.
INTRODUCTION – A ‘LONG WAVE’ PERSPECTIVE

ON EU LOGISTICS NETWORKS
The evolution of logistics networks during recent decades can be charac-

terized by a strong rationalization of business processes. Companies have
become more aware of the impact that their logistics organization can have
on the costs of doing business and on the degree of satisfaction of their cus-
tomers. Facilitated by the advent of information and communications
technology and the lowering of trade barriers companies have sought to
135
optimize their logistic processes by continuously restructuring distribution

networks and logistics partnerships.
Logistic costs have been cut almost in half since 1987 (ELA 2004).
Companies have found that one of the instruments to save resources and
improve performance is to outsource logistics tasks to specialized service
providers. Over a longer term, we can see that companies have been with-
drawing to their core business by sourcing transport services and wider logis-
tics services from outside – the so-called Logistics Service Provider (LSP) or
Third Party Logistics Services (3PL). At the same time, many external drivers
have steered the development of logistics services. The series of production
steps of goods is increasing, as the firms that produce these goods tend to
become more and more specialized, searching to reap economies of scale.
The above trends have introduced an important dilemma in logistics
thinking – weighing logistics costs against logistics service quality. The
supply chain management discipline embodies this attempt to balance
these two sides of the equation in order to raise profits, shareholder values
and market shares. Especially when considering which changes in logistics
networks are yet to come, this dilemma involves a tension between increas-
ingly complex consumer demands and logistic costs. More specifically, on
the one hand the firm is faced with a fragmentation of flows because of
smaller, customized shipments in higher frequencies; on the other hand the
need to maintain control over cost levels through benefits of scale in the
logistic process is as high as ever.
We believe that companies have responded to this tension over time in
waves. Each new era in logistics involved technological and organizational
innovations that have brought the quality of logistics services to a higher
level. A longer-term view molds these eras into a picture of self-organization
of the sector. Whereas the 1980s introduced new approaches toward
customer-oriented production and supply chain management, leading to a
growing fragmentation of flows, since the 1990s we have seen companies
reorganize their logistics structures to maintain performance. In the first
instance this mainly involved rationalizing internal and vertical processes by
reducing inventories and outsourcing transport services. Nowadays, as the
potential of internal reorganization appears to have been exploited to the
fullest extent possible, we see new forms of collaborative networks emerging,
where firms cooperate horizontally to share the costs of using logistics facil-
ities and services (Figure 5.1).
The key question we explore in this chapter is: What will be the impact of
increased horizontal collaboration between firms in logistics organization
on the demand for the freight transport services offered by different modes?
To understand which changes will take place we need to understand the
main drivers behind changes in logistics systems, and particularly those
Globalized trade, logistics and intermodality 137
Fragmentation of flows Internal rationalization External collaboration

• direct shipping • stock reduction • multi-user hub networks
• vertical disintegration • outsourcing 3PL => 4PL • horizontal bundling
1999 2000 2010 2020
Figure 5.1 The evolution of logistics networks through time
that are specific to Europe. These trends are described in the following
section. We also need to look into the present functions of intermodal
transport networks and public and private strategies to improve their
efficiency. We look into these roles and strategies further on in this chapter.
Also we explore the economic mechanisms that shape collaborative logis-
tics networks and the practical constraints toward building such networks.
Finally we draw some conclusions.
EXTERNAL PRESSURES SHAPING LOGISTICS

NETWORKS IN EUROPE
Worldwide Trends in Logistics
A number of trends have characterized the development of logistics

systems in the last decade (Ruijgrok 2003). These are
1. Spatial concentration and migration. At the continental scale, the

European economic integration has allowed firms to further rational-
ize their distribution structures. Mostly this has meant that the number
of warehouses has decreased. Also, as a result of the accession process
of new EU members, production capacity was moved from the North-
West to the Central and Eastern European regions and even further
toward Eurasia and the Far East. In recent years we have seen reverse
developments, in part at least.
2. Vertical disintegration. Reversing the trends of the 1960s and 1970s,
the number of production steps is increasing again as companies are
focusing on their core business, trying to improve their competitive
power by specializing and gaining scale advantages. This disinte-

gration of the chain applies to services as well as production steps and
is also a reply to a geographically increasing customer base.
3. Product flow scheduling. Many techniques have developed in
recent decades that have found application worldwide. This goes
well beyond just-in-time and includes methods such as quick
response, lead-time management, lean logistics, agile logistics,
efficient consumer response and process and pipeline mapping. These
have helped firms to drastically reduce their inventories while increas-
ing service levels. As we will see, the low-volume but high-value seg-
ments have greatly expanded, benefiting from these new techniques
and the opening up of new markets for customized and highly
responsive services. Nevertheless, a European survey (van Laarhoven
et al. 2000) pointed out that for most products delivery requirements
in Europe were still stated in days or weeks. Old and new structures
exist alongside each other.
4. Transport systems in Europe have benefited from increasing deregula-
tion and cost decreases. However, the possibilities of optimizing trans-
port systems within a deregulated environment have been depleted and
the growth of road transport is running toward its limits due to con-
gestion, road pricing and environmental pressure. Road transport is
absorbing almost the entire growth of freight transport demand within
the EU, as it answers best to the logistical demands of speed, flexibility
and reliability. As unit transport costs are expected to increase,
however, we can expect that this will affect distribution structures at a
European scale. Firms will be looking for ways to perhaps shift part of
their freight to alternative modes of transport without losing speed,
flexibility and reliability.
The above trends describe only a relatively short period of a decade in

the long process of rationalization of logistics networks in Europe. Within
this short period, however, we can already see that trends are not stable and
may reverse. We see that as systems evolve, the older structures may not be
abandoned altogether but systems may become more diversified as well,
combining old and new structures.
East–West Trade Growth
Between 1999 and 2003, trade volumes between Europe and its trading
partners have increased gradually. The decrease of trading impediments
has been the most rapid between East and West Europe, leading to almost
a doubling of trade in this period (Figure 5.2).
1.0
0.9 Imports
Exports
0.8
0.7
Percentage
0.6
0.5
0.4
0.3
0.2
0.1
0.0
ric
a
ric
a pe IS ica st ia rld
uro /C Afr Ea As Wo
A me Ame E a t es dle
rth tin rn St Mi
d
No La ste ltic
We / B a
pe
E uro
rn
ste
l / Ea
a
ntr
Ce
Source: WTO trade statistics, accessed at www.wto.org/english/res_e/statis_e/statis_e.htm.
Figure 5.2 Growth of trade flows (US$) to and from Western Europe,
1993–2003 (percentage)
Continuing Growth of Freight Flows by Road and Sea
Overall, freight transport within the EU has doubled within a period of 30

years. This growth was shared about equally by two modes of transport:
road and short-sea (Figure 5.3). Transport growth within the EU in general
has kept pace with the development of the economy. Growth in cross-
border flows, however, and in particular East-West, has outstripped GDP
growth by far. This is a result of increasing trade flows, accompanied also
by the centralization of distribution systems within Europe.
Over the longer term, continued growth of global freight flows is
expected. Although this growth will be most conspicuous in the emerging
Asian economies (especially China and India), flows are expected at least to
double in the first half of this century in all regions of the world (Figure 5.4).
The development of transshipment volumes among the European ports
reflects the above trends in trade and transport. As the Central European
countries are joining the European Union and increasing their trade with the
3500
pipelines
3000 inland waterways
rail
2500 short sea
road
2000
1500
1000
500
0
1970 1974 1978 1982 1986 1990 1994 1998 2002
Figure 5.3 Freight transport growth within the EU-15 (billion tonne-km)
rest of the world, Western European seaports find that their hinterlands are
gradually extending eastwards. Clearly, container ports in Northern Europe,
such as in Hamburg, have been gaining in market share at the expense of the
Western European ports such as Rotterdam (Figure 5.5). It is interesting
also that at these ports on average about 60 per cent of container moves are
related to deep sea traffic and 40 per cent to short sea (ISL 2001). This fact
emphasizes the role that these ports play as freight distribution points.
The EU Consumer Market and Its Accessibility
The EU consumer market is fairly large and immensely concentrated

(Figure 5.6). We find more than 170 million consumers within a 300-mile
radius and a further 80 million within an additional 300-mile radius. Within
a day’s travel, 250 million consumers can be reached.
See Figure 5.7 for isochrones depicting the travel time by road, to cities
within Europe from the Netherlands, in one-hour time bands.
50 000.0
Africa Other Asia
45 000.0 Latin America China
Middle East Eastern Europe
40 000.0 India FSU
OECD Pacific
35 000.0 OECD Europe
OECD North America
30 000.0
25 000.0
20 000.0
15 000.0
10 000.0
5000.0
0.0
2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
Source: WBCSD, Sustainable Mobility Project (2004).
Figure 5.4 Expected growth in world freight travel by land modes

2000–2050
It appears that the European region is quite compact and that major
clusters of population are quite accessible to one another. For example
travel times from the Netherlands by rail/highway allow relatively easy
access to much of Europe. But this isochronic pattern is changing. Road
transport is under considerable pressure and travel times have been grad-
ually increasing. Three-quarters of the high intensity (60–120.000/day)
links lie within the London–Milan corridor, where most of the EU’s eco-
nomic activity is concentrated. Moreover, the length of these high inten-
sity links is expected to double in the first decade of this century.
Another key driver for change is the increase in road transport costs,
fueled by regulations concerning driving time and environmental impacts,
and new levies and tolls on the European highways. These measures have
made rail, sea and inland waterways transport relatively attractive to ship-
pers. In the next section we take a closer look at the role of the various
modes of transport in maintaining freight logistics activity around
Europe.
300000
Northern range (Germany)
250000
Western range (Benelux, F)
200000
*1000 tons
150000
100000
50000
0
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
Source: National Ports Council, the Netherlands.
Figure 5.5 Container traffic growth favors Northern EU ports
EU LOGISTICS AND INTERMODALITY
Transport as Forgotten Link in the Supply Chain
Logistics involves a range of related activities, including storage, inventory

management, materials handling and order processing. Logistics manage-
ment is an integrative process that seeks to optimize the flow of materials and
supplies through the organization to the customer. If all firms involved in a
particular supply chain optimize their logistical systems independently of
other firms in that chain the management of product flow across the whole
chain, or ‘pipeline’, is likely to be suboptimal. Attempts to overcome this
problem have resulted in the creation of ‘supply chain management’. Supply
chain management extends the principles of logistics management to cus-
tomers and suppliers, crossing geographical and organizational boundaries
(Trilog 1999).
Transport is only one of the aspects playing a role in supply chain man-
agement. At higher (strategic) levels of decision-making transport only
plays a minor role. Although the transport possibilities are part of the
framework within which different supply chain management strategies are
Helsinki
Oslo
Stockholm
Copenhagen
London Amsterdam
Brussels Bonn
Paris
Bern Vienna
Madrid Rome
Lisbon
Figure 5.6 Key areas of economic activity in Europe (colored dark)
feasible, the choice of transport mode is usually a derivative or consequence

of decisions taken on higher levels. These decisions yield a set of transport
service requirements, such as lead-time, reliability, and so on, which are
later translated in transport decisions. In other words: Shippers generally
do not specifically demand a special transportation mode but rather a
transport performance. As a result, Logistic Service Providers (LSPs) play
a key role in increasing the intermodal potential. In order to control the
complexity of intermodal goods flows, they need sophistication, ICT solu-
tions and a proactive attitude towards shippers (Bogers and Henstra 2003).
Logistic Service Providers and Intermodality
The expanding worldwide economy buoyed by the boom in China helped the
Top 25 Global LSPs to strong double-digit growth in 2004. In turn, the large
LSPs are prosperous enough to invest in high-quality systems, processes and
logistics networks that have allowed the world’s largest companies to imple-
ment efficient supply chains that stretch from Asia to North America and
Europe. This synergy between the major LSPs and their customers has been
highly beneficial to both sides and is likely to continue. Continuation of this
trend towards concentration is anticipated. ‘The big Third party Logistics
Figure 5.7 Travel times in one-hour bands from the Netherlands

to EU destinations
Providers are expected to continue to get the big opportunities’ (Foster and
Armstrong 2005).
The present situation on the supply side of the market for logistic ser-
vices, however, is still characterized by fragmentation, both in terms of
market share and in terms of specialization. The Top 25 LSPs in the world
only have a limited market share and usually generate most of their
turnover in specific markets. These market specializations of LSPs may
concern a specific product or mode of transport (for example, ocean ship-
ping, express delivery) or geographical coverage.
On a global level the big LSPs are by definition intermodal companies.
For intercontinental transport, intermodal transport, especially container
based intermodal transport, is the only way. On a European continental
level, however, intermodal transport is of only limited importance for the
big LSPs. Only a few LSPs have integrated intermodal transport into their
intra-European service offerings. Examples of LSPs that do make use of
intermodal transport on a substantial scale include Stinnes (part of
Deutsche Bahn) and P&O Nedlloyd/Maersk Sealand (operating the ERS
rail shuttle). Most of the LSPs however are very much road-oriented.
The fragmentation of the industry is even stronger on the side of the

intermodal operators. The service providers offering intermodal transport
services can be categorized as follows (Bogers and Henstra 2003):
1. Traditional forwarders who have established connections to road

hauliers and use intermodal transport as a complement, as reserve
capacity or when customers specifically ask for it.
2. Semi-trailer operators and swap-body operators owning the load units
and buying the haulage services from small hauliers, short-sea shipping
lines or intermodal operators.
3. Container shipping lines and the shipping agencies. These are
dominant customers when it comes to feeder transport of containers
between ports. They have shown a particular interest in controlling
the hinterland transport (carrier haulage). As such, they control
important flows in short-sea shipping, rail and inland waterway
transport.
4. Road transport companies, either operating independently or in
cooperation with other hauliers (for example, UIRR), organizing
intermodal transport services.
STRATEGIES AND POLICIES RELATED TO

INTERMODALITY IN EUROPE
Intermodal Markets in Europe
In Europe three modes are used for the non-road transport legs in inter-
modal transport: rail transport, inland shipping and short-sea shipping.
The markets differ considerably in transport concepts, geographic coverage
and market organization.
European intermodal transport is concentrated on certain corridors.
Short-sea shipping has a strong position in feeders from and to the bigger
container ports (Rotterdam, Antwerp, Felixstowe, Hamburg). Inland ship-
ping has a strong market position in hinterland connections from Rotterdam
and Antwerp. Rail transport has a traditionally strong position on the
North-South routes but is also used for transport of maritime containers
into Eastern Europe (Table 5.1).
Intermodal Rail Transport
Rail transport in Europe has experienced a strong decline in recent decades,

especially in the area of freight. In 1970 the railways carried 21 per cent of
Table 5.1 Existing intermodal markets in Europe
Pre/end haulage of Intra-EU transport

maritime containers
Short-sea Strong position in feeders Continental load units and RoRo
shipping from/to bigger ports on Channel, Mediterranean, Baltic
Rail Strong position on Domestic (for example, in
North–South axis (especially Germany, France, Italy) and Alp-
across Alps) and domestic, crossing swap-bodies, RoRo and
especially in bigger countries trailers
Inland shipping Strong position in Rhine Negligible (some RoRo
delta Antwerp-Rotterdam on Danube)
Source: Bogers and Henstra (2003).
all freight in the 15 countries of the former European Union. By 2000 the
figure was 8.1 per cent.
The general economic and logistic trends of the past few decades did not
benefit rail transport in Europe. Changes in the composition of European
goods flows – that is, from bulk to manufactured goods – and logistics
requirements have favored road transport, which has become increasingly
competitive. The traditional core of rail freight traffic – wagonload trans-
port – was particularly vulnerable to competition from road transport. As
a consequence, its relative importance has declined considerably.
At the same time, the trend towards containerization of goods and the
introduction of the rail container shuttle concept have resulted in a con-
siderable increase in the volume of European intermodal rail transport in
recent decades. Rail transport now plays an important role in the hinter-
land transport of maritime containers from/to container terminals. On
these axes, the rail product is very competitive due to the fact that only one
additional transshipment move is required, the traffic volume is concen-
trated, and the business model is sound. It is in this market segment where
most new entrants are challenging the former monopolists, at least in a
number of countries.
Based on the volume of maritime containers, the remaining available
space on frequent shuttle trains can be filled with continental (that is, intra-
European) cargo. Continental intermodal rail transport is concentrated on
corridors where geographical and/or traffic constraints apply to road trans-
port, such as the Alps and the Channel Tunnel. The share of continental
units on shuttle trains is increasing. The ERS shuttle between Rotterdam
and northern Italy now even carries more continental than maritime
containers.
Intermodal Short-sea Shipping
Within intermodal short-sea shipping we distinguish the feeder container

market (transport of containers arriving from or going to other continents
via deep-sea), the intra-European container market, and the RoRo market.
The intra-European container market is the domain of operators pri-
marily providing door-to-door container services for intra-European trade.
The trade routes of unitized intra-European traffic are widespread and
varied. Sea-borne carriage of goods is most significant between the British
Isles and mainland Europe. Also, the routes serving Scandinavian countries
are significant, as are those linking across the Mediterranean. The last
couple of years has shown an increasing professionalization in the industry
resulting in increased entrepreneurship, improved reliability of services and
increased integration of short-sea shipping in multimodal operations (for
example, Geest North Sea Line, integrating short-sea, rail and inland water-
way services). The intra-European short-sea container operators are also
the driving force behind the increased use of the 45-ft pallet wide container
as a European load unit.
Feeder consists of port-to-port movements of containers, by short-sea
lines carrying extra-European cargoes to the requirements of their cus-
tomers or owners, the deep-sea lines. Feeders also carry empty containers
for their customers, where the latter’s trade is imbalanced and containers
repositioning in Europe is necessary.
Intra-European RoRo transport is not often used for long distances,
because most of the time it is too expensive. The biggest international flows
can be found between Great Britain and the continent, between Denmark
and Germany and Scandinavia and within the Mediterranean.
Inland Shipping
Traditionally, inland shipping is a transport mode for (break)bulk. In the

first decade of containerization in Europe inland shipping lost a significant
market share to road and rail transport. In the 1980s and 1990s inland ship-
ping managed to organise container transport, including the establishment
of terminals and the development of skills to organize door-to-door trans-
port. This resulted in a steady growth of container transport via inland
waterways. Intermodal transport that includes a waterborne section now
accounts for 5 per cent of river traffic. European intermodal inland ship-
ping is predominantly hinterland transport of containers from the major
Dutch and Belgian ports. In these markets, the operational costs are
reduced by increasing vessel sizes. Other axes, such as the Danube, are still
to be developed. Despite its success in maritime container transport, inland
shipping has not yet managed to claim a substantial role in intermodal

transport of continental cargo.
Policies for Intermodal Transport
General
The European Union is developing its own support policy for intermodal
transport, even if no directive is specifically devoted to it. Via the Marco
Polo Programme, the European Commission supports the launch of freight
services using short-sea, rail and inland waterway transport in order to
reduce road congestion and improve the environmental performance of the
whole transport system.
Via the Trans-European Transport Networks (TEN-T) program the
European Commission co-funds infrastructure investments with the objec-
tive to improve the interconnectivity and interoperability of the several
national networks. The TEN-T funds mainly go to railway projects (at least
55 per cent).
The network junctions and intermodal loading infrastructure do not
figure explicitly in the TEN-T policy. As a result, EU policy is still very
mode-based, as is the case in most individual member states.
Rail transport
EU policy aims at increasing the presence of private competitors in the
market. This was foreseen by the measures of the First Railway Package,
which was to be incorporated into national legislation by 2003. Its imple-
mentation has experienced quite a few delays however, and is still not com-
pleted in 2006. Full intramodal competition currently occurs in only a few
EU Member States, and especially in the intermodal market.
The challenge for the European Commission is to have all Member
States implement the directives accepted by the Transport Council and
the measures of the First and Second Railway Package. In some countries,
this will imply reorganizations and result in job losses. The challenge to
the European Commission is to convince the trade unions that resistance
to change and competition may be detrimental to the position and, con-
sequently, employment opportunities of European rail transport in the
long term. In this process one should be aware of the possible actions
taken by former monopolists to hinder the operation and expansion of
newcomers.
On certain axes, particularly the North–South axis, capacity limits may
hinder the growth of rail transport. However, transport capacity can be
increased and performance can be improved using the currently available
infrastructure, as has been demonstrated in Switzerland. The challenge is
to find a compromise on the issue of the prioritization of freight and pas-

senger trains in the slot allocation process.
Short-sea shipping
The attention for short-sea shipping on the part of policy makers has
increased recently. In its Transport White Paper of September 2001, the
Commission proposed the development of ‘Motorways of the Sea’ as a ‘real
competitive alternative to land transport.’ Concerted actions proposed by
the EU include funding of (port) infrastructure investments (via the TEN-T
funds) and subsidization of freight transport services based on short-sea
shipping via the Marco Polo Program. There are differing views on how the
actions should be implemented, a major concern being to avoid possible dis-
tortions of competition. Actions being implemented focus on simplifying
administrative and customs procedures (reducing the administrative burden
in ports, especially for ships carrying out intra EU transportation) and on
the promotion of short-sea shipping as a viable alternative to road transport,
for example, via support to the establishment of Short Sea Promotion
Centers (organizations providing information on sailing schedules, organ-
izations, policy, and so on, with the aim to increase the awareness of short-
sea with shippers and forwarders and transport companies’ shippers).
From a policy maker’s perspective, the main challenge for the short-sea
shipping industry seems to be to continue the growth in container services,
especially on those axes where it competes with road transport. Given this
likelihood, a scale increase (larger ships) seems to be a more promising
strategy than a speed increase. The potential flows that can be shifted from
road to sea are, however, constrained by the long break-even distance com-
bined with the discrepancy between the fact that cargo flows over long dis-
tances are usually rather thin while short-sea shipping needs considerable
volumes to operate cost-effectively (in order to reach the minimum require-
ments concerning cost, scale and frequency).
As for the break-even distance, short-sea shipping will remain a long(er)-
distance mode of transport (over 500 km). Frequently mentioned areas for
growth include the axis Western-Europe–Iberian Peninsula and Western-
Europe–Baltic. Potential niche markets include sea river shipping, for
example, on the axis Germany–UK. Improved interconnectivity of oper-
ators and reduced friction cost via streamlining and simplification of admin-
istrative procedures may be able to reduce the break-even distance somewhat.
Inland shipping
There is not much inland-shipping-specific policy at an EU-level except in
the field of technical regulation. The main policy-making body, drawing up
the rules governing shipping on the Rhine and its tributaries, is the Central
Commission for Navigation on the Rhine (CCR), which issues rules con-
cerning technical requirements to vessels, traffic rules, labor times, danger-
ous goods transport and competition. The EU also issues directives, for
example, those concerning technical prescriptions, access to the profession
and the scrapping initiative. The national governments deal with registra-
tion issues, requirements concerning professional skills and labor/rest time
issues. In the framework of the TEN-T, the European commission aims at
the removal of obstacles and bottlenecks on two inland shipping axes –
the Rhine/Meuse–Main–Danube corridor and the inland waterway axis
Seine–Scheldt – in order to stimulate sustainable transport in an enlarged
Europe. Last but not least, the European Commission aims at the imple-
mentation of harmonised information services (River Information Services
or RIS) to support traffic and transport management in inland shipping,
including interfaces to other modes of transport.
THE FUTURE OF EU LOGISTICS: HYBRID

NETWORKS
The Need for Flexible Structures
As a result of the increasing sophistication that is required for logistics sys-

tems to fulfill the increasing demands from their users (or clients from these
users), there is a growing need for flexible logistics structures that aim for:
1. Cost and asset efficiency

2. Responsiveness towards changing customer requirements
3. Obtaining marketing advantage.
The first objective is forced even more by the last two, because only if
logistic structures can be efficient, can they offer feasible solutions in today’s
ever more competitive environment. Consolidation and collaboration (hori-
zontal as well as vertical cooperation between chain partners) are the most
logical ways to generate lower cost per unit of freight. Through consolida-
tion of flows, larger vehicles can be used and the loading efficiency is opti-
mized. Through collaboration also the synchronization of logistic activities
becomes possible, which results in a much smoother, seamless flow of goods
through the logistic system, and therefore in higher utilization of resources
but also creates the possibility of using cheaper and slower modes of trans-
port (see below) and avoids the need of safety stock (Groothedde 2005).
The high level of responsiveness that is required could possibly conflict
with the above-mentioned need for slower and smoother flows of goods, but
avoiding this possible conflict is one of the biggest challenges in the design of
logistic networks. The setup of hybrid networks (which create different pos-
sibilities for flows to reach their final destination), for production, warehous-
ing and transportation, creates the flexibility required. Part of the production
with a demand pattern that can be predicted well in advance is produced on
far-away locations that use the low labor cost. The rest of the production is
postponed to the last possible moment on locations close to the customer.
Valuable products with a very low demand frequency (C-goods) are
stocked centrally and can be shipped quickly on long distances if the reduc-
tion in inventory costs outweighs the additional transport cost of small lot
sizes using express transport. The utilization of cheap and slow modes of
transport in combination with faster means of transport can sometimes be
much more advantageous than that of high-speed expensive means of
transport, especially for products with a low value density and with a high
level of demand certainty (see below).
All of these examples show that hybrid networks can combine the
advantages of both network alternatives and thus create a higher level of
efficiency and flexibility. Some of these possibilities are clarified in Figure 5.8.
From hierarchy To dynamic/complex

inflexible flexible
one-step-IT supply-chain IT
simple transporters professional LSP’s
Suppliers
Production
EDC
NSO
Distributors
Customers
Note: EDC – European Distribution Centre; NSO – National Sales Organisation.
Source: Van Goor et al. (2003).
Figure 5.8 Flexibility in hybrid networks

This figure highlights some of the possibilities for creating hybrid struc-
tures through bypassing some of the echelons in a strict hierarchical network
which interconnects the prime suppliers with the ultimate customers.
Setting up a New Strategic Network Design
As these examples show, many logistic decisions are interrelated, and

together they can generate a flexible hybrid structure.
1. Choice of location of facilities

2. Number of echelons
3. Inventory policy per echelon
4. Sourcing decisions
5. Assignment of customer orders
6. Choice of Mode of Transport
7. Shipment frequency
8. Shipment size
9. Type of consolidation
10. Cross docking
11. Route choice.
This means that in designing logistic networks, one must be careful not to
disregard these interdependencies and that it is dangerous to split the
network design problem in a number of independent subproblems involv-
ing production and warehousing location decisions separately from oper-
ational multimodal network assignment solutions.
The factors that influence the design choice of a specific network are
determined by both internal and external circumstances. There are external
factors, such as customer-service requirements related to transportation
time and legal and tax issues, that limit the degree of freedom of the actual
network design choice. But also the willingness to collaborate between
potential partners in this logistic network can constrain the potential for
network optimization. There are also internal factors such as organizational
considerations that limit the freedom of choice. If the business strategy that
is chosen is ‘focus on cost-efficiency’ it will create completely different
alternatives than if the chosen strategy relates to the concept of ‘market-
responsiveness’. Another blocking factor can be the split responsibilities in
supply chain for service levels, inventories and forecasting. In many organi-
zations the optimization of logistic processes is hampered by the organiza-
tional structure which splits the logistics responsibilities in different persons
or departments or leads to suboptimization because each of these depart-
ments is trying to pursue (from an integrated point of view) conflicting goals.
Besides these organizational issues there are also physical characteristics

that limit the possibilities for optimization. The economic trade-offs and
the evaluation of costs and benefits that influence these network decisions
are determined by some key characteristics that influence heavily the costs
per unit of product:
1. product characteristics such as value density and package density and

specificity of products (country/customer);
2. possibilities for postponement;
3. sales patterns: slow versus fast-moving, seasonal patterns; and
4. product life cycle/aging.
In setting up these hybrid structures in order to create possibilities for

flexibility, one has a range of options that can facilitate the decision process:
1. clarify choice structures and responsibilities;

2. clarify cost accounting rules and decision parameters;
3. create transparency in choice options; and
4. create transparency of availability of stocks and resources on various
echelons and locations.
The transparency of the decision process heavily depends upon the avail-
ability of data of the alternatives at stake. Sometimes these data are difficult
to obtain, also because of the lack of willingness to cooperate between the
potential partners involved.
In general one can say that the decision to choose between a central, a
decentralized or a hybrid solution depends on a comparison between advan-
tages and disadvantages of each of these options. In Table 5.2 the benefits
and concerns for the extreme options are classified. The hybrid solution, if
correctly designed, can combine the better of these two extremes.
In practice, however, the implementation of hybrid networks will depend
on the willingness to change and the level of innovativeness of the sector
involved. In the Figure 5.9 these are categorized for different sectors.
NEW ROLES FOR TRANSPORT MODES IN

HYBRID NETWORKS
New Organizational Forms: the Role of LSPs
In the previous chapter we have highlighted the evolution of the strat-

egic design of networks. Given the design and given the organizational
Table 5.2 Concerns and benefits for extreme design options
Benefits Concerns
Centralized • Close to the • Stocks levels high
Distribution market/responsiveness • Cost management and
• Clear responsibilities competence
• Local simple ICT • Cost of incoming
• Risk easily managed transportation
• Efficiency in final • Product availability
distribution to customers • Contract management LSPs
• Simple third parties
Decentralized • Cost transparency • Obsolete (central) stock
Distribution • Stock control easy • Unclear responsibilities
• Synergy in materials • ICT-systems complex
handling and incoming • Risk of complexity
transportation • Flexibility in delivery(time)
• Competence simple • Complex contract
• Product availability high management LSPs
Time-
horizon Automotive
Long term
(5–10 years)
Retail
High-tech/
Fast moving consumer computers
goods
Pharmaceuticals
Steel and mechanical
engineering
Short term Chemicals

Content of
(1–2 years)
outsourcing
Operational Strategic relationship
execution partnership
Source: After Van Goor et al. (2003).
Figure 5.9 Different levels of logistical sophistication in different

sectors of industry
structure of all parties involved in such a design there are still many degrees
of freedom with regard to the tactical and operational level of organization.
The functioning of the network largely depends on the possibilities to syn-
chronize the activities of each of the parties involved. Synchronization has
to do with the timely and coordinated exchange of information between the
parties enabling them to adjust their actions and avoid unnecessary buffers
and disruptions of the flow. In order to achieve this one has to
1. improve transparency along the supply chain;

2. improve forecasting and planning procedures;
3. reduce uncertainty in demand and supply;
4. create flexibility and avoid panic decisions; and
5. create parallel sourcing possibilities.
Especially in the hybrid networks advocated in the previous section, the

level of exchange of information regarding upcoming events and the real-
ization of planned activities has to be much more intense than in a decen-
tralized organization where everyone is on his own.
In such complicated networks there is a need for a ‘chain-manager’ that
coordinates all related activities. Such a chain manager has to have some
authority in order to force parties to work according to the service levels
they have agreed upon.
In Figure 5.10 a typical organization form for such a supply chain coord-
ination which involves coordination as well as synchronization is sketched.
(This example is described extensively in Groothedde (2005).)
In such a network the Logistic Service Provider (LSP or 3PL) plays a
crucial role. This party has to make sure that the commercial contracts of
the producers that have created a consortium to deliver their products in a
synchronized way to their customers (the retailers) are performed accord-
ing to the service level agreements they have made. This means that in order
to work efficiently and effectively the 3PL has to know what specific logis-
tic agreements exist between all parties concerned and has to know the
orders and production plans in advance. Also the 3PL has to make sure that
the utilization of the resources is optimized and that proactive action is
taken if unplanned actions occur that obstruct the current plan.
In the case of a hybrid network the 3PL has to decide which part of the
orders will be fulfilled in one way and which part will be fulfilled in another.
The way this is done is clarified in Figure 5.11, which was taken from an earlier
article on the same subject (Groothedde et al. 2005). In this example a hybrid
network is used, which facilitates parallel transport between two modes –
road and inland navigation according to the organizational structure of
Figure 5.10. Orders that come in timely are transported via the slow but cheap
Retailers Small
producers
(independent)
Large
producers 3PL
in a
consortium
Inland Terminals
Truckers navigation
Source: Groothedde (2005).
Figure 5.10 Organizational structure for a collaborative logistic network
inland navigation hub transport network, while the unexpected, late orders
(where the shipment time t4 t1 the order lead time t3 t1) or orders with
a short distance between origin and destination are carried out through the
road transport mode. On average a trip using inland navigation takes at least
a day, while within the Netherlands a trucking trip takes on average not more
than two hours. Most retailers ask for less than 24 hours of lead time between
order and delivery, which makes the inland navigation mode not feasible. But
by combining inland navigation and trucking in a collaborative network the
inland navigation mode is becomes an interesting feasibility. It is clear that
such a hybrid network asks for a good coordination and synchronization of
the actions of each of the partners in the logistics network.
Some Examples of Hybrid Networks
This type of hybrid network operation in which slow and cheap transport
is combined with fast and expensive transport has a great future if the
organizational problems in achieving such a collaborative network can be
overcome. Examples of these networks can be found in networks that
combine short-sea shipping with road transport and in networks where sea
transport is combined with air.
Parallel transportation
2000
1750
Number of items in order
1500 Order pattern
1250
1000
peaks via direct
trucking
750
500 stable part

via hub
250 network
t1 t2 t3 t4
Time shipment time via hub network
shipment time direct trucking

order lead-time
gap
Source: Groothedde (2005).
Figure 5.11 Example of hybrid multimodal network using an inland

navigation hub network for well-predicted demand, and a
truck network for excess demand
An example of a hybrid network was presented in the Trilog Study

(1999), where Sony developed a parallel hybrid network of deep-sea con-
tainer transport and air transport, using fewer points of stock for the
transportation of high tech products which originally were shipped solely
by air transport (Figure 5.12). This solution follows the principle illus-
trated in Figure 5.10: the predictable demand is shipped by sea contain-
ers and the excess demand is shipped by air. Significant reduction in air
transport costs and inventory costs have been established through this
policy.
An example of a hybrid short sea/rail/road network concerns the
Logistics Service Provider Vos Logistics and one of its clients, a large pro-
ducer of chemical products. In this case, described in Henstra et al. (2004),
the planning of the supply of granulates from three plants of the chemical
producer spread over Europe to three of its customers located in Italy on
Current Air Cargo Entry Points to Warehouse

Network – FY98, 13 Entry Points
Hubs
SC Warehouses
Future Air Cargo Entry Points to Warehouse

Network – FY01, 1 Entry Point
Hubs
Sony Europe – Proposed Shipping Routes FY01 – 4 Ports
Hubs
SC Warehouses
Helsinki
Copenhagen
SouthamptonRotterdam
Antwerp
LeHavre Koper
Genoa
Barcelona
Figure 5.12 The Sony multimodal hybrid network

Order
CODP
Transport
Figure 5.13 The VOS network before reorganization
nearby locations was improved in such a way that on the basis of

exchanged forecasts the processes were ‘de-hurried’. This allowed for a
modal shift to non-road modes (especially short-sea shipping) to take
place.
Most shipments used to be transported by road (see Figure 5.13).
Planning was easy: a customer ordered a certain amount of granulates, this
order was allocated to a plant and a truck was sent on its way. There was
no status information about the location of stocks, nor information
exchange between the plants on their respective inventory positions. Some
significant changes were implemented in order to optimize inventory and
transport management (Figure 5.14). First, the customers now share their
forecast demand for granulates (base material for producing plastics) with
the chemical producer and the Logistics Service Provider. In addition the
planning data from both the producer and his customers are fully trans-
parent to the Logistics Service Provider. The Logistics Service Provider
integrally plans and controls the stocks at the different sites, and those
Forecast
Order
CODP
Transport
VMI
Figure 5.14 The VOS network after reorganization
underway. The inventories at the customers’ are managed by the Logistics

Service Provider on behalf of the chemical producer (Vendor Managed
Inventory). The raw material is sent on its way on the basis of the forecasts,
that is without orders having been placed. Thus, the inventory (slowly)
moves towards the customer. Short-sea, rail and road transport are used.
No specific routes are fixed. Instead, alternative ‘lanes’ are used with
different costs and lead times. Road-only is the last-resort alternative lane,
used as back-up option in case of unpredictable peaks in demand. At inter-
modal terminals near the customer, the containers wait for the actual call-
order of the customer to be placed. This means that the customer order
de-coupling point (CODP) is moved downstream in the logistics chain.
Upon the call-order, the goods can reach the customer within a day.
CONCLUDING REMARKS
Summarizing the various – sometimes conflicting – trends into one unify-

ing picture is difficult, but we can certainly identify some overall trends:
1. There is a trend toward the increased usage of hybrid networks.

Multimodal networks are a specific example of hybrid networks, espe-
cially if these modes are used in a parallel way and not only in a con-
secutive way.
2. Hybridization occurs on all levels: production, inventory and trans-
port. Through an overall planning and control mechanism shortcuts
are created that enable consolidation of freight flows and enable fast
and reliable delivery at the same time.
3. These trends mainly emerge from increasing customer requirements,
translated into shipper demand. In general the supply of transport is
lagging behind and especially the old-fashioned unimodal modes of
transport that only try to optimize flows as they occur from station to
station (that is, the railways), are not able to cope with this increasing
requirements.
4. Increasing transport prices due to internalization of external costs and
increasing labor and fuel costs will lead to a higher emphasis on redu-
cing transport costs and will increase the need to use cheaper modes of
transport, if possible. Also possibilities to substitute transport costs for
inventory costs, through using slower modes and lower frequencies of
transport, will become more attractive.
The development of these logistics structures come and go in waves, but

because of the fragmented nature of the market one will be able to see mul-
tiple solutions for the same type of problem simultaneously. The picture may
look gray from a distance; but is certainly black and white from up close.
The main driving forces behind these trends are the necessity to reduce
costs in order to stay competitive in globalizing markets and the improved
possibilities to control logistic processes using information and communi-
cation technology.
Of course not everyone will welcome these innovations because they
threaten existing market positions, and many of the more advanced ways
of logistic organization not only rely on technology but also on trust.
However the need to remove suboptimization in ever more competitive
markets can only be realized if companies use the advantages of informa-
tion that is available and make this information transparent to other part-
ners in the supply chain. In many cases the existing level of information
availability is insufficient to really optimize logistic processes. If however
the need for optimization emerges because of cost increases or higher

quality requirements, it is likely that these barriers will be overcome.
One specific consequence of the emerging occurrence of hybrid networks
is the stabilization in time of the logistic processes. Better planning leads to
less uncertainty and the possibility to use slower but more efficient means
of transport.
REFERENCES
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html.
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13–14, accessed at www.cnt.fr.
ELA (2004), ‘Excellence in logistics 2004 – differentiation for performance’, ELA/
AT Kearney survey 2004, Brussels.
European Commission (2004), ‘EU Energy and Transport in Figures 2004’, DG
TREN, Brussels.
Foster, T. and R. Armstrong (2005), ‘Top 25 third-party logistics providers: bigger
and broader’, accessed at www.glscs.com.
Groothedde, B. (2005), Towards Collaborative Logistics and Transportation
Networks – A Modeling Approach to Hub Network Design, Trail Research Series
2005/15, Delft: Van Marken.
Groothedde, B., C.J. Ruijgrok and L. Tavasszy (2005), ‘Towards collaborative logis-
tic hub networks’, Transportation Research Part E, 41(6), 567–83.
Groothedde, B., L.A. Tavasszy and C.J. Ruijgrok (2003), ‘Collaborative intermodal
hub networks’, paper presented at the 2nd STELLA Focus Group 1 Meeting on
‘Globalization, E-economy and Trade’, Brussels, accessed at www.stellaproject.
org.
Henstra, D., M. Iding, T. Verduijn, M. Ziegenhorn and P. Lorda (2004), ‘New issues
in intermodality’, EUTRALOG Deliverable 4.2, accessed at http://eutralog.mettle.
org/deliverables.html.
Institute of Shipping Economics and Logistics (ISL) (2001), Shipping Statistics
Yearbook 2000, Bremen: ISL.
PROTRANS (2003), ‘The role of third party logistics service providers and their
impact on transport’, final report, accessed at www.logistik.tu-berlin.de/protrans/
index.html.
Ruijgrok, C.J. (2003), ‘European transport: insights and challenges’, in A.M.
Brewer, K.J. Button and D. Hensher (eds), Handbook of Logistics and Supply
Chain Management, Amsterdam: Elsevier, pp. 29–46.
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tics networks: implications for transport systems and policies’, Growth and
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tno.nl/rapport.php?nr157.
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accessed at www.inro.tno.nl/trilog/
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Distribution and Supply Chain Logistics, Groningen: Wolters Noordhof.
Van Laarhoven, P., M. Berglund and M. Peters (2000), ‘Third party logistics in
Europe: Five Years’, International Journal of Physical Distribution & Logistics
Management, 30(5), 425–42.
World Business Council for Sustainable Development (2004), ‘Mobility 2030’,
Geneva, WBCSD, accessed at www.wbcsd.ch
Woxenius, J. and L. Sjöstedt (2003), ‘Logistics trends and their impact on European
combined transport – services, traffic and industrial organisation, Logistik-
management, 5(2), 25–36.
PART III
Globalized freight, sustainability,

e-commerce and technology
6. E-commerce, logistics and the future
of globalized freight
William P. Anderson and Thomas R. Leinbach
INTRODUCTION
E-commerce may be defined broadly as the trading of goods and services

over computer-mediated networks (Eurostat 2002). Computer-mediated
networks may be either private or public, but in recent years there has been
a massive shift from private networks toward the ‘open’ Internet. E-com-
merce activities are generally divided into two categories: business-to-con-
sumer (B2C) and business-to-business (B2B). While an earlier paper
(Anderson et al. 2003) focused on B2C e-commerce, this chapter will focus
on B2B. More specifically, this chapter seeks to assess the potential influence
of expanded B2B e-commerce on volumes, patterns and structure of freight
services. As Table 6.1 shows, 94 per cent of the shipments classified as
e-commerce by the US Bureau of the Census in 2003 were in the B2B cat-
egory; 21 per cent of all manufacturing shipments to other firms were
classed as e-commerce, as compared with only 1.7 per cent of retail sales
(US Bureau of the Census 2005).
B2B also dominated e-commerce in the European Union, with a share of
87 per cent in 2001. Table 6.2 illustrates that, as in the US, manufacturing
Table 6.1 E-commerce penetration in US industries, 2003
E-commerce as % of total sales Share of total e-commerce

Total 10.1 100
B2B 19.0 94.3
Manufacturing 21.2 49.8
Wholesale 16.9 44.5
B2C 1.3 5.7
Retail 1.7 3.0
Other services 1.0 2.7
Source: US Bureau of the Census (2005).
167
168 Globalized freight, sustainability, E-commerce and technology
Table 6.2 Per cent of enterprise turnover from e-commerce, 2004
EU 15 EU 25
Total 9.2 8.4
Manufacturing 13.2 11.9
Wholesale/retail 8.5 7.7
Accommodations 3.5 3.6
Transportation/storage/communication 7.0 7.9
Source: Eurostat.
has the highest penetration in the EU. While differences in industrial

definition make a direct comparison impossible, recent penetration in
Europe represents significant catching up with the US in recent years. It is
also interesting to note that penetrations in the EU 25 are not much lower
than in the EU 15, which indicates substantial e-commerce penetration
among the new entrants.
To some extent the higher penetration of B2B versus B2C reflects the fact
that businesses were much more prone than consumers to use pre-Internet
electronic means including telex, fax and private network electronic data
interchange (EDI) (see below). Thus, a firm’s adoption of the Internet as a
medium for completing transactions would require less of leap than a
consumer’s substitution of web-shopping for conventional shopping.
However, the Internet provides businesses with a far more flexible and com-
prehensive means of interaction at a much lower cost than earlier electronic
technologies.
In only a few lines of business does e-commerce substitute for the phys-
ical distribution of goods (Banister and Stead 2004). For example, software,
publications, plane tickets, images and other things that can be digitized
may be downloaded by the customer, eliminating the need for freight trans-
portation. In a sense, e-commerce translates what was once a good into a
service in these cases. Since this chapter is concerned with the implications
of e-commerce for freight, its scope is limited to those lines of business
where each electronic transaction triggers a physical transfer of goods.
Some recent research on the development of B2C e-commerce, and
especially e-shopping, provides interesting preliminary evidence on the
transport implications of this growing activity (Mokhtarian 2004). First a
review of the comparative advantages of store shopping versus e-shopping
reveals that neither type uniformly dominates the other. Moreover it is clear
that store retailers will not passively watch the e-tailing phenomenon but will
attempt to actively enhance and promote their natural advantages as well as
to narrow the gap of disadvantages. Looking at the basic elements of the
E-commerce, logistics and globalized freight 169
shopping process it is clear that information and communications

technology (ICT) is making possible the spatial and temporal fragmentation
and recombination of these elements. More important the transport impact
of e-shopping is not unambiguous as some factors result in reduced travel
while others lead to increased travel. The combined outcome does not
support the claim often elicited that e-shopping will reduce travel. On the
contrary there may be negative impacts due to increased travel even if those
impacts are likely to be localized and small in magnitude (Mokhtarian
2004: 279). Rather than an ‘either/or’ choice set in regards to store versus
e-shopping it is apparent that there will likely be a continued adoption of
both forms. Assessing the transportation impacts of e-shopping presents
some difficult measurement challenges in both the short and longer term. But
these challenges must be accepted if we are to understand better human
behavior and how it may affect freight and personal auto travel as the shift
to new patterns occurs.
B2B and B2C e-commerce have rather different implications for freight.
When a consumer adopts e-shopping, there is almost always a substitution
of personal transportation – whereby the consumer drives to the shop to
receive the good – for freight transportation – whereby a freight service
provider delivers the good to the consumer. We say ‘almost always’ because
a significant share of pre-Internet retail was catalogue shopping, which is
similar to e-shopping in that goods are delivered to the consumer. In this
sense, almost all businesses are catalogue shoppers. Only on rare occasions
does a business send a representative to pick up goods. On the face of it,
therefore, it may seem that B2B e-commerce will have a less profound
impact on freight services than B2C e-commerce. Orders will be placed and
processed through a new medium, but goods movement will be the same as
always.
On further reflection, however, the potential for e-commerce to trans-
form the volumes, structure and pattern of business freight systems is very
great. One can envision three categories of impacts:
1. Impacts on the freight industry itself. In North America and Europe,

transportation has been among the industries with the fastest rate of
e-commerce adoption. It is therefore fair to ask how this new technol-
ogy will affect the industry structure and performance. Will it lead to
faster and cheaper service? Will it lead to more or less competition?
Will new types of services be offered?
2. Impacts via shifts in the spatial distribution of production that are
induced, in whole or in part, by the widespread adoption of e-commerce. If
e-commerce increases competition over wider geographical areas, firms
may source inputs and target customers at greater distances. Firms in
transitional and developing economies may be better able to participate

in global production chains. All this implies longer shipments.
3. Structural changes such as shifts in the mix of goods and services, changes
in production technologies and changes in the firm. If e-commerce is
truly a transformational technology, it may spur changes in both tech-
nologies and institutions. For example, the reduction in transactions
costs provided by the Internet may change the logic of the firm’s level
of vertical integration. Disintegration will naturally have an impact on
freight patterns.
These categories are neither mutually exclusive nor exhaustive, but they
provide a point of departure. Before considering each category of impact
in greater detail, a general overview of B2B e-commerce is needed.
B2B E-COMMERCE
Business-to-business transactions based on electronic communication are

hardly new. As early as the 1960s, the EDI system was used to replace paper
documents such as orders and invoices with data files based on a standard
format. Among the advantages of EDI over paper transaction: it was faster
than the physical movement of paper among firms, less error prone than
paper documentation and, despite high initial costs, cheaper than paper
transactions, at least for large-volume firms. EDI became ubiquitous in indus-
tries such as automotives, where large assembly firms required their suppliers
to adopt it. For most firms, however, EDI proved too expensive because of the
need to establish dedicated communication lines, the cost of subscribing to
private ‘value added networks’ and a relatively steep learning curve.
For document exchange, the role of the Internet has been principally to
lower barriers to entry so that a much larger proportion of firms, including
small and medium enterprises (SMEs) and firms in developing and transi-
tional economies, can participate. EDI standards are still used on the
Internet, as well as others including XML, which is derived from HTML.
Not only is the cost of using these systems much lower than the old private
EDI, but the inherent user friendliness of well-designed Web sites makes
the transition from paper to electronic documents far easier. The wide-
spread and growing use of EDI accounts for most of the gap between B2B
and B2C in e-commerce penetration. For example, the fact that trans-
portation equipment accounts for almost 40 per cent of all US e-commerce
manufacturing shipments (versus 16 per cent of total manufacturing
shipments) reflects the early and almost universal adoption of EDI in that
industry (US Bureau of Census 2005).
Systems of electronic document exchange require three special features.

For the purpose of protecting valuable, private information, some form of
encryption is necessary. Also, in order to prevent delays in payment based
on the claim of not having received the bill, some sort of audit trail must
indicate when each party received electronic documents. Finally, some form
of electronic signature is needed to close deals without face-to-face contact
or any paper handling.
Document exchange, however, is essentially a one-to-one proposition,
and it is in one-to-many and many-to-many interactions that the real power
of the Internet is evident. In the realm of one to many, the firm’s Web site
has become a critical window of communication with existing and poten-
tial customers. Surveys in Europe indicate that the most pervasive use of
the Internet by business is for marketing (as opposed to sales) and customer
service (Yip and Dempster 2005), both of which may be achieved via the
company web site. From a statistical perspective, this is an important obser-
vation because current definitions of e-commerce generally are limited to
situations where an order is placed electronically (Davis 2003). An order
that arises from information obtained from a web site but which is placed
in a more traditional manner does not go into estimates of total B2B
e-commerce activity. Thus, the total influence of the Internet on business
activity may be underestimated in available data.
The emergence of many-to-many electronic marketplaces represents a
greater break with the past. Again, this is not a clean break as it has long
been possible to buy and sell stocks via remote terminals. But the Internet
makes such activities drastically cheaper and more user friendly, allowing
for the elimination of trading intermediaries.
In the B2C world, eBay is the quintessential Internet marketplace.
Here buyers and sellers find one another and prices are discovered via auc-
tions. Openness and neutrality are the hallmarks of eBay; openness in the
sense that it is easy to qualify as a buyer or seller and neutrality in the sense
that there is relatively little bias in favor of particular market participants.
By putting buyers and sellers in direct contact, eBay acts as an agent of dis-
intermediation. At the same time, eBay is in itself an example of reinter-
mediation, the process whereby new types of intermediaries are created to
promote e-commerce. As an intermediary, eBay serves two types of func-
tions. First, it provides the marketplace where a seller is assured of a large
number of potential customers. Second, it provides a mechanism to miti-
gate the high level of risk that is inherent in e-commerce, not by enforcing
rules of good behavior but by providing the ‘feedback’ mechanisms
whereby market participants attain positive or negative reputations.
In the B2B world, electronic marketplaces, essentially web sites where
buyers and sellers meet to do business, reflect differences in transparency.
Table 6.3 B2B marketplaces
Open Restricted Closed

Transactional Neutral hub Public exchanges with Private exchanges
qualification
Informational Dating service
Source: Adapted from Humphrey (2002).
These marketplaces lie on a continuum between neutral hubs and private

exchanges (Ordanini, Miceli and DiMaria 2004). Neutral hubs are the B2B
analogues of eBay, but private exchanges may restrict entry and have inter-
ests in favoring particular participants. A further distinction can be made
between marketplaces that provide the mechanisms to complete trades and
‘dating services’ (Humphrey 2002) such as TradeMile.com that limit them-
selves to reducing search costs in bringing potential buyers and sellers
together (Table 6.3) . Further distinction can be made between vertical and
horizontal market places. In a vertical marketplace, the products and ser-
vices offered are part of one production chain (for example, TruckersB2B.
com to buy fuel, tires or vehicles). In a horizontal marketplace, different
buyers and sellers meet (for example, Transplace.com). The products offered
can be part of different production chains. National Transport Exchange
(www.nte.net) in the United States is a well-known non-asset third party
logistics service provider (3PL). It provides a marketplace in which 350 ship-
pers and 200 carriers can meet and exchange information on transportation
demand and supply (Visser and Nemoto 2002: 175).
There are essentially two reasons for restricting the openness of B2B
e-commerce marketplaces. The first is that there is a high risk of oppor-
tunism and nonperformance in e-commerce transactions. ‘Dating services’
essentially avoid this problem by staying out of transactions. For market-
places where transactions are to occur, participants need some assurance
that, for example, the seller is able to deliver the order or that the buyer is
able to pay. Thus, some exchanges that are meant to be neutral may require
high standards of qualification. The second reason is strategic: to main-
tain market power in the exchange. For example, a purchaser who is large
enough to create a private exchange can avoid bidding against competing
buyers. An example is Covisint.com, which was created jointly by Ford,
General Motors and Daimler Chrysler to present request for quotations
(RFQs).
The degree of openness in B2B marketplaces is critical to discussions to
come later. One of the predictions that have been made about the emergence
of e-commerce marketplaces is that they will decrease barriers to entry for

SMEs and firms in developing and transitional economies. An increasing
role for highly exclusive marketplaces, however, may have just the opposite
effect.
As in the case of B2C, certain types of goods and services are more
amenable to e-commerce. For consumers, search goods and goods whose
characteristics can be conveyed via Web sites (books, music) have had
higher market penetration than experience goods that must be ‘touched,
felt and smelled’. Similarly, commodity goods such as metals, chemicals
and agricultural products for which there are well-recognized international
standards are more amenable to e-commerce. So, for example, market-
places such as chemconnect.com for chemicals and scrapsite.com for steel
scrap connect buyers and sellers worldwide allow price structuring via auc-
tions or online negotiating processes. Also, the Internet has become a
popular medium for disposal of overstock merchandise. ApparelBids.com
is an example of a site where major apparel manufacturers auction off odd
lots of goods to discount retailers.
As B2B e-commerce has grown, new methods have developed to handle
increasing complex transactions. These include more interactive forms of
deal negotiation rather than just auctions and RFQs. Also, many of the
largest Internet marketplaces have expanded into management of the
supplier-purchaser relationship on an ongoing rather than one-off basis.
This includes facilities to manage coordination of production with sales
and inventory replenishment (see, for example, GNX.com).
E-COMMERCE IN THE FREIGHT SECTOR
Freight service providers, like a variety of other producer service providers,

have been relatively earlier adopters of e-commerce. Not only carriers but
also third-party logistics firms and freight forwarders are able to effectively
manage client service orders over the Internet. By receiving client informa-
tion in an electronic form they can more easily take advantage of software
that helps them optimize load consolidations, scheduling and routing.
Furthermore, the Internet provides a medium for managing and conveying
information on the location of consignments (a process known as ‘track-
ing’) using data produced by intelligent transportation systems (ITS) tech-
nologies such as various scanning technologies. This provides a high level
of visibility in freight transport systems. Instead of knowing what goods
have been shipped from where and when they are expected to arrive at their
destinations, a highly visible freight system allows one to locate in transit
goods at any point in time within a small margin of error.
The growth of e-commerce roughly coincides with ‘logistics revolution’

whereby new methods of coordinating materials and goods movement
within firms have made it possible to reduce inventories (see Baudin (2004)
for a review). Lean logistics procedures call for materials and components
to be delivered into the production stream on a just-in-time (JIT) basis.
Associated lean production systems are driven by ‘demand pull’ whereby
input requirements are determined by a constant flow of information from
point of sale back up the supply chain, as opposed to ‘supply push’,
whereby inputs and final goods are produced and inventoried based on sea-
sonal sales projections. In the absence of complete vertical integration, lean
logistics systems require a level of coordination and data sharing among
firms in the supply chain that was previously unheard of.
E-commerce is complementary to lean logistics systems for three reasons.
First, by reducing the cost of procurement it is more economical for firms to
purchase at shorter intervals in response to demand signals. Second, it pro-
vides a medium for firms in a supply chain to share information on produc-
tion rates, inventories and work in progress. Finally, greater visibility makes it
easier for firms to integrate on-site logistics (movement of materials through
the production site) with off-site logistics (movement of goods in transit).
These logistical changes have a variety of implications for freight. For one
thing, the goal of reducing inventories often requires that the firm accept
inputs in smaller and more frequent consignments (Mason 2003). Figure 6.1
provides a theoretical basis for optimal inventory policy. Define total logis-
tics cost (TLC) as the sum of procurement, carrying, and transportation
costs associated with that input. Procurement costs (P) will be lowest if one
large shipment is received because it will only have to be ordered and
processed once. Transportation costs (T) will also be lower because it is gen-
erally cheaper on a per unit basis to ship large batches of goods. However
carrying costs (C), which include interest, insurance and storage costs, will
be lower if the input is received in small shipments so that the amount held
in inventory is minimized. (This is one of the principal benefits of JIT
systems.) Thus the optimal input shipment size – and the associated optimal
level of inventory–depends on the trade-off between procurement and trans-
portation costs on the one hand and carrying costs on the other.
This is illustrated in Figure 6.1 where the sum of transportation and pro-
curement costs (PT) and carrying costs (C) are graphed against the
average size of shipments (B). The optimal B is found where TLC
TPC is at a minimum. When a reduction in procurement cost from P to
P occurs – shown here as a downward shift in the PT schedule – the effect
is a decrease in the optimal B. Thus, reduced procurement cost due to e-
commerce technology leads to reduced storage, insurance and interest costs
associated with carrying inventory (see McCann (1998) for details).
TLC
Costs
TLC
P+T
P+T
B B Shipment size
Source: Adapted from McCann (1998).
Figure 6.1 Total logistics costs
This may imply a shift to smaller freight vehicles and an increase in the
number of vehicle miles driven, which will increase congestion and green-
house gas emissions. On the other hand, this tendency may be largely offset
by improvements in combining consignments and scheduling to avoid
empty backhaul that will be possible in a more information-rich environ-
ment (Browne 2000).
There is also an increasing emphasis on speed and timeliness. The time-
saving benefits of e-commerce will go largely unrealized if delivery remains
slow. Since there is generally little scope for increasing vehicle speeds,
freight service providers are under constant pressure to reduce loading and
transfer times. ‘Timeliness’ refers not only to speed but to the ability to
deliver goods within narrow, predefined time windows as is necessary to
maintain JIT inventory systems. Achieving speed and timeliness requires
the ability to choose rapidly among a set of delivery options such as surface
versus air freight and drop shipping versus shipping from aggregator’s
warehouses (Bailey 2005).
The pressure and complexity of modern supply chains has induced many
firms to outsource their entire logistics operations – including on-site and
off-site logistics – to third-party logistics (3PL) firms. According to a recent
industry report (www.eyefortransport.com/3pl/NA_3PL_Jul04.pdf) the top
25 3PL firms in North America have annual gross revenues of almost $40
billion. Most 3PLs grow from firms in businesses such as trucking, ware-
housing or freight forwarding. They expand from their core competencies
to provide a more comprehensive service and increase profit margins. A new
generation of firms called 4PLs takes this a step farther by reengineering the
firm’s entire logistics process. 4PLs generally do not provide services directly
but rather act as neutral business process outsourcers (BPO), contracting
with various service providers on behalf of the client firms.
In short e-commerce is an important impetus to a process whereby the
freight transportation industry is becoming an increasing information-
intensive sector. The importance of information content has become a crit-
ical force driving the structure of the industry. Firms in the domestic and
international courier business have been able to use their early expertise in
information technology to acquire dominant positions in the broader
freight and logistics industry. The case of FedEx is instructive.
From its founding in 1973, FedEx was the first major firm in the
ground/air express transportation industry. Because of the need to keep
track of hundreds of thousands of point-to-point, multimodal ship-
ments, ground/air express was at that time the most information-intensive
branch of the freight industry. As early as 1979, FedEx had a centralized
computer database system that tracked movements of all its packages,
transmitting information to a central database in Memphis. In the 1980s,
FedEx gave to its customers 100 000 PCs loaded with software that
allowed them to request pick-ups, track packages and so on online. By
establishing electronic communications with all of its major customers,
FedEx was able to reap huge labor cost savings by minimizing the size of
its customer support staff. In the 1990s it was quick to change to an
Internet-based system whereby customers could download user-friendly
software that allowed them to, for example, track packages on their own
computers.
At the same time that FedEx was developing its Internet capabilities, it
was expanding into other areas of freight such as TL and LTL trucking and
international air and marine shipping. It also developed a 3PL branch. For
a time these operations worked somewhat separately, but in 1999 FedEx
followed the lead of its main competitor UPS to create one-stop-shopping
for all levels of supply chain support (Farhoomand 2001).
A substantial proportion of the heavy freight moved by FedEx is actu-
ally carried in other freight providers’ vehicles. FedEx’s ability to act as an
intermediary in these shipments arises because of its prowess in informa-
tion technology and e-commerce, which is far ahead of most firms in the
freight industry. Other firms with roots in the courier business – UPS, TNT
and DHL – have been able to broaden their scope of service offerings in a
similar way. Thus e-commerce appears to have a concentrating effect in the

freight industry.
There is anecdotal evidence that the services provided by these firms can
lead to spatial concentration of warehouse activity. For example, National
Semiconductor has outsourced all of its warehousing activities to FedEx,
allowing it to eliminate seven regional warehouses in North America, Asia
and Europe. Upon taking control of National Semiconductors’ inventory,
FedEx filled all orders from a single warehouse in Singapore (Farhoomand
2001).
IMPLICATION FOR SPATIAL PATTERNS OF

PRODUCTION AND FREIGHT
The volume and mode characteristics of freight activity are ultimately

dependent on the spatial patterns of intermediate goods linkages among
firms and on the spatial juxtaposition of final goods production and markets.
As a medium for interaction that has relatively low start-up costs, virtually
no marginal costs and is virtually unaffected by distance, e-commerce has the
potential to affect spatial patterns in a number of ways. Three hypotheses
that arise from the literature will be considered here:
1. The increased price discipline imposed by an information-rich envir-

onment will lead to greater specialization at the plant level and thereby
higher freight activity.
2. The lower entry costs will lead to a greater role for small and medium
enterprises (SMEs) in supply chains.
3. Lower entry costs and the ease of overcoming the friction of distance
(at least in communication) will provide greater opportunities for firms
in developing and transitional economies to participate in global
supply chains.
Although it is beyond the scope of this chapter to test these hypotheses

empirically, a general discussion of each will be provided.
According to the neoclassical theory of search, an agent intending to buy
a particular good will continue searching by sampling from a population of
vendors until the cost of search, which is constant, is exactly equal to the
expected benefit of repeated sampling, which is marginally declining
(Stigler 1961). This allows for some price dispersion as, by the stochastic
nature of search, some buyers will stop searching before they reach the
average price. The Internet affects this process in two ways. First, by radi-
cally reducing the cost of search, it reduces the probability that a buyer will
quit searching and accept a high price. Second, software agents can
effectively eliminate the stochasticity of the search procedure by automat-
ically finding the lowest available price. The expected result is convergence
around a lower price.
Space complicates this result. A B2B buyer will have to take into
account the cost of transportation of the good in question, so the vendor
with the lowest mill price does not necessarily provide the lowest deliv-
ered price. This leaves room for some price dispersion, as vendors with
poor accessibility may have to set a lower mill price to offset high trans-
portation cost for most potential buyers. Also as the search extends
beyond national boundaries, exchange rate risk may affect a buyer’s deci-
sions. (Ellis (2002) notes that this gives EU firms located in countries that
have adopted the euro a distinct advantage in e-commerce.) Still the
general affect of e-commerce is to impose greater price discipline on
selling firms.
One strategy for a firm faced with greater price competition is to narrow
its product line in order to achieve scale economies or to exploit core com-
petencies in that good or those goods for which it can be most competi-
tive. Greater specialization at the firm or plant level implies a higher
volume of freight movement because for each good there are fewer firms,
so the probability that there will be a supplier nearby any point of demand
is lower.
This effect is offset somewhat by the fact that speed and timeliness are
increasingly important in the new logistics paradigm. Proximity of suppli-
ers is an important advantage in some supply chains because it makes coor-
dination of production easier, so firms will not always choose the
lowest-priced vendor (Van Geenhuizen 2004). While some supply chains
may achieve a high level of coordination at a global scale, others are likely
to remain more local.
Of course a second strategy for a firm faced with intense price competi-
tion is product differentiation. But product differentiation should also lead
to goods movement over longer distances. (After all, it is because of
product differentiation that someone in California drinks a bottle of wine
from Australia.) Thus in general, to the extent that e-commerce implies
greater price competition, it would seem to imply more tonne-km of freight
movement.
Until the advent of the Internet, most SMEs were excluded from elec-
tronic commerce via EDI because of the high costs of providing dedicated
lines and subscribing to private networks. Since in the developed world the
great majority of SMEs have some sort of Internet access, the fixed cost of
adopting Internet EDI or some related technology is much lower, allowing
SMEs to participate in networks and exchanges from which they were
excluded in the past. Available technologies make the development of Web

sites with facilities for taking orders and making secure transactions rela-
tively cheap, and a variety of third-party firms can provide the necessary
logistical service. Thus, the Internet may be viewed as a means of over-
coming many of the barriers of entry that have prevented SMEs from con-
tending with large firms in the past.
An increasing role for SMEs will only affect the spatial pattern of freight
if the location patterns of SMEs is substantially different from the location
patterns of larger firms. There may, however, be significant impacts on the
structure of the freight and logistics industry. Since SMEs are less able to
manage in-house logistics, there may be an increasing role for 3PLs and
other contractors. Large firms using large numbers of SMEs as input
providers will have to manage more complicated supply chains.
There are ways, however, in which e-commerce may work against SMEs
by eroding their traditional advantages. The ability of large firms to use
e-commerce as a means of acquiring detailed information on customers or
potential customers may reduce the local advantages that some SMEs have
enjoyed in the past (Drew 2003). Essentially, as business interaction
becomes less locally oriented, SMEs must compete more directly with
larger firms. Also electronic marketplaces that allow purchasing firms to
conduct reverse auctions for inputs may force SMEs to compete more
intensively with one another. E-commerce also provides opportunities for
large firms to pursue niche markets that have traditionally been the preserve
of SMEs.
One of the most contentious issues in the literature is whether expanded
B2B e-commerce will provide new opportunities for firms in developing
and transitional economies. The arguments in favor of this proposition are
similar to those regarding SMEs. The United Nations Conference on Trade
and Development (UNCTAD 2003) has gained a reputation as an optimist
in this debate. UNCTAD argues that the potential benefits of e-commerce
are sufficiently great to encourage all developing countries to implement
national ICT strategies with a strong emphasis on the Internet. Consider-
able optimism is also found among the transitional economies. In a recent
survey, far more SMEs in Eastern Europe considered e-commerce an
opportunity than a threat (Damaskopoulos and Evgeniou 2003). There is
also some empirical support for optimism. For example, a recent study of
firms in India found that those who made better use of e-business tools had
more success in exporting (Lal 2004).
The benefits of e-commerce for firms in developing countries have
received a great deal of pessimistic scrutiny. Much of this is based on the
proposition that involving firms from developing countries in global supply
chains involves significant risks of nonperformance and opportunism.
Interpersonal relationships, which cannot be established vie electronic

media, are necessary to mitigate these risks. E-commerce technologies may
be useful in coordinating global supply chains but only after business rela-
tionships based on trust have been developed (Moodly and Morris 2004).
Private and restricted electronic marketplace use high participation stand-
ards to try to offset risk (Humphrey 2002). Even highly capable firms in
developing countries may be excluded because of their inability to produce
the necessary financial documentation.
Perhaps the greatest impediment to firms from developing countries par-
ticipating in electronically mediated supply chains are the demands for high
quality logistics. As noted above, the growth of e-commerce has raised the
bar for logistics. Firms in developing countries may not be able to provide
such high-quality logistics and, unlike firms in developed countries, may
not be able to outsource their logistics to 3PLs. What is worse, in many parts
of the developing world poor infrastructure and institutions lead to con-
stant delays in transportation and port clearance (Lakshmanan et al. 2001).
In general, firms that have access to high-quality logistics have the greatest
potential to benefit from e-commerce (Garau et al. 2001). This excludes
firms in many parts of the developing world, especially in Africa, South
Asia and the Middle East.
The safest conclusion is that access to e-commerce technologies is a nec-
essary, but not sufficient, condition for inclusion of firms from developing
countries into global logistics chains. ICT strategies must be accompanied
by complementary, and potentially much more expensive, transportation
infrastructure development strategies. Also the development of native
firms specializing in logistical services will speed entry into Internet-
mediated relationships. Countries such as Singapore, Taiwan and Korea
were able to make the transition to global markets after massive invest-
ments along these lines. E-commerce technology will not substitute for
such investment.
E-commerce and the Firm
We have already suggested that e-commerce should lead to greater price

competition, which in turn may influence firms to become more specialized
and to pursue product differentiation more actively. These impacts are apt
to lead to increasing freight activity. In addition to these strategic changes,
however, there may be more fundamental changes in the structure of the
firm and how it relates to other firms. These changes may also have impli-
cations for freight activity.
We can think of the firm’s structure as a set of interrelated business func-
tions executed by a single legal entity. The degree of vertical integration is
one aspect of the structure, as is the degree to which support functions such
as IT, accounting, logistics, and so on are done in-house. According to the
theory first suggested by Coase (1952) and later developed by Williamson
(1985), a firm will execute a function internally so long as the savings from
outsourcing do not exceed transactions costs, which include the legal, com-
munication and monitoring costs of contracting and the risk of possible
nonperformance and opportunism.
E-commerce technologies reduce transactions costs in a number of ways.
The most obvious is the reduction in communication costs; for example, the
cost of Internet EDI versus the cost of paper transactions or private
network EDI. All internet marketplaces reduce search costs, and most have
facilities for risk reduction. To the extent that e-commerce reduces trans-
action costs, it should lead to greater vertical disintegration and outsourc-
ing of business support functions.
Despite some early predictions, the extreme model of the ‘virtual cor-
poration’ that functions only as a decision-making unit and contracts out
all of its functions has not emerged. However, a class of multi-firm
systems sometimes called B-webs comes close. An example is Cisco
Systems, the largest provider of electronic networking systems in the
world. While Cisco produces core router technology and software itself,
most of the hardware and value-added services that it provides are pro-
duced by firms, some of which are connected to Cisco via equity stakes.
Since nearly all of Cisco’s clients demand customized systems, coordinat-
ing the many actors to serve the unique needs of each customer is a daunt-
ing task. Cisco’s interactions with its customers and with partner firms are
overwhelmingly managed via Internet applications software (Tapscott et
al. 2000).
Hardware components for network systems developed by Cisco can
come from factories located in North America, Asia and Europe. In 1999
Cisco outsourced its logistics operations to FedEx, which agreed to gradu-
ally eliminate all Cisco’s warehousing. A system called ‘merge-in-transit’
ships various components to the customers’ site where they are assembled,
completely eliminating the need for warehousing.
Another example of a near virtual corporation is Hong Kong trading
company Li and Fung. Although the firm is over a hundred years old it
uses cutting-edge technologies to produce truly global products. One of
Li and Fung’s businesses is producing private label garments for US retail-
ers such as The Limited. The typical procedure is for the retailer to send
design sketches to Li and Fung, who provide a prototype garment. Once
this is approved the garment is produced in a network of independently
owned plants located around Southeast Asia. (In one example a garment
included yarn from Korea; cloth woven and dyed in Taiwan; and buttons
and zippers produced by a Japanese firm in China. The garment was

assembled in Thailand (Hill 2002).) Li and Fung uses its own logistical
division to move the goods around Asia and deliver them to stores in
North America – all within five weeks of the date when the prototype
garment is approved.
It is important to recognize that e-commerce is only one of a set of mutu-
ally reinforcing trends that reduce transactions costs at the global scale.
Others include reduction in tariff and other trade barriers; reductions in
transportation costs, especially air freight; the pervasive use of the English
language for business; growth of private enterprises in formerly centrally
planned economies; and increasing harmonization of technical standards.
All of these contribute to an integration of production at the global scale,
which implies an increasing demand for transportation services of increas-
ing quality.
From the perspective of the firm, e-fulfillment, the actual delivery of
goods, is of growing importance to e-commerce. Consumers and firms buy
goods within minutes through e-commerce transactions but must wait for
days before actually taking delivery of the purchased items. Thus increas-
ingly the logistics element associated with e-commerce is critical because it
appears that it is the weakest link in the e-commerce chain. Further and
most important, it is highly related to competitiveness. Obviously a high-
quality and efficient delivery system for e-commerce transactions is
crucial.
In this regard more emphasis has been placed on cooperative delivery
systems which are being implemented by logistics providers. Essentially by
consolidating transport flows through joint distribution (deliver and pick
up cargos with different destinations jointly especially in an urban area), it
becomes possible using a common terminal and carrier to optimize freight
transport to a greater extent than when optimizing a single channel. The
relevance to e-commerce and firm efficiency is that intelligent transport
systems (ITS) and information technologies (especially the Internet) are
making it easier to share shipment information, vehicle location, and
delivery status information.
SUMMARY
It is clear that e-commerce will affect freight transport in a variety of

important ways. It obviously offers firms new possibilities for selling their
products and services without establishing a physical point of sale close to
the customer. E-commerce as an application of ICT has diverse dimen-
sions. The stakeholders in these developments are businesses (which may
be split into shippers (for example, suppliers, manufacturers, wholesalers,

and retailers) and logistics services providers (for example, freight carriers,
warehouse firms and third-party logistics)), consumers, and governments.
Shippers are either the consignors who send goods or the consignees who
receive goods in the supply chain. They basically attempt to maximize net
profits by reducing lead time from order to fulfillment and seek production
efficiency in light of the dynamics of consumer demands and supply
points. Some shippers will have logistics functions in-house for competi-
tive reasons, and others will rely on separate firms for this function.
Governments are represented by local and federal levels and in principle
are tasked to maximize net social benefits in the new environment of
e-commerce which is being performed by the private sector. Their inter-
vention may take the form of providing public goods/infrastructure, regu-
lating logistics operations and making equitable resource allocations (for
example, road pricing).
The transactions between these stakeholders have a commercial
dimension, a financial/administrative dimension and a logistical or oper-
ational (for example, fleet management) dimension. Applying new tech-
nologies in the process of developing e-commerce will clearly change the
demand for the transport of goods and services (Visser and Nemoto
2002).
Business
S2S C2C
B2C
Shippers Consumers
(S) (C)
C2B
S2L L2S C2G G2C
B2G
Logistics
Governments
service providers
(G)
(L) G2B
L2L G2G
Source: After Nemoto et al. (2001).
Figure 6.2 Stakeholders in e-commerce

As we have noted above e-commerce has many features. Among these is

the enabling of companies to operate more efficiently in a competitive
environment. Especially important perhaps is the way in which electronic
transactions permit small firms to compete and participate in a global
market. E-commerce operates beyond national borders and thereby brings
together supply and demand at a global level. This feature may lead to
changes in the structure of supply chains as global sourcing increases. In
this light, procurement can be carried out with a supplier or a host of
suppliers regardless of location. Negotiations can be expedited as a result
of the online transmission of documents (OECD 2001).
The implications for transport in all of these developments are varied.
Clearly electronic data interchange has changed the way companies do
business and in particular manage their inventories. E-commerce has also
brought about the ability to tailor products to consumers’ needs and has
driven the ‘build to order’ approach whereby the whole stream will be
pushed closer to customers. This approach also is already changing
supplier–customer relations.
The overall impact on transport demand is not clear. In regards to freight
transport one can outline a scenario where e-commerce leads to an increase
in freight transport demand. Here e-commerce would produce a result
whereby transport is subordinate to customer service. Here frequent JIT
small package shipments may lead to highly fragmented freight shipments
defined by LTF truckloads to and from distribution centers. In another
scenario the application of ICTs, including outsourcing and consolidation
between shippers, combined with environmental concerns and the need to
maintain competitiveness, will result in opportunities to reduce transport
demand. The actual prevailing pattern would depend on many unknowns
such as the relative costs of various ways of getting goods and the cost
sensitivity of purchases. These obviously would vary given regulatory
regimes and socioeconomic conditions. As we note below this is one area
in which research must be mounted.
But perhaps one of the most significant ways in which freight transport
will potentially be affected is through changes in the supply chain of many
products and services (Leinbach and Zook 2005). E-commerce is now
driving changes in supply-chain management (SCM). It is impacting vert-
ical integration between trading partners (both shippers and logistic ser-
vices providers) and the appearance of completely new functions and
companies. The former relates to information sharing, common planning
and exchange of existing functions by way of supply-chain integration.
Suppliers, manufacturers, wholesalers, retailers and consumers can choose
trading partners more easily and directly as the supply chain moves from a
traditional physical structure to one which has virtual enhancements. A
Existing physical value chain
Suppliers Distributors Marketing and Customer

Operations
(inbound logistics) (outbound logistics) sales service
Virtual value chain enhancements
New products and services

Efficiency in procurement/sales
Suppliers Distributors Marketing and Customer
Operations
(inbound logistics) (outbound logistics) sales service
New intermediary functions

Expanding market reach
Source: After Leinbach and Zook (2005).
Figure 6.3 Physical and virtual value chains
consequence of e-commerce is that information becomes more easily avail-

able to all participants in the supply chain. Agents, forwarders, wholesalers
and retailers will all face more and more competition from e-commerce
sales channels. In a formal sense disintermediation occurs as certain inter-
mediation roles in the chain become redundant. Yet we now know too little
about the dynamics of supply-chain evolution as e-commerce begins to
take hold in various industries and in turn has impacts on freight transport
(Browne 2001).
Finally as we have noted above also time and cost advantages of
e-commerce brought about through order processing and logistics planning
will increase the emphasis on time-definite delivery. In global e-commerce
the impact on air cargo is already being felt (Leinbach and Bowen 2005).
Another challenge is local distribution. Shipping costs remain one of the
biggest deterrents for consumers who are considering the online purchase
of physical goods. Traditional warehouses and distribution centers are not
well suited to the fulfillment of e-business. The lack of low-cost and
efficient distribution systems may impede the economic advantages of
online shopping. One possible impact may be the switch from high-density
channels such as warehouse and shopping centers to low-density routes
involving factory and residential areas. Thus it is possible to conceive of
two divergent impacts on transport: a greater disaggregation of freight
flows at the urban level but greater consolidation of long-distance ship-
ments (OECD 2001).
DIRECTIONS FOR FURTHER RESEARCH
Consideration of the relationship between e-commerce and freight is strik-

ingly absent in the literature. General books on e-commerce such as
Farhoomand (2001) and Tapscott et al. (2000) make scant reference to
freight issues, and a recent general book on logistics (Baudin 2004) hardly
mentions e-commerce. Modeling the implications of e-commerce for
freight transport in a variety of contexts is in its infancy (Demkes et al.
2002; Enarsson 2002; Taniguchi and Kakimoto 2004). Yet e-commerce is
one of the most powerful forces shaping the freight industry, and freight
considerations are critical to the successful penetration of e-commerce in a
global perspective, including the developing world. A number of steps are
necessary to fill this important research gap.
The first step involves data. In the US, the Census Bureau publishes aggre-
gate data on e-commerce activity but does not disaggregate spatially or even
separate domestic from international transactions. A very useful step would
be for freight surveys, such as the US Commodity Flow Survey, to ask
whether the order being fulfilled by a particular shipment was placed elec-
tronically or by more conventional means. This would allow us to ask ques-
tions such as: are e-commerce shipments longer than other shipments? Are
they more likely to be intra-industry shipments? Are they more likely to use
air transportation? Are they more likely to be international shipments?
Given the complexity of e-commerce, however, survey data can only go so
far toward understanding the full implications for freight. Detailed case
studies defined at the level of the supply chain rather than the firm or indus-
try would be helpful. The goal of such case studies should be to under-
stand the types of supply-chain transformations that are encouraged by
e-commerce and other complementary trends and to measure the incremen-
tal effects of those transformations on both the quantity and quality of
freight services demanded. In addition the variation in freight demand given
the presence of e-commerce must be investigated under a wide range of con-
ditions. Especially important are the relative costs of various ways of getting
goods and the cost sensitivity of purchases. These need to be examined within
particular regulatory regimes and under specific socioeconomic conditions.
One of the more important issues for researchers to address, we feel, is
the impact of e-commerce on economic development in low-income coun-
tries. It is clear that e-commerce is an important technological and institu-
tional driver of globalization, but at the same time it may have a polarizing
effect within the developing world. In particular, firms in Africa, where
there is a low level of both communications and transportation infrastruc-
ture, may be increasingly disadvantaged as supply chains become more
complex and logistical requirements become more rigorous.
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7. Sustainable solutions for freight
transport
William R. Black
During the last decades of the twentieth century there was a growing
recognition that most of our economic activities were being carried out in
such a way as to be detrimental to the natural environment. It was recog-
nized that the methods and procedures used could be less harmful and
undertaken in a manner that might be more sustainable. We thus had the
appearance of volumes on ‘sustainable forestry’, ‘sustainable manufac-
turing’, ‘sustainable agriculture’, ‘sustainable tourism’ and ‘sustainable
transport’. Trade, and the transport associated with it, has not been given
the same level of attention. It is the purpose of the present chapter to
address this shortcoming. To this end the chapter first examines some of
the differing definitions of sustainability and discusses some of the attrib-
utes of transport in general and freight transport in particular that make
it nonsustainable. This will be followed by a discussion of the nature of
freight flows in global trade. Specific problems with these flows as they
relate to sustainability will also be reviewed. The impacts of globalization
on this entire area cannot be ignored, and this will be discussed as it relates
to the increased flows that have occurred over the last couple of decades.
We will then review some of the solutions that have been proposed and in
some cases implemented to solve specific problems of sustainability in the
freight transport sector. The problems of security in this sector and their
relation to sustainability will also be examined briefly. The chapter con-
cludes with a summary of the various ‘sustainability solutions’ and some
conclusions.
Before beginning it is worth clarifying a couple of points. The concern here
is with global trade flows. Most of these flows are intermodal, involving the
flow of the same bundle of goods by more than one transport mode.
Although we often talk of rail shipments, movement by waterborne vessels
and so forth, the reality is that most of these flows are intermodal. Rail in
nearly all cases gets traffic from other modes, and nearly all shipments use
motor carriers for the last portion of the move to the destination, sometimes
called ‘the final mile’. The same can be said of most waterborne and air
189
freight moves. To some extent it is these shifts of traffic from one mode to
another that have resulted in port and terminal congestion.
SUSTAINABILITY: DEFINITIONS
The recent use of the word ‘sustainability’ stems from the 1987 Brundtland
report (United Nations Commission on Environment and Development
1987).1 That report had as its focus economic development and more
specifically sustainable development, which was defined as development
that meets the needs of the present without compromising the ability of
future generations to meet their own needs. In the present case the major
concern is with sustainable transport and this has been defined as transport
‘that meets the current transport and mobility needs without compromis-
ing the ability of future generations to meet these needs’ (Black 1996).
Daly (1992) goes somewhat further and sets parameters for any sector
being sustainable. Within this context transport is sustainable if it satisfies
three conditions: ‘(1) the rate at which it uses renewable resources does not
exceed their rate of regeneration; (2) the rate at which it uses non-renewable
resources does not exceed the rate at which sustainable renewable substitutes
can be developed; and (3) its rate of pollution emissions does not exceed the
assimilative capacity of the environment’.
Gordon prefers not to be drawn into a debate over definitions of sustain-
able transport and states instead that underlying these ideas of sustainable
transport are three different visions. ‘The first of these visions centers on
changing people and the way they live, the second on changing technology,
and the third on changing prices’ (Gordon 1995). In effect, these are the
actions that will be necessary if we are going to make transport sustainable.
INHIBITORS OF SUSTAINABILITY
These are fine ideas, but they are not very specific, and one might very well
ask what exactly is it that makes current transport nonsustainable. Most
researchers in this area agree that among the factors are diminishing petro-
leum reserves, emissions that are detrimental to local and global atmospheres,
accidents and fatalities and congestion. Let us examine these in more detail.
Diminishing Petroleum Reserves
In the one hundred or so years of motor vehicles using gasoline as a fuel,

the world has used approximately one trillion barrels of petroleum for this
Sustainable solutions for freight transport 191
and other purposes. This occurred at a time when only a small proportion
of the population of this world had access to such vehicles or other uses for
petroleum energy. The major question at this point is: What is the future
demand for this fuel and will the planet be able to supply it? Given that
countries such as China are beginning to see significant increases in energy
demand and the rest of the developing world is expected to increase its
demand for energy in transport and other sectors, global demand for petro-
leum will increase significantly.
What can be said of supplies? The optimist would say that there are
about two trillion barrels of recoverable, conventional petroleum reserves
out there. In general, production keeps pace with demand, but if there are
significant increases in demand, it is likely that additional production and
refining facilities will be necessary. At the present time consumption is
exceeding new discoveries by more than a three to one ratio. If we stick to
conventional sources of petroleum, some scholars believe we have found
all the major fields in the world. If more fields are found (perhaps in the
South China Sea or off the Siberian Coast), it will probably enable the
world to fight a delaying action (Deffeyes 2001). Others would say that
the conventional sources will not last beyond 2020 and that there is
significantly more petroleum out there in unconventional sources (Greene
et al. 2003). These would include shale oil, oil sands and tar sands.
Estimates are that the first of these is substantially more expensive to
produce and deliver, while the others have costs that are comparable to
those of conventional sources. Depending on what the actual costs are, we
will see the slower or faster development of alternative fuels. In the final
analysis our current transport systems are nonsustainable because at least
at present they use a fuel that is finite and nonrenewable, and this is true
whether we are talking about conventional or unconventional sources of
petroleum.
The vessels and vehicles that move freight today are in nearly all cases
powered by petroleum; this is generally held to be true for 95 per cent of the
freight moves. The exception to this would be some electrified rail systems in
Europe and the Northeast Corridor of the USA, and some of these may gen-
erate power using that fossil fuel. Therefore, any problems with the supply of
petroleum threatens the future viability of freight moves and the sustain-
ability of this sector.
Global Atmospheric Impacts
Nearly all atmospheric scientists believe that humans are placing emis-
sions into the atmosphere that will eventually have impacts on the global
climate. Others believe these impacts have already begun with increasing
global temperatures and sea level rise. The emissions, sometimes called
greenhouse gases, may lead to a forcing or an enhancement of the
greenhouse effect. This is the effect that under normal conditions enables
the planet to sustain enough heat to make it amenable to plant and animal
life. More specifically, the burning of fossil fuels has released substantial
amounts of carbon dioxide, a greenhouse gas, into the atmosphere, and it
is expected that this will lead to a forcing or an increase in the global
average temperature. It is only at this point that there is some disagree-
ment among scientists and this is in terms of how much of an increase will
occur.
Transportation and the use of petroleum-based fuels are responsible for
approximately 25 per cent of these emissions; this makes it nonsustainable.
One might reasonably ask if this warming will create major problems or
whether it will be only a minor inconvenience. We really don’t know the
answer to this, but the general consensus is that the negative impacts could
be substantial from only a minor change in temperature. For many sectors
there is a tendency to want to ignore the impacts on the planet, and this may
be possible for some sectors, but it is not so easy for transport. Transit
tunnels flooding due to sea level rise or storm sea surges, airplanes not taking
off due to high temperatures, highways and railroad track buckling due to
heat, coastal highway and railway flooding and the submersion of dock
facilities are not problems that can easily be ignored. Even more important
is the potential shift in agricultural production to new areas with moderate
climates and away from areas that are too hot or too dry; this would result
in the need to relocate certain transport infrastructure in such areas (Black
1990). In terms of global freight flows, the major impacts would be on port
and dock facilities located near sea level as well as with rail and highways
that run along coastal areas.
Local Air Quality Impacts
The contribution of motor vehicle emissions is a significant part of urban

air quality problems. This must also be seen as something that makes
current transport nonsustainable. As of 1998 mobile sources accounted
for 7 per cent of sulfur dioxide emissions, 53 per cent of nitrogen oxide
emissions, 79 per cent of carbon dioxide emissions, approximately 20 per
cent of particulates (19 per cent of particulate matter 10 microns in size
or larger and 21 per cent of particulate matter greater than 2.5 microns
in size) and 43 per cent of volatile organic compounds. A substantial
portion of the production of urban ozone also has its origin in mobile
sources. These various pollutants must be viewed as contributors to
non-sustainability, and they are viewed as such in Europe and by the
Organization for Economic Cooperation and Development. Although

they have not always been viewed as part of the sustainability problem in
the USA, this may be due to the fact that these problems were and are
being addressed; this attitude seems to have generally changed recently.
The negative health impacts of these emissions, primarily on the human
respiratory system, must be viewed as a significant problem that cannot be
allowed to continue. The USA has made substantial progress in reducing
the significance of these emissions, and some believe such emissions will
cease to be a significant problem in the foreseeable future. Nevertheless, at
this time these emissions are one of the factors making transport systems
nonsustainable.
Although this is often viewed only as a motor vehicle problem of
urban areas, it is also a significant and slightly different problem for
major port cities where other vehicles (including rail and ocean carriers)
contribute significant amounts of pollution to the local atmosphere.
Fatalities and Injuries
It should be an accepted premise that a transport system that kills off its

users is not sustainable. However, many policy-makers do not want to
include fatalities and injuries in the calculus of nonsustainability factors.
Indications are that the world’s motor vehicle fleet is responsible for nearly
a million fatalities each year and probably 70 million or more injuries
(WHO 2001, as cited by Evans 2003). Global forecasts of fatalities for the
next ten years are almost beyond comprehension.
In the USA’s case the fatalities per vehicle mile are dropping, but it is
likely that this is due primarily to increases in vehicle miles driven. Until
quite recently total fatalities were also dropping, but the latter would
appear to be increasing now or at least leveling off. In March 2004 the
USA set a national target of a 33 per cent reduction in fatalities in the
next four years. This reduction is expected to occur through increases in
seat belt use, stronger enforcement of drunk driving laws and hours of
service regulations for motor carriers. This is an achievable target. Other
countries have set more ambitious targets; for example, Sweden has set a
target of zero fatalities, but the action taken by the USA is a significant
improvement over prior goals they have set. Most other countries have
not established any goals in this area. In any event, fatalities and injuries
should be added to the criteria that keep our transport systems from
being sustainable. We will summarize the fatalities related to freight
modes below. Suffice it to say at this point that motor carriers are the
worse of these on just about any criterion, followed by rail and then ocean
vessels.
Congestion
Policy makers in general do not view congestion as a major barrier to trans-

port sustainability. The reason for this is not at all clear, although it may be
attributable to the indirect nature of the impacts generated. Congestion
decreases the speed of vehicles and results in lower fuel efficiency. It
increases emissions that are detrimental to both the global and local envir-
onments. It increases motor vehicle incidents, while it decreases fatalities.
Perhaps it was viewed as a manifestation of all the other criteria leading to
nonsustainability, and its inclusion was viewed as redundant.
Several years ago at a Transportation Research Board annual meeting
the following question was asked: If we adopted a renewable transport fuel
with zero harmful emissions, would we have a sustainable transport system?
The question was never answered, but it is one that must be asked again.
Clearly, if hydrogen was the fuel it would remove our concerns about the
depletion of fuel stocks as well as the problems of global atmospheric
impacts and local air quality. It could also contribute to a reduction in fatal-
ities as motor vehicle accident fires would be eliminated in the case of a
hydrogen fuel. However, we would still have the problem of congestion in
urban corridors and increasingly on major interstate highways in the USA
and major highways of Europe and this, and eventually gridlock, must cer-
tainly be viewed as contributors to nonsustainability. So the answer to the
question is that even a wonder fuel would not make the transport system
sustainable. We would still have congestion which threatens only to get
worse in the coming decades.
In the global freight sector the major congestion problem is in port areas.
The recognition of this has received considerable attention. A study by the
ECMT (2000) does a very good job of addressing the problem for OECD
nations. In the USA the problem has also been the subject of specific
studies of individual ports with an obvious focus on air quality. There are
also modal congestion problems related to freight moves, but these are
worse in port areas as well. A related problem is congested urban streets
and the problem of delivering urban goods to these (ECMT 1999). It is a
freight problem, but not what would usually be thought of as a global
freight problem, and it will not be examined here.
Other Inhibitors of Sustainability
There are other inhibitors of sustainability in addition to the ones noted

above. One of these of some significance in Europe is noise. It is of less
concern in the USA primarily because there is a greater separation of trans-
port facilities and human populations. The density of both of these makes
it more of a problem there. Still other inhibitors are impacts on flora and
fauna, impacts on water resources, and impacts on equity. The first two of
these will receive some attention below, but the impacts on equity will not
be examined here.
THE NATURE OF FREIGHT FLOWS IN

GLOBAL TRADE
A supply chain consists of those firms that supply the inputs to the manu-
facturing process as well as the manufacturers, wholesalers, distributors
and retail outlets that sell the final product. Connecting these various com-
ponents are transport links. It is over these linkages that freight moves.
Some of this freight may consist of raw materials moving in bulk form, for
example, iron ore, while on the other extreme it may also be a finished
product, for example, an operational desktop computer. Given the focus
here on global trade we are not necessarily interested in all of the flows of
the supply chain. Our concern here will be on the movement of goods from
a raw material or component production location or manufacturing
(assembly) location to a port, the movement from this origin port to a des-
tination port and the movement from the latter port to a distribution
center, a wholesaler or a retailer. There will be little explicit discussion of
freight flows with both origins and destinations within a single country, but
much of what is written here will also apply to that situation.
Raw materials in the form of grains and ores, or coal, tend to move in
bulk carriers. In many cases these materials will be picked up by motor car-
riers and transported over usually short distances to a waterborne or rail
carrier. Waterborne transport is preferable over rail since it tends to be
cheaper, but it is also constrained by its lack of availability in many areas,
and this is usually where rail will dominate.
Components or parts of a final product, as well as that final product will
move from a production center to wholesale, distribution or retail locations
by motor carrier in most cases today. There are some exceptions to this
where some high-value products may move by rail (for example, automo-
biles or television sets), but these are exceptions for the most part in the
USA and Europe, where the motor carrier is becoming the preferred mode
for most manufactured products. In many of these cases the products may
be placed in motor carrier trailers or containers and transported on flat cars
of a railroad. If the goods are to be exported then in the vast majority of
cases today these will be placed in containers. Containers are generally of
two broad types: 20 or 40 feet in length (6 m and 12 m). Data sources prefer
to discuss these container moves in terms of TEUs (20-foot equivalent
units), even though FEUs (40-foot equivalent units) are the most commonly
used. Produce also moves by containers that are either dry (for produce such
as soy beans) or refrigerated (for produce such as some fruits and vegeta-
bles). Container ships today can handle loads of 5000 to 8000 TEUs, and
ships are being developed that will handle nearly 10 000 TEUs. These
containers and the ships that carry them are responsible for nearly three-
quarters of the US and European international merchandise trade
(USDOT, BTS 2003).
After arrival at the destination port the containers are shifted to rail or
motor carriers and moved to public distribution centers (in the case of
Europe) or private distribution centers (in the case of the USA). From these
sites the goods are moved to assembly plants, manufacturers, wholesalers
(although this is less common today) or retail outlets, depending on the
item being transferred.
SUSTAINABILITY IN THE GLOBAL FREIGHT

TRANSPORT SECTOR
It should be understood at the outset that it is unlikely that the freight trans-
port sector will ever be a sustainable system. It is feasible to make the sector
‘more sustainable’, and that should be the goal of decision-makers in this
area.
Since the energy consumed is analogous to fuel consumed and since
emissions are a function of fuel consumed (as well as speed and the vehi-
cles used), it should be apparent that from an air quality or global climate
point of view we would like to see motor carriers used the least relative to
waterborne or rail transport.
Returning to the original discussion of global freight flows and what has
been called the triptych, we can make some general statements. On the
origin side there is a substantial use of rail and waterborne transport with
less transport by motor carriers except in the very early parts of these
moves or when the shipping distances involved are short. As a result these
flows tend to be rather efficient from a sustainability perspective with
minimal amounts of air pollution emissions resulting from the use of rail
and water carriers in relation to the total volume moved. The worst case is
where motor carriers are used for long-distance movement of goods. In this
case we have the emissions, possible increases in accidents, excessive fuel use
and congestion.
The port-to-port moves are perhaps the most sustainable of any trans-
port flows today since waterborne modes tend to pollute the environ-
ment the least. These moves do have some problems, but these are all
associated with the movement of crude petroleum in oil tankers. The first
problem is the release of methane into the atmosphere when petroleum
is being loaded or unloaded. Methane is also a greenhouse gas, and it
is believed to be 25 times more significant in terms of its ability to lead
to a warming of the atmosphere. In some locations vacuum systems
prevent the release of this gas, but these systems are not available every-
where.
A second problem stems from the use of oil as ballast by oil tankers. In
general, ships fill ballast tanks with petroleum instead of water so that they
can deliver more oil to petroleum refining areas. Once the petroleum is
delivered and these tanks are emptied, these ballast tanks are refilled with
ocean water (so that the tanker will sit lower in the water during storms).
As these vessels near their destination (exporting) areas, they pump the
ballast and any residual oil in them into the oceans. This is a common
source of ocean water pollution.
The final problem is the pollution that occurs when there are oil spills.
This may be a minor problem or it can be an environmental disaster.
Determinants as to which of these will result is a function of several vari-
ables including among other things the amount of oil spilled, distance from
shore, weight of the crude petroleum and its tendency to evaporate, the
ambient temperature in the area of the spill and the wildlife in the area.
These incidents make the evening news programs where viewers see various
water birds and marine animals covered in oil. Although these events can
be locally devastating there is no instance where a species has been elimin-
ated due to such a spill. If the spill occurs far enough out to sea, there is a
very good chance that the natural environment (evaporation, salt water and
carbon dioxide) will mitigate its major impacts before the oil reaches
coastal areas.
On the destination side one might expect a situation similar to the origin
side, and this is often the case. Containers are loaded onto motor carriers
or rail flat cars for the move to a distribution center or final manufacturing
or retail location. These moves are as environmentally sustainable as the
modes and conditions that they encounter in the move. However, in a
growing number of cases the receiving ports are working at well beyond
their capacity and as a result there is congestion in the water, on the rails
and on the highways in the area. This congestion slows the transfer of con-
tainers from the ships to the land carriers, resulting in all modes operating
at less than their optimal performance levels.
The amount of transatlantic and transpacific container traffic at the
major ports of Asia, the USA and Europe are depicted in Figures 7.1
through 7.4. These figures illustrate that the transatlantic trade has been rel-
atively stable on both sides of the Atlantic with the possible exception of
1250
700 1998
1999
1998 2000
1999 2001
600
1000 2000 2002
2001
2002
500
750
400
Containers
Containers
500 300
198
200
250
100
0
0
Charleston Houston New York Norfolk Savannah Antwerp Bremerhaven Felixstowe Le Havre Rotterdam
PORTS PORTS
Source: Journal of Commerce, PIERS. Source: Journal of Commerce, PIERS.
Figure 7.1 Transatlantic container traffic at US ports Figure 7.2 Transatlantic container traffic at European
(thousands of TEUs) ports (thousands of TEUs)
4000 1998 3000
1999
2000
2001 1998
2002 2500 1999
2000
3000
2001
2002
2000
2000 1500
Containers
Containers
199
1000
1000
500
0 0
Long Beach Los Angles New York Oakland Seattle Hong Kong Kaohsiung Pusan Shanghai Yantian
PORTS PORTS
Source: Journal of Commerce, PIERS. Source: Journal of Commerce, PIERS.
Figure 7.3 Transpacific container traffic at US ports Figure 7.4 Transpacific container traffic at Asian ports
(thousands of TEUs) (thousands of TEUs)
12000
10000
Containers
8000 Transatlantic
Transpacific
6000
4000
1998 1999 2000 2001 2002

YEAR
Source: Journal of Commerce, PIERS.
Figure 7.5 Transatlantic and transpacific container traffic, 1998–2002

(thousands of TEUs)
New York during the 1998 to 2002 period. The transpacific trade has seen
considerably more activity; all West Coast and Asian ports in the figures
show positive trends. Figure 7.5 looks at all transatlantic and transpacific
container traffic and clearly shows the dominance of the Pacific trade.
This increase in traffic on the West Coast of the USA has not been
without its problems of which congestion is the major one. Gallagher
(2004) noted during the first week of November 2004 that ‘the backlog of
ships at anchor at southern California ports was expected to climb to 100
last week’. He further noted that the ‘extending line in the Pacific Ocean
came as intermodal volume of 231 255 trailers or containers set a weekly
record for the week of October 16, besting the old mark of 231 025 trailers
or containers set during the week ended September 25. That was 9.5 per
cent more than the comparable week a year ago: container volume was up
10.1 per cent and trailer volume up 7.7 per cent’.
It is congestion of this type that is one of the most serious of the freight
flow sustainability problems, but this problem is essentially a problem of
globalization.
GLOBALIZATION AND ITS IMPACTS
There are many types of globalization. Our concern here is with what is
usually called economic globalization. This economic globalization has
occurred over the last couple of decades, and it has been facilitated by
developments in information and communication technology as well as a
general lowering of the costs of transport. It has resulted in a significant
change in the distribution of production with growth occurring in less-
developed countries and the loss of manufacturing and other jobs in the
developed world. Contemporary theorists in economics, such as Bhagwati
(2004), see economic globalization as a good thing, but like so many eco-
nomic theories, this one is partial, short-sighted and incomplete. The long-
term goal of this globalization is to increase the level of living of all the
world’s peoples, and that is a laudable goal on many different levels.
However, while this is occurring it can create significant hardship for those
losing productive activities. The theory says nothing about how long this
‘adjustment’ will take, and there is little being done to soften the blow in
those countries negatively impacted by the loss of economic activities. Even
now there are indications that many countries are not benefiting from glob-
alization (Garrett 2004). However, this is not the place to argue the merits
or faults of economic globalization, but let us look only at the impacts of
globalization on the transport sector.
The freight transport sustainability impacts of globalization can be illus-
trated by looking at the early theoretical work of E.N. Gilbert, a researcher
at the Bell Laboratories of the mid-twentieth century. Gilbert noted that
the average distance between two randomly selected nodes on a surface is
equal to 0.68 (NA)0.5, where N is the number of nodes and A is the area in
which these nodes are located. Globalization introduces new nodes (N) to
the trade system and significantly increases the area (A) over which trade
occurs. As a result we can deduce that the average length of shipments are
bound to increase, and with this there will be an increase in emissions,
accidents and fuel use since we know that all of these are a function of the
length of shipment. The existence of tariffs prior to the creation of the
European Union or the North American Free Trade Area type agreements
effectively limited trade partners (N) and the area (A) over which trade
could be undertaken economically. This area was constrained by the tariffs
which when added to the transport costs would make such trade less
profitable. Of course the decrease in transport costs and improvements in
information and communication technology have also assisted the increase
in globalization and increased the area over which trade can occur.
One could argue that for the developed world trade partners are not
selected at random; this is true. They are selected for the most part based
on prices which in a spatial sense are nearly random, or very clustered if

one accepts the notion of spatial autocorrelation, the tendency for nearby
areas to be similar (in terms of prices in this instance).
In effect, economic globalization has moved much production outside
the regions where it was formerly undertaken. This has increased the length
of many freight shipments and increased emissions harmful to local and
global atmospheres, increased accidents and increased fuel inputs to the
freight transport sector, increased congestion (particularly at port areas)
and as a result made trade flows less sustainable.
SUSTAINABLE SOLUTIONS IN THE FREIGHT

TRANSPORT SECTOR
We have alluded to a series of problems associated with the freight trans-

port area. Let us now examine some of the possible solutions to these prob-
lems that will render them, if not sustainable, at least more sustainable than
they would otherwise be. We will examine such solutions for port conges-
tion, marine pollution, railroad and motor carrier pollution, freight acci-
dents, fuel use and emissions from the various transport modes. It should
be noted that there are some major projects in Europe that will not be dis-
cussed here. These projects may very well improve the sustainability of
freight operations in Europe, but they were not undertaken with that in
mind. A good example of such a project would be the TransEuropean
Networks (TENS) projects intended to increase the accessibility of various
parts of the European continent (FHWA 2002). This would also make the
transport of freight on the European continent more sustainable, but as
noted this was not its original purpose.
Sustainable Solutions to Port Congestion
If there are too many ships arriving at a port the obvious solution is to divert
some of these to other ports. This method has actually been used on the
West Coast of the USA where between June and November of 2004 there
were 49 vessels diverted from Los Angeles/Long Beach to other ports on the
West Coast (Portland, Oakland, Seattle/Tacoma). It would be possible to
divert more if the port area knew the ships were coming, but they often don’t
know this (Gallagher 2005, p. 25). It seems as though better communication
in terms of vessel arrival would help in this area, but for many these delays
are tolerable given the Southern California market of 17 million inhabitants.
Labor recommends several ‘short-term solutions, including increasing
the number of workers within container gangs, 24-hour gate systems that
would allow empty containers and loads to be dropped off and picked up

at the same time, a prioritized gate system that would allow freight to be
picked up by appointment, and creating on-site and off-site staging areas
to make better use of space inside the terminal gates.’ Labor has also criti-
cized railroads for not having enough workers or locomotives and for
failing to prioritize cargoes. Furthermore, it has been noted that railroads
don’t coordinate train arrivals or departures with the ports (Gallagher
2004). Implementing these suggestions would improve the sustainability of
freight flows.
Another solution has been generated by the problem on the West Coast
of the USA. In response to the level of congestion noted previously the
Transportation Stabilization Agreement (which represents 13 shipping
lines serving the West Coast) issued voluntary guidelines that would
increase fees by $285 per FEU for shipments to the USA West Coast, $350
per FEU on intermodal rail shipments to inland destinations and $430 per
FEU on all-water shipments via the Panama Canal to the East Coast of the
USA (Mongelluzzo 2004). It is unlikely that this will have much of an
impact on congestion at the Los Angeles/Long Beach port facilities since
these shipments will continue and the costs will be absorbed by the con-
sumer in the end. It could reduce traffic to New York, which has seen earlier
declines in transpacific traffic via the Panama Canal.
On the infrastructure side there are two proposals that have to garner
some attention. The first of these is the solution that was the dominant
response to highway congestion through the 1980s in the USA – network
expansion to facilitate the movement of traffic away from the port. On the
US side this is represented by the nearly $2.5 billion Alameda Corridor
project, which connects the ports of Los Angeles and Long Beach with the
city of Los Angeles with a grade-separated rail and truck corridor. A
similar project on the European side is the Betuweroute rail freight line
(BRL) between the port of Rotterdam in the Netherlands and the rail
network of Germany just inside the latter’s border. This $5 billion project
represents a rail-only corridor of 160 kilometers in length and is scheduled
for completion in 2006. This project as well as the Los Angeles Alameda
Corridor project are attempts to alleviate port congestion while ensuring
the viability of each area’s major port.
Another type of infrastructure solution to the problem of port conges-
tion is the construction of what have been called ‘freight villages’. These are
intermodal terminals usually located at a distance from the port that allow
container traffic to be moved immediately away from congested areas.
These terminals usually involve motor carrier and rail access, often through
dedicated highway infrastructure, as well as a high level of information and
communication technology.
One such freight village is located at Bologna in Northern Italy.

Approximately 75 per cent of the traffic which traverses the Italian penin-
sula from North to South and vice versa passes through Bologna. The facil-
ity occupies 2 million square meters of a 4 million square meter land area.
Companies that rely on logistics as well as logistics companies benefit from
the facility. Traffic can easily be routed to a destination given the high level
of road and rail access of the location.
A similar facility is the European Container Terminal at Venlo in the
Netherlands. What the Bologna facility does in southern Europe, the Venlo
facility does for northern and central Europe. The latter facility is located 120
miles inland from the port of Rotterdam. Containers are moved to the facil-
ity by rail and then taken by truck to their final destination. Facilities also
exist on the site for the storage of containers to be moved by ocean container
carriers. Verona in northern Italy is also the site of a major freight village.
Of the various ‘solutions’ to port congestion it would appear that the
freight villages are likely to be the most successful in the long run. The cor-
ridor projects are bound to become congested in time and lose their utility
as a congestion relief device. If corridors are to be relied upon then it seems
reasonable that these should be constructed to remotely located freight
villages, which offer the greatest likelihood of success.
Sustainable Solutions to Pollution from Marine Sources
Oil spills are one of the major problems with ocean tanker petroleum
moves. A major cause of such incidents is single-hull tankers grounding or
colliding with other vessels. These vessels tend to rupture more often than
double-hull tankers. This has been recognized for quite some time, and the
Oil Pollution Act of 1990 was intended to correct this problem for US-built
ships operating between US ports. The act calls for the phasing out of all
single-hull ships in this service by 2015 (GAO 2000). As of late 1999 there
were still 144 single-hull vessels in service, but there is every reason to
believe that all of these will be phased out by the 2015 deadline. So although
this is a continuing problem for tankers of other nations, it is in the process
of being solved for US carriers operating in US waters.
Methane is one of the major greenhouse gases. Although there are
numerous sources of methane emissions, one of these sources results from
the transport of petroleum (Eastern Research Group 2001). There are
several sources: (1) the transport of petroleum releases methane; (2) the
loading of crude oil into tankers also results in the production of methane;
(3) the transfer of this crude oil at terminals also releases methane; and (4)
the ballast tanks when filled with water or oil emit methane. Solutions
involving methane capture by vacuum systems are possible, but these are
not found everywhere so that these emissions will continue until such
systems are available everywhere. Since the USA consumes 25 per cent of
the world’s petroleum and it produces an estimated 5 million kilograms of
methane emissions from petroleum transfer, a conservative estimate would
place global emissions from this activity at about 20 million kilograms.
The solution system noted above, vapor capture systems, can be 90 to
99 per cent efficient. The gas captured can be recovered through the use
of refrigeration, absorption, adsorption and/or compression. The major
barrier to the use of this technology is its cost.
A final sustainability problem attributable to ocean traffic is the emis-
sions from the engines that power these vessels. These are significant, but
they are as previously noted probably quite a bit less than the emissions
from other transport vehicles on a tonne-mile or tonne-kilometer basis.
This problem will be discussed later.
Sustainable Solutions to Railroad Pollution
Historically, there were numerous types of pollution related to the opera-

tion of railroads (Carpenter 1994). These range from the use of PCBs
(polychorinatedbiphenols) in brake boxes of rail cars to the use of creosote
for the treatment of railroad ties. The use of defoliants and herbicides along
rail rights of way was also common, as were numerous petroleum-based
products used as lubricants. At the same time none of these are really that
bad in terms of sustainability. None of these offer major impacts beyond
the local area and even then some of these have been taken care of. For
example, PCBs are no longer used in brake boxes, and there are tests under
way at present to use rail ties made of recycled plastic as opposed to treated
lumber. In Europe rail ties (called sleepers in the UK) are made of concrete,
which creates less of a problem. All things considered this mode seems to
have the least impact on a tonne-mile basis on the global environment.
Sustainable Solutions to Excessive Freight Transport
Whenever there are too many vehicles on the road system one possible solu-
tion is to increase the price of using the roadway. Of course such a solution
in theory could also be used in the case of excess emissions from this same
traffic. This may occur in the general case as congestion pricing (also called
value pricing). In the freight transport case, the solution may be a duty on
fuel used, a tax just on freight vehicles, or tolls and/or user charges on such
vehicles. These are approved for use by the European Union, and such
charges are used by each member of the EU (Technical Research Centre of
Finland 2000; Van Vreckem 1994).
An excessive amount of freight traffic through Switzerland led that

country to impose a truck toll of $200 (€158) per truck at the border.
Although decreasing the volume of truck traffic was the goal, there was also
a desire to divert traffic to a Swiss shuttle train capable of handling con-
tainers or trailers (FHWA 2002).
Sustainable Solutions to Motor Carrier Pollution
The total impacts of motor carriers or lorries moving freight are primarily
in the fuel area, which will be addressed below. It is true that motor carrier
brake systems use asbestos, and many of the lubricants used find their way
into water supplies, but once again these are local impacts and not detri-
mental to larger areas in the same manner in which an oil spill would be.
Freight Accidents and Sustainability
As noted at the outset, a sustainable system cannot kill off its users. In the
freight transport sector the principal modes and vehicles are much safer
than one would expect. According to the Bureau of Transportation
Statistics (BTS 2004), the USA had 708 fatalities among the occupants of
large trucks in 2001, or 1.6 per cent of all transport fatalities in that year.
The picture becomes worst if we include non-occupants involved in these
accidents. In this case the number jumps to 4897 fatalities.
Waterborne carriers are very safe if we consider the volume of traffic that
they move. This sector had 59 vessel related fatalities in 2001. Even safer
than waterborne carriers are the railroads, which had 36 fatalities, exclud-
ing those involving motor vehicles at grade-crossings.
From a safety perspective, it would be desirable to decrease fatalities in
all sectors, but this is particularly so for motor carriers. General initiatives
to decrease motor vehicle fatalities by requiring seat belt use and stronger
enforcement of drunk driving laws may have a minor effect, but the enforce-
ment of the ‘hours of service’ requirements may have a significant impact
in the motor carrier area. This provision limits the number of hours that an
individual can drive a motor carrier without taking a break for rest.
Fuel Use and Sustainability in the Freight Sector
For the three major modes of transportation used in freight flows today,
there is considerable variance in terms of their energy use. It is very difficult
to compare the energy intensity of transport by motor carriers, rail and
water, since these all operate in such different environments. Nevertheless,
on a BTU (British thermal unit) basis, motor carriers clearly use the most
energy at 3337 BTU per tonne-mile, and long moves by this mode should
be minimized from a sustainability perspective. Rail moves are considerably
better at 346 BTU per tonne-mile of freight, but this can increase to nearly
twice this level if containers or trailers are being moved due to the lower
weight of these (for example, in comparison to the weight and density of
coal). Water moves of containers are clearly the most energy efficient with
444 BTU per tonne-mile. From a sustainability point of view we should
have a minimal amount of motor carrier traffic, but this is obviously not
the case in the USA or Europe. For movement within the 15 nations of the
EU approximately 44 per cent of the tonnes moved by motor carriers, and
in the USA the comparable figure is about 66 per cent. Rail handles only
8 per cent of the tonnes in Europe compared to 16 per cent of the tonnes
in the USA. The major difference in the two areas is in water transport
where the EU has about 45 per cent (for inland and international EU
traffic) compared to the USA’s 6 per cent.
To decrease energy use in the global trade sector one needs to find either
a policy or technical solution that will facilitate this. One policy approach
used in Europe is the creation of a tax or toll that will fall primarily on
heavy lorries. In this case the country is Germany, and the tax is to go into
effect as soon as a toll collection system is developed (CNT 2004). It seems
unlikely that such approaches will meet with much success as a way of dis-
couraging motor carrier use, since the toll will simply be passed on to con-
sumers. Nevertheless, the toll will probably generate a substantial increase
in revenues.
In Canada the government is seriously considering the initiation of full
social costing. This is similar to full cost accounting wherein users of high-
ways would have to pay for their use of the system as well as for the nega-
tive externalities that their use generates. In other words, users would have
to pay for the damage inflicted by emissions into the local and global atmos-
phere, for example, the medical costs of those affected by the emissions and
several other costs identified (see Black et al. 1995). If this were instituted at
a high enough level it might result in the diversion of some traffic from the
highway sector to the rail or waterborne sectors and therefore decrease some
of the emissions as well as decrease fuel/energy consumption. It seems
unlikely that this will occur in the near term since there is not general agree-
ment as to what these costs area[ACG1] (see Quinet 2004).
In the USA full costing or similar proposals have been reviewed for the
freight sector (TRB 1996). Using this approach would be viewed as a tax,
and it is unlikely that it could ever be enacted by any level of government.
Instead, the USA will go for the continued use of motor carriers, but they
will try to improve their environmental sustainability through some type of
technological innovation. At this time it looks as though this will probably
be through the use of fuel cells in the near term and alternative fuels in the
longer term.
Although fuel use in the waterborne sector is perhaps the most efficient,
this has not prevented some from seeking ways to decrease fuel use there.
In 2006 a German firm based in Hamburg will begin outfitting cargo ships
with huge kites that will pull the vessels and decrease diesel fuel consump-
tion by approximately one-third, saving 20 per cent of the total shipping
costs (The Economist 2005). A firm in Denmark had tried a similar idea
using sails, but these were more difficult to manage, took up significant deck
space and the larger masts (greater than 60 meters high) were not permit-
ted through the Panama Canal.
The use of the kites will also help the ocean carrier sector meet the
International Maritime Organization’s recent rules intended to reduce
emissions from ship exhaust which came into effect in 2006. These rules
seek to reduce emissions of sulfur oxides from 1.5 per cent to 4.5 per cent
depending on the area. The rules also seek to limit emissions of nitrogen
oxides, as well as several of the greenhouse gases.
Congestion and Urban Goods Movement
The delivery of freight in urban areas is often viewed as a major problem.

Many of the solutions in this particular sector are known but difficult to
implement. One successful application out of Europe involves making
deliveries to supermarkets out of hours (between 6:00 and 7:00 and
between 19:00 and 21:00). The project was in Haarlem in the Netherlands
and is viewed as successful because it involved all the stakeholders. The one
weakness of the project was that a wider application area was necessary
(OECD 2003).
Since 2002 all trucks over 2.5 tonnes must have a certificate in order to
make a stop inside the inner city center of Copenhagen, Denmark. The
certificate provides access to loading zones. Trucks receiving the certificate
must be more than 60 per cent full and have an engine that is less than eight
years old. Entering the inner city without the certificate results in a fine
(OECD 2003).
Emissions and Sustainability
In addition to the ocean shipping case, we have alluded to emissions at

several points throughout this chapter, but we have not focused on this to
any great extent. Emissions are not that different for most of the freight
modes on a per liter of fuel basis. It is the fact that the different modes use
significantly different amounts of fuel to move a tonne-kilometer of traffic
Table 7.1 Emissions (in grams/tonne kilometer) for freight modes
Mode CO HC PM NOx SO2 CO2

Road 0.479 0.227 0.078 0.978 0.031 98.301
Rail 0.196 0.098 0.027 0.472 0.036 28.338
Short-sea shipping 0.036 0.012 0.006 0.311 0.290 15.450
Ocean shipping 0.048 0.016 0.0483 0.499 N.A. N.A.
Source: Commission of the European Communities (1999), US Maritime Administration.
that results in their different levels of emissions in terms of grams per tonne
kilometer (see Table 7.1).
As the table reveals ocean or short sea shipping tends to emit the fewest
grams of emissions for most of the pollutants of interest today. The excep-
tion to this statement are emissions of sulfur dioxide, which are higher in
such vessels due to the high sulfur content of the fuel used for that mode.
It would be misleading to go a step further and suggest that ocean con-
tainers pollute the least. When one considers the extremely high proportion
of trade that moves by this mode, it does contribute a significant amount
of pollution in the aggregate. Nevertheless, if it were possible to use the
other modes to move this traffic, they would pollute more.
With regard to emissions that may come from older motor carriers
(lorries), the United Kingdom provides subsidies for retrofitting these with
technologies to reduce emissions (OECD 2000).
SEAMLESSNESS AND SECURITY
There was a considerable effort during the 1990s to make international

freight flows seamless. In other words, there was a desire to expedite the
movement of freight and to decrease activities that would slow this move-
ment. With regard to container flows, there was consideration given to elec-
tronic locks on containers at the origin of these flows that would enable the
movement of these to their final destination without intermediate inspec-
tions. This seemed easily within grasp until the events of 11 September
2001. At that time security entered the picture, and this caused a certain
amount of hesitation on the part of governments and shippers alike.
It is no longer sufficient to know that the container has not been opened
en route, although that remains a concern. Now we must know what is in
these containers and whether they pose a risk for national security. This
actually became a campaign issue during the 2004 national elections in the
USA with John Kerry pointing out that the containers coming into the
USA were not being inspected and that he thought they should be.
Considering the number of containers involved this seems unlikely in the
USA or Europe. Although the technology exists to automate such inspec-
tions and to create ‘smart containers’, some believe the funds necessary for
this development and the additional cost per container move would be
significant and that perhaps the funds could be better spent.
On the North American side freight moves of automobiles between
Canada and the USA and between Mexico and the USA operate under a
program called FAST (Free and Secure Trade). There are 12 points of entry
on the northern border and 14 such locations on the southern border that
permit ‘passage of pre-approved eligible goods through streamlined, syn-
chronized customs processes agreed to by the respective governments.
Dedicated FAST truck lanes are available at some crossings’ (Hoffman
2004).
Although these concerns seem to be peripheral to the subject of freight
flow sustainability, they are not. Any attempt to decrease congestion in port
areas will first have to demonstrate that it does not jeopardize national
security, and this may prevent these flows from becoming more sustainable.
FREIGHT FLOWS AND FUEL PRICES
During the summer of 2005 there were significant increases in the price of
gasoline and diesel fuel globally, and it is reasonable to examine the poten-
tial impacts of these price changes on freight flows and the sustainability of
those flows. At the outset one should note that much of the increase in
freight flows since the early 1990s is a result of economic globalization. At
the same time economic globalization has been facilitated by low labor
costs in less developed parts of the world as well as developments in infor-
mation technology and low transport costs. Since a large component of
transport costs consists of fuel costs it is reasonable to infer that there will
be an adjustment in freight flows because of these increases in fuel cost.
That is, increases in fuel prices will result in an increase in the price of the
product and this will decrease demand, resulting in less flows and a more
sustainable situation. However such an inference may be incorrect.
Fuel cost increases began to stabilize somewhat in late summer 2005.
Economic globalization did not occur overnight, and the local firms that
have been replaced in many cases by quite distant firms on other continents
will not suddenly come back to life. The firms have been shut down, the
labor supply has moved on to other sectors or aged to the point where
most of it is retired or nearing retirement age. Although many might have
a nostalgic yearning to see such a rejuvenation occur, it is not very likely in

the USA or Europe.
Although there is anecdotal evidence of some individuals trading in their
SUVs for more fuel-efficient automobiles when fuel prices began to
increase in the more developed countries, it is unlikely that firms in Asia will
close based on such fluctuations in the price of fuel. The more likely sce-
nario is that the price of imported products will increase to compensate
current manufacturers for their increases in fuel costs to get their products
to markets in the more developed parts of the world. Will such increases be
large enough to curtail demand and therefore decrease freight flows? That
does not seem likely.
However while the price of petroleum-based fuels will most likely
fluctuate, there is every reason to believe that these prices will remain at or
near the same high levels. This belief rests on the fact that conventional
petroleum supplies globally are nearing a peak from which the production of
this fossil fuel will begin to decrease. In the near term this will most likely lead
to the use of nonconventional petroleum fuels (tar sands, shale oils and so
forth) to make up the shortfall. These nonconventional fuels generally have
a higher recovery and refining cost, and as a result they will yield a higher-
priced fuel. Therefore, drops in fuel prices over the long term seem unlikely.
What are the potential implications of this? If fuel prices remain high,
and if such prices are a significant contributor to the cost of the imported
products, then it is reasonable to suggest that there may be a substitution
of production areas for these goods. In the case of North American
markets this would not lead to the aforementioned rejuvenation of indus-
tries there; labor costs would continue to make that area uncompetitive.
Instead, it could very likely lead to an increase in industrial growth in
Central and South American nations from which transport costs would be
substantially less.
From a freight transport sustainability point of view, price increases that
decrease the amount of goods being shipped long distances are good. If
these price increases are large and result in a substitution of nearer pro-
duction areas with shorter distances to market and less fuel consumed,
fewer emissions, fewer fatalities, and so forth, this is also good from a sus-
tainability point of view. In effect, the price increases would act in much the
same way as a tariff or tax.
SUMMARY AND CONCLUSIONS
This chapter has sought to introduce some of the notions of sustainabil-

ity to the discussion of global freight flows. Sustainability was defined
and the various barriers to such sustainability were identified in general

as well as how they pertain to the freight sector. The nature of freight
flows was described as were those aspects of these flows that appear to
be nonsustainable. Globalization as an initiator of many of the current
flows was recognized as was the fact that this process is bound to lead
to additional transport inputs to the production process. This was fol-
lowed by a discussion of possible solutions to some of the problems
of sustainability in the freight sector. The discussion concludes with
caveats regarding the role that security now plays in questions of freight
flow sustainability and the possible role of increasing fuel costs on freight
flows.
Table 7.2 provides a summary of the various ‘sustainability solutions’ for
the freight sector. Several of these have been mentioned in this chapter, and
examples have been offered. Some of the ‘solutions’ are not noted in the
text because they are general solutions for the sustainability of transport of
which trade is only a portion. Nevertheless, the sustainability of trade and
freight flows would benefit from their implementation. The objectives
discussed are those generally accepted by both North Americans and
Europeans. Policies may be undertaken by the private or public sector. The
former is more common in North America since more transport modes and
facilities operate privately there, while public control tends to be more
common in Europe. The general exception to this statement is in the area
of motor carrier transport where both areas deal largely with the private
sector. The table suggests a broad array of actions that can improve the sus-
tainability of freight movements.
It was noted early in this chapter that global freight flows will never be
sustainable and that the best that we can hope for is a situation where the
flows are ‘more sustainable’ than they are at present. Part of the reason for
this is the recent move toward globalization, which in a transport context
is the acquisition of goods from greater distances than was necessary
heretofore. This clearly increases the amount of transport that is needed for
any given flow and leads to a sort of ‘transport inflation’. This would not
be that harmful if transport charges for these flows included the cost of the
negative externalities that they generate, but they do not and they are
unlikely to incorporate these anytime soon.
It is not possible to stop the move toward globalization. Even if it
were possible, one must ask whether it would be desirable. The goals
of globalization probably make it reasonable to pursue, and in the
larger picture if a trade-off is necessary between transport sustainabil-
ity and globalization, then it is reasonable to resolve this in favor of the
latter.
Table 7.2 Objectives and activities necessary to improve sustainability

of freight flows
Sustainability objective Policy (public or private) Activity

Decrease petroleum Increase modal shift Tolls or taxes on least
utilization efficient modes
Increase load factors Use brokers and forwarders
Decrease shipment length Buy more local products
Decrease empty backhaul Use brokers and forwarders
Increase vehicle fuel Technological improvements
efficiency in engines
Rely less on petroleum Utilize and develop renewable
energy sources
Decrease search behavior Increase in-vehicle navigation
equipment
Decrease global Decrease reliance on Shift to rail or water where
atmosphere impacts motor carriers practical
Decrease CO2 emissions Shift to renewable fuels
Utilize carbon dioxide tax
Improve emissions technology
Decrease methane Improve emissions control
emissions for ocean oil tankers
Methane capture systems
‘at the pump’.
Decrease local air Decrease tailpipe Improve catalytic converter
quality impacts emissions life and capture
Use less polluting Tax high-polluting modes
modes/vehicles Offer incentives to remove
most polluting modes
Initiate full social-costing
of emissions
Decrease fatalities Decrease length of haul Purchase more goods from
and injuries local sources
Decrease excess driving Initiate ‘hours of service’
time strategies
Provide adequate overnight
parking rest locations
Improve safety Improve seat belt, air bag,
technology and similar requirements.
Require ‘rear view’ television
in vehicles
Utilize safer modes Encourage use of intermodal
where possible transport
Table 7.2. (continued)
Sustainability objective Policy (public or private) Activity

Favor safe transport Contact with firms having
firms good safety record
Reduce congestion Deliver goods at Work with firms/
off-peak times establishments to allow this
Coordinate deliveries Inform harbor officials of
pending arrival
Have rail officials informed
of arrival times
Schedule motor carrier
pick-ups on 24 hour basis
Use freight village ideas Move freight away from
ports for sorting/pick-up
Increase handling More employees for
capacity loading/unloading modes
More cranes for removal of
containers/cargo
Divert traffic to If congestion expected,
alternate ports alter port destination
Decrease container Develop electronic seals for
inspection times use at origin of move
Increase the number of
inspectors
NOTE
1. This section on definitions and the next section on what makes trade-related transport
nonsustainable draws on a paper by the author entitled ‘Sustainable transport: definitions
and responses’, which was presented by the author at the National Symposium on
Sustainable Transportation held in Baltimore during July 2004 and sponsored by the
National Research Council’s Transportation Research Board.
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PART IV
Globalized freight and policy considerations

in Europe and North America
8. Policy implications of
dynamic globalized freight
flows in Europe
Roger Vickerman
INTRODUCTION
Transport policy and the analysis of transport markets have often focused
primarily on domestic transport markets. At the international level
interest has focused on the operation of bilateral agreements which have
governed much international transport. Rarely have the links between
domestic and international transport and the role of international trans-
port in determining the pattern of international trade been brought
together as part of the seamless transport experience. Recent work in the
‘new economic geography’ has done much to link transport more fully
and formally to location and trade; at the same time the pressures of
market globalization in such sectors as ports and airports as well as in
transport operators have been forcing a rethinking of the nature and
scope of transport policies. Nowhere is this more clear than in the chang-
ing priorities of the European Union’s policies towards transport, increas-
ingly governed not so much by the traditional regulatory/public service
approaches but by the role which efficient transport plays in European
competitiveness.
In this chapter we first explore the recent history of the development of
freight transport and trade both within the EU and in its external relations.
Second we examine the constraints on the growth of intermodal transport
and the potential for more effective policy intervention. Third we look at
the use of e-commerce in the transport sector and its implications for future
patterns of growth and efficiency. Finally we examine a range of policy
implications concentrating on the appropriateness of intervention at the
EU level rather than at the national level as well as the relevance of sus-
tainability, and we identify some of the main barriers and challenges for the
future.
219
220 Globalized freight and policy considerations
TRANSPORT POLICIES, FREIGHT MOVEMENTS

AND TRADE
Trade costs and transport costs are often elided as the unavoidable
costs involved in international trade, yet we still have a relatively poor
understanding of the links between the two, particularly in a world of
imperfectly competitive markets. In classical trade theory transport costs
are effectively ignored in the search for comparative advantage. However,
a simple exploration of economic history shows the importance of
changing transport technology (and hence transport costs) in the global-
ization of trade – the initial rise of the maritime nations, the increasing
dominance of faster land transport modes with the growth of the railways
and then roads and finally the emergence of air transport. Over the
very long term space has shrunk with each new innovation, but that
does not mean that distance is no longer relevant. Rietveld and
Vickerman (2004) have shown how distance is still significant and in some
of the most detailed analyses of the influence of transport on trade costs
Hummels (2004) has shown that such costs have remained remarkably
constant over the past 30 years despite a general belief that the world has
shrunk.
What these analyses demonstrate is the way that changes in the markets
for the supply of transport and changes in the markets for goods under
conditions of increasing returns and imperfect competition interrelate. In
a world of increasing returns transport costs may not be reducing but may
be less significant; in such a world imperfectly competitive transport
markets may enable rent-seeking transport operators to obtain a larger
share of the gains from trade. Apart from the detailed empirical work of
Hummels, Venables and Limao (2002) and Venables (2004) have shown
how the various gains from trade may be shared under different assump-
tions about transport costs. These pioneering studies into these key rela-
tionships provide the rationale for this look at the recent history of trade
and transport in the European Union.
The European Union is the largest trading bloc in the world accounting
for 20 per cent of world trade. In the past decade the value of exports
increased almost two and a half times (Figure 8.1) and the volume
increased 75 per cent (Figure 8.2). Unlike the US the growth of imports and
exports for the EU has been roughly similar and the balance of trade has
remained reasonably constant over the longer period.
During this period the openness of the EU, measured by the share of
trade in GDP, has grown by between two and three percentage points
(Figure 8.3). However, the most recent period of recession has seen a slow
down in both the rate of growth of trade and its importance in GDP. The
Policy implications in Europe 221
1200
1000
800
1000 million e
600
400
200
Extra EU15 imports by value Extra EU15 exports by value
0
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Source: Eurostat.
Figure 8.1 EU-15 external trade, 1992–2003 (billion €)
120
100
Index (2000 = 100)
80
60
40
20
Imports (volume index) Exports (volume index)
0
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Source: Eurostat.
Figure 8.2 EU-15 external trade and GDP (volume index)

14
Imports/GDP Exports/GDP
12
10
Percentage
0
1995 1996 1997 1998 1999 2000 2001 2002 2003
Source: Eurostat.
Figure 8.3 Openness: share of trade in GDP (EU-15)
major trading partner of the EU is the United States, which accounts for
around one-fifth of both imports and exports.
The EU15 is broadly similar in terms of openness and trading patterns
to the United States, but if we were to look inside the EU at individual
member states we would see that the individual economies are much more
open and most likely to trade with each other. Among the larger member
states such as the United Kingdom, France and Germany trade accounts
for between 17 and 33 per cent of GDP (in terms of exports). For the
smaller member states the proportion is typically much greater. Of this
trade around 55 to 60 per cent is intra-EU15. The enlargement of the EU
to 25 states in 2004 has only changed these percentages a little as the GDP
of the EU25 is less than 5 per cent greater in nominal terms than the EU15.
Given the global nature of EU trade it is not surprising that the dom-
inant mode for all trade is sea, which accounts for nearly 60 per cent of
trade by volume although less than 30 per cent by value (Figure 8.4). High-
value trade, even that external to the EU, is carried mainly by road, but the
negligible tonnage (little over one-tenth of one per cent) carried by air
accounts for over 12 per cent of the value.
This dominance of maritime transport focuses attention on the main
European ports and access to them by different modes of transport. One
port, Rotterdam, stands out above all the rest, handling over 350 million
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
EU25 EU15 EU25 EU15
Value (Billion e) Quantity (million tonnes)
Other Inland Waterway Sea

Air Rail
Pipeline Road
Source: Eurostat.
Figure 8.4 Modal shares of EU external trade, 2003
tonnes of freight in 2004, well over twice as much as the second largest port,
Antwerp (Figure 8.5) and accounting for over 17 per cent of all freight
handled in EU ports. Rotterdam was the third largest port in the world in
2004 by throughput, behind Singapore and Shanghai although it had
slipped from being the largest in 2002 despite almost 10 per cent growth.
Over these two years Singapore grew by 27 per cent and Shanghai by an
amazing 44 per cent. Within Europe one group of ports, those from
Hamburg in the north to Le Havre in the south, dominate trade. Only one
port outside this group, Marseille, features in the top six ports and, as
Figure 8.5 shows, Marseille has shown virtually no growth over the past 20
years. Other Mediterranean ports such as Algeciras and Genoa have shown
more growth in recent years and these are now in seventh and eighth pos-
ition behind Amsterdam with throughputs of 61 and 56 million tonnes in
2004 respectively.
The top three ports by volume of trade are also the top three container
ports in Europe (Figure 8.6) and the fourth largest is another port in the
same region, Bremen. The other significant container ports include Gioia
Tauro in Southern Italy and Algeciras in Southern Spain, plus Felixstowe
400
350
300
Rotterdam Marseille
250
million tonnes
Antwerp Le Havre
200 Hamburg Amsterdam
150
100
50
0
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
20
20
20
20
20
Source: Port of Rotterdam, Port Autonome de Marseille.
Figure 8.5 Traffic by major European ports, 1985–2004 (throughput

million tonnes)
in Eastern England. Note however that Rotterdam’s dominance is not so

great for container traffic.
If we take just Rotterdam as an example, a very high proportion of the
throughput is actually transshipment activity. By volume, some 90 per cent
of incoming traffic and about one-third of outgoing traffic is moved
onward or received by sea. A further third of outgoing traffic arrives by
barge. Road and rail account for a very small proportion of total traffic. If
we examine just container traffic to the port hinterland, the picture is rather
different with around 60 per cent moved by road, 30 per cent by barge and
less than 10 per cent by rail.
Although of much less total significance by volume, air traffic is very
significant by value and particularly for high-value, time-sensitive goods. The
top six airports by volume of cargo traffic are all in the North-West Europe
area with Paris-Charles de Gaulle having overtaken Frankfurt Rhein-Main,
London-Heathrow and Amsterdam-Schiphol in the last decade (Figure 8.7).
Some of the Paris-CDG growth can be accounted for by a significant decline
in cargo traffic through Paris-Orly. The fastest growth, however, in this group
9000
8000 Rotterdam
Hamburg
7000 Antwerp
Bremen
6000 Gioia Tauro
Felixstowe
Algeciras
1000 TEU
5000
4000
3000
2000
1000
0
19 0
19 1
19 2
19 3
19 4
19 5
19 6
19 7
19 8
19 9
19 0
19 1
19 2
19 3
19 4
19 5
19 6
19 7
19 8
20 9
20 0
20 1
20 2
20 3
04
8
8
8
8
8
8
8
8
8
8
9
9
9
9
9
9
9
9
9
9
0
0
0
0
19
Source: Port of Rotterdam.
Figure 8.6 Container traffic by major European ports, 1980–2004

(thousand TEUs)
of airports over this period has been that of Luxembourg, although other
secondary airports have recorded even faster growth. Cargo traffic through
the Belgian airport of Liège has increased nearly 50 times since 1995.
Significant year on year increases are being recorded in some of the faster
growing regions of the EU25 though airports such as Dublin and Prague.
Here we have shown the extent to which globalization in aggregate trade
patterns has had a significant impact on the nature of the associated
demand for transport. This suggests that there is considerable scope for
greater rationalization of transport supply to meet these changes, particu-
larly in terms of increasing intermodality.
INTERMODAL POLICIES AND THEIR

CONSEQUENCES
Freight transport in the EU is predominantly carried by road. Comparison

with the US (Figure 8.8) shows that, excluding the 40 per cent of intra-
2000
1800
1600
1400
1200
1000 tonnes
1000 Paris Charles de Gaulle London Heathrow

Frankfurt Rhein/Main Luxembourg
800 Amsterdam Schiphol Brussels National
600
400
200
0
1995 1996 1997 1998 1999 2000 2001 2002 2003
Source: Eurostat.
Figure 8.7 Air cargo traffic at major EU airports
EU15 traffic carried by sea, road is around 2.5 times as important for EU
traffic as in the US. The switch from rail to road has not occurred in the US
where road has grown at the expense of inland waterways and pipeline
traffic, but rail has maintained its share of tonne-km over the past 30 years.
In part this reflects the average length of haul which is still significantly
shorter in the EU than the US, reflecting the fragmentation of markets, but
it also reflects the fragmentation of transport supply. The desire to rebal-
ance mode use as part of a more sustainable transport system has been a
major preoccupation of European transport policies. The growth of inter-
national transport in the EU has left the rail systems unable to compete
with road in terms of price, speed or quality; the average speed of rail
freight in the EU has been estimated at about 18km/hour, much of which
is due to the problems occasioned by handing trains over from one national
rail operator to another at national borders.
Unlike the situation in the US where private sector rail operators have
developed competing trans-continental services, European railways remain
balkanized by their origins as publicly owned national rail systems. Inter-
national traffic, whether extra-EU or intra-EU, thus suffers from the lack
100%
80%
60%
tonne-km
40%
20%
0%
1970 1980 1990 2000 1970 1980 1990 2000
EU15 US
Pipeline Inland Waterway Rail Road
Source: Eurostat.
Figure 8.8 Modal split of intra-EU-15 and US freight traffic (excluding

sea), 1970–2000
of a genuinely continental network. Although the EU has been encourag-

ing the emergence of new generations of operators which can benefit from
the provision of open access to national rail networks, progress has been
slow as national operators (and labour union pressure) have been resistant
to the introduction of competition. Even where through operation is pos-
sible, the legacy of separate development of the national rail networks is
present in the infrastructure. Although most of the EU network has a
standard 1435 mm (4 feet 81⁄2 inches) track gauge, Ireland, Spain, Portugal
and Finland all have non-standard broader gauges.
More seriously for the development of combined or intermodal
transport the loading gauge is more constricted in Europe such that the
double-stacking of containers is not normally feasible. Moreover, there is
no standard loading gauge, there are differences between almost every
national system, albeit some of these differences are small, such that it is
impossible to develop a single standard European freight wagon which is
both efficient in being able to exploit the largest gauges and flexible enough
to be used anywhere.
Even where track and loading gauges are sufficiently similar to allow
through operation, technical differences in electrification systems, sig-
nalling and rail safety hinder simple through operation of block trains. This
is compounded, as suggested above, by the lack of harmonization between
working practices and labour markets.
Despite these hindrances, the promotion of intermodality has been at the
heart of EU policy since the 1992 White Paper (European Commission
1992). A significant effort in the development of the Trans-European
Networks (TENs) has focused on the development, first, of rail networks
which can substitute for road in the development of freight transport and,
second, on the creation of genuine intermodal networks. However, despite
the designation of a major north–south axis as a priority TEN (European
Commission 1998) little progress has been made. In 2002 only some 1.5 per
cent of total tonne-km of freight in the EU25 was carried by combined
transport. Continuing barriers exist in such factors as the lack of open
access to the rail network to allow the emergence of genuine intermodal
operators and the requirement for coastal shipping to complete formalities
at coastal ports (with associated costs of time and port dues) before gaining
access to inland waterways (European Commission 2001a).
A series of three rail packages designed to complete a single market in
rail transport, both freight and ultimately passenger, has been adopted by
the European Commission (2001b, 2002a, 2004a). These have been desi-
gned to open up national rail markets to competition, provide for inter-
operability and standards for rail safety and management, allow for
cross-border operation by train drivers and provide for a coherent system
of access charges. However, progress has been slow and much of the first
package had not been introduced across all member states by the time the
third package was published in 2004.
The EU is attempting to promote intermodality further through the
Marco Polo programme. This is a follow-on from the PACT (pilot action
for combined transport) programme which from 1992 has had some limited
success in moving freight from road to rail, inland waterways or coastal
shipping (European Commission 2001). However, much more action is
needed and Marco Polo as well as providing a vehicle to encourage inter-
modality will provide specific support to the development of logistics oper-
ations through start-up funding and the encouragement of innovation. A
key element in this plan is encouragement to the development of a new
form of freight intermediary, the freight integrator with responsibility right
along the logistic chain.
LOGISTICAL AND E-COMMERCE DEVELOPMENT

AND POLICY
The EU has adopted general policies towards the wider adoption of ICT.
These policies reflect concerns both that the fragmentation of markets
within the EU has militated against the adoption of common standards
and that less advanced regions are lagging behind in the adoption of new
technologies. There are significant variations in the adoption of mobile
telephony, internet usage and broadband application across EU member
states. Broadly speaking the Nordic countries have led in the penetration of
all technologies and the more peripheral countries, especially those in
southern and eastern Europe are considerably behind. Even within the core
of Europe there are significant variations. However, it is difficult to provide
a categorical picture of developments because they change very rapidly.
France, for example, having developed its own technology of Minitel, then
having lagged in the adoption of internet and broadband access, particu-
larly at the domestic level which is important for much of the development
of e-commerce appellations, has recently shown a surge in broadband
provision and usage.
Recent reports from the UK’s annual broadband benchmarking report
(Department of Trade and Industry 2004) suggest that the infrastructure
supply problem is no longer the main constraint on broadband usage; the
problem is more the recognition of application and training on the demand
side. In addition, increasing concerns over security, especially of wireless
networks, may lead to a lower than expected overall take-up. Interestingly
early adopters of this type of flexible technology such as the US and
Canada have noted significant falls in its use recently.
The eEurope 2002 Action Plan was launched in 2000 as part of the
Lisbon process of improving the EU’s economic, social and environmental
renewal (European Commission 2000). The Action Plan identified 11
action areas and 64 targets. These elements include internet connectivity for
households, business and schools; competition to reduce prices, especially
with respect to the introduction of broadband; the development of fast
research networks; providing the necessary legislative framework for elec-
tronic communication networks and services; and stimulating the use of the
internet across all aspects of business, commerce, education, government
and social life. The Final Report on eEurope 2002 which led to the further
eEurope 2005 initiative (European Commission 2002b) claims that most of
the 64 targets have been achieved with more than 90 per cent of schools and
businesses online and more than 50 per cent of citizens are regular users.
The fast research network GEANT has been a great success, but the
remaining challenge is to ensure the take-up of fast access by households
and small businesses. The wide availability of broadband access was a main
objective of eEurope 2005.
The European Competitiveness Report 2003 highlighted that ICT
capital had contributed more to the growth of labour productivity (meas-
ured as productivity per hour) in the US than in Europe. The 2004 Review
on the EU Economy (European Commission 2004b) emphasized the fol-
lowing factors explaining why the EU is lagging behind in terms of impacts
resulting from ICT:
1. the European economy is more focused on industries the technological

level of which is low or medium;
2. the ICT production sector (which is regarded as a crucial engine for
productivity growth) is relatively small in Europe;
3. the benefits from ICT use were less than those experienced in the US
economy.
To explain the US-EU differences in productivity growth, the lower pro-

duction share of ICT in Europe is not sufficient. The focus on ‘national
champions’ does not provide sufficient market incentive for the development
of innovation, including the inability to attract the best brains and resources.
Industries with higher-qualified workers and with a higher intensity of infor-
mation technology use e-business applications more frequently than other
industries. The adoption of e-business solutions is still low in small- and
medium-sized enterprises and those industries with low skill intensity.
Thus there remains a concern that e-commerce has not penetrated EU
business sufficiently to make a real difference. Although individual trans-
port and logistics operators have adopted innovative applications, these still
do not cover a large enough proportion of internal EU trade for this to have
a significant impact on productivity and growth.
FREIGHT TRANSPORT POLICIES AND

SUSTAINABILITY
Policy towards freight transport in the European Union is a shared respon-

sibility between the member states and the Union. There has been a require-
ment for a Common Transport Policy (CTP) since the original Treaty of
Rome in 1957. The logic is that with the removal of other barriers to trade
between the member states it is essential to have a consistent policy towards
transport. However, the implementation of transport policy, and critically
most of the finance for investment in transport, lies with the member states.
The member states also have a number of vested interests in transport to
protect, not least in terms of state-owned railways which led to quite strin-
gent regulation of the road freight transport sector. Although there was an
attempt to develop a strongly interventionist strategy in the 1960s through
the development of ‘forked tariffs’ (maximum and minimum prices for a
given haul or a given commodity), the trend to deregulation in the 1970s
and beyond led to a period of inaction on transport policy at EU level with
concern concentrating on the removal of social, technical and fiscal
barriers to free movement rather than the promotion of efficient markets
(Button 2000; Quinet and Vickerman 2004; Van Reeven 2005).
Initially the CTP was concerned solely with internal transport and covered
only land transport modes. Air transport was highly regulated through bilat-
eral agreements and sea transport was not a major feature of internal trade
between the original six member states which all had land boundaries with
other member states. It was the expansion of the EU which drew attention
first to the need to include maritime transport, both ferries and short-sea
shipping, because of the geographical situation of new members states such
as the UK, Ireland, Denmark and later Greece, but also because of the
importance of shipping as an activity in these countries. In 2003 some 35 per
cent of vessels and over 55 per cent of the tonnage controlled by EU15 coun-
tries were under Greek control although some three-quarters of this traded
under a foreign flag. International (external to the EU) trade by air and sea
was largely excluded because of the dominance of bilateral agreements and,
in the case of shipping, the major liner conferences.
However, recognizing, first, the increasing need for a common approach
to ensure greater sustainability of transport and, second, the internation-
alization of transport providers gave an impetus to the development of a
more consistent approach to transport policy at the EU level, albeit after
legal action regarding the European Commission’s failure to implement the
treaty provision for a CTP. Two White Papers on transport (European
Commission 1992, 2001) and a large number of supporting documents on
the development of Trans-European Networks (see European Commission
2003), infrastructure pricing and accessibility to local networks have
defined the EU principles of transport policy. This time, faced with the
global problems of the growth in air transport, the need for efficient
markets in all modes supplying international transport and the underutil-
ized resource of sea transport, a more comprehensive approach to trans-
port has been adopted.
Two issues dominate the thinking on transport related to trade. First is the
question of modal shift and the promotion of intermodality. Second is
the globalization of transport itself. Although sea transport dominates extra-
EU trade, it has made much less impact on intra-EU trade. Much
of the movement of goods by sea between EU ports reflects the increasing
hub-and-spoke operation of container shipping rather than the movement of

goods between EU origins and destinations. In part this is due to the way
modern industries have moved away from traditional locations in industrial
areas close to ports as they become less tied to the geographical advantages
of such locations and as land transport modes have become more efficient.
But it also reflects the way that the use of shipping imposes significant time
penalties for the transshipment of goods, while for many journeys there
would be significant increases in the total length of haul. The promotion of
shipping also carries with it the possible increase in road haulage to and from
ports except in the cases where barge or rail connections are possible. Both
Rotterdam and Antwerp are investing in rail connections. In the case of
Rotterdam this is through the completely new Betuwe line which is designed
to carry freight into the German hinterland as a parallel route to the Rhine.
Antwerp’s connection is via upgraded rail lines essentially as a competitive
response to Rotterdam’s perceived better connections into Germany, dubbed
‘the Iron Rhine’. This also highlights the lack of coordination where com-
peting ports are in different member states leading to duplication of facilities.
The concept of the ‘motorways of the sea’ is designed to appeal to
shippers that the use of short-sea shipping can be as convenient as road.
However, the apparent convenience and flexibility of road tends to lead to
shippers not considering short-sea routes as viable alternatives in many
cases. Even where they are, there are potential problems. A recent survey of
Irish exporters by the author identified that in a choice of using roll-on/roll-
off ferries and road via the UK or short-sea routes via Rotterdam for traffic
between Ireland and continental Europe, port congestion was often a
major deterrent to use of the short-sea shipping. Such congestion occurs
both in the port and on approach roads to the ports.
Globalization in the provision of transport poses a new set of questions
for EU transport policy. In shipping one of the consequences has been the
out-flagging of much of the EU merchant fleet such that by 2003 some 64
per cent of the EU-owned fleet sailed under non-EU flags. This reflects the
lower wage costs which can be obtained by using different flags but also
raises questions relating to regulation and safety of ships using EU ports.
While the use of out-flagged ships for extra-EU trade is a means of increas-
ing or maintaining competitiveness with goods from other countries, the
use of such shipping in intra-EU trade raises more difficult questions of
potentially unfair competition with land modes where the outsourcing
option does not exist. Particular concerns have been raised about ensuring
safety in such circumstances. For example the EU has led the way in legis-
lating for the banning of single-hull tankers from EU ports from 2015.
Globalization is also being felt in the emergence of global port operators.
Whereas traditionally ports were operated by often publicly owned local or
national operators, a new wave of mergers has led to the growth of a small
number of very large global players (Financial Times 2005).
Similar questions are raised with respect to air transport. The move
towards open-skies agreements between the EU and other major countries
has been a positive step, but the concomitant growth of strategic alliances
risks the loss of some of the potential benefits in rent-seeking by these
alliances. One of the effects of this is through the way that the major
alliances control key European hubs: Star Alliance through Lufthansa
dominates Frankfurt, One World through British Airways dominates
London Heathrow and Sky Team through Air France dominates Paris-
Charles de Gaulle (and with the merger between Air France and KLM also
Amsterdam Schiphol). In passenger transport this dominance has been
controlled by the ease of entry for low-cost carriers which have been able
to take not just marginal traffic but also a significant share of core business
traffic, even when this has necessitated the use of secondary airports. In
freight transport the major operators have continued to dominate except in
the specialist courier market where firms such as FedEx and DHL have
developed their own key hubs and have shown that they are able to use their
considerable market power in selecting hub airports. This is demonstrated
by DHL’s recent move from Brussels to Leipzig as its core base.
On safety and environmental issues in air transport the EU has also
begun to recognise the advantages in moving collectively, for example over
issues such as the revision of aircraft noise standards in the International
Civil Aviation Organization. Globalization has not only affected the trans-
port operators, it is also apparent in the operation of ports and airports.
This may be to some extent a countervailing power to globalization in oper-
ations but also risks the distortion of internal transport as it may lead to
longer internal transshipment of goods because of strategic pricing by port
operators. Potential alliances or mergers between operators and ports is the
next stage in this development although so far the European Commission
has been concerned to monitor these carefully. Ownership of airports by
airlines has generally not been endorsed. Special deals on airport charges
by airport authorities anxious to attract airlines, especially low-cost air-
lines, has been ruled anticompetitive. Nevertheless, main ports and air-
ports, those which serve as global gateways, have typically been supported
by national governments to avoid loss of traffic. Thus, for example,
Rotterdam and Antwerp have both been able to a degree to dictate policy
over access to the Dutch and Belgian governments, and BAA, which con-
trols the main London airports, has been influential in the arguments over
future runway and terminal needs for the UK.
All these cases reflect the way that national governments are convinced
of the role which these global gateways play in contributing to national
economic performance. The EU has not been able to exercise any real
influence over this as these remain matters over which the member states
retain key decision-making powers under the provisions of subsidiarity.
Member states urge the EU to act when it is thought that this can control
the actions of other member states or those of non-members. For example
the recent UK White Paper on transport policy (Department for Transport
2004) only refers explicitly to the EU in terms of support for policies
towards opening markets in shipping and aviation.
One area of key significance in the development of more efficient
transport by all modes is the use of satellite navigation. The EU took the
decision to invest in its own technology, Galileo, to provide commercial
coverage for multiple uses independent of the existing US and Russian
satellite communication and global positioning systems but compatible
with them to ensure global coverage. The target is for Galileo to be oper-
ational by 2008. This would provide not just the ability to track vehicles,
useful for such diverse uses as shipping safety and road pricing, but also for
the multi-modal tracking of goods to ensure efficient just-in-time delivery
(European Commission 2001).
CONCLUSIONS
Barriers to transport and trade are of three main types: physical or infra-
structure barriers, regulatory barriers and market-induced or competitive
barriers. National and international policy can address the first two of
these, but the third is a much more difficult problem to solve. The EU has
tended to concentrate on solving its internal problems rather than having a
clear position in the various international fora, which have been left largely
to bilateral actions by member states. The emphasis on infrastructure in the
TENs and other initiatives arises because of the need to be seen to be doing
something which is clear and visible. As many studies have shown, however,
simply providing infrastructure does not ensure that it is used to maximize
the economic benefit (Vickerman 2002, 2003).
As the work of Hummels (2004) and Venables (2004) shows, there are
strong two-way links between transport and trade, which are still imper-
fectly understood in both analytical work on trade and in both trade and
transport policy making. The globalization of goods production (and ser-
vices) and the globalization of transport markets interact in a complex
manner. Transport markets in the EU, especially when it comes to the use
of public policy and funding to provide the necessary infrastructure for new
developments, is often still too narrowly focused and parochial to meet the
global challenge.
What are the priorities for the future development of policy in this area?
First, an overriding concern of the EU is to maintain its share of world
trade in the face of competition from the newly emerging global players:
Brazil, Russia, India and above all China (the BRIC economies). Second,
there is the need to balance the EU interest with the more varied interests
of the 25 individual member states who retain considerable sovereignty
over these issues. Third, there is a recognition that the EU is committed
to playing a role in enhancing sustainability under the Kyoto commit-
ments, which has considerable implications for the future development of
transport.
Maintaining the share of world trade depends fundamentally on enhan-
cing productivity in the EU. Much of the rationale for the various restraints
on trade and subsidies to specific sectors which cause such problems in the
World Trade Organization meetings comes from the lack of competitive-
ness experienced by many sectors in the EU economy. This arises both in
the ‘old Europe’ of the EU15, the countries of Western and Northern
Europe, and the ‘new Europe’ of the new, former Communist member
states of Central and Eastern Europe. This has been identified as a key
policy problem for at least two decades and resulted first in the creation of
a Single Market in the EU – the so-called 1992 programme – and more
recently in the attempted renewal through the ‘Lisbon Agenda’ (see Sapir
2004 for a full discussion). Much of the rhetoric of the Lisbon Agenda is
about the creation of flexible markets, not least in the labour market, which
is riddled with anticompetitive practices in many EU countries, and more
particularly in the EU15, than in the new member states. However, discus-
sions of increasing competitiveness also recognize the importance of
improved transport, in terms of both infrastructure improvements to inte-
grate national networks and the liberalization of markets so long dom-
inated by publicly owned operators.
Unfortunately, in both of these areas the EU has failed to meet expecta-
tions: the Lisbon Agenda has not been delivered effectively as the report
of the High Level Group identified (Kok 2004). Just as identified in the
report on the lack of progress in the development of the TENs (European
Commission 2003), the EU has been singularly unsuccessful in effecting
reforms of those markets where national interests have prevailed. Transport
is riddled with such interests and the moulding of these into a genuinely
European interest is important for the EU’s ability to make serious progress
on global transport issues such as the long awaited open skies initiative with
the US. If an agreement on a so-called ‘Single European Sky’ – an integra-
ted air traffic management and control system – cannot be reached there is
little hope for real progress on extra-EU matters. Despite this, a number of
measures designed to liberalize air transport links, both with neighbouring
countries such as Ukraine and Russia and with more distant ones such as
Japan and China, have been concluded.
As well as the individual vested interest of member states in global trans-
port, it will have become clear that these are also found in internal trans-
port markets, particularly rail. One area where the EU has made some
progress on agreeing on clear targets is in environmental sustainability with
a strong commitment to Kyoto, although it has to be admitted that achiev-
ing these targets has been much less satisfactory.
Thus the areas where policy needs to be focused are in the completion of
the single transport market, driven more by changes to its competitive
structure than by a reliance on infrastructure, and in the EU acting collec-
tively in negotiations on global transport issues, including the environ-
mental impacts. It is possible that such developments may ultimately be
forced on governments through the globalization of key elements in the
transport chain, notably through the ownership of ports and airports.
REFERENCES
Button, K.J. (2000), ‘Transport policy in the European Union’, in J.B. Polak and
A. Heertje (eds), Analytical Transport Economics, Northampton, MA, USA and
Cheltenham, UK: Edward Elgar.
Department for Transport (2004), The Future of Transport: A Network for 2030,
Cm6234, London: The Stationery Office.
Department of Trade and Industry (2004), ‘Business in the Information Age: the
International Benchmarking Study’, accessed at www.dti.gov.uk/bestpractice/
assets/ibs 2004.pdf.
European Commission (1992), The Future Development of the Common Transport
Policy: A Global Approach to the Construction of a Community Framework for
Sustainable Mobility, Luxembourg: Office for Official Publications of the
European Communities.
European Commission (1998), ‘Trans-European transportation network. Report
on the implementation of the guidelines. Basic data on the networks’, report to
the European Parliament, the Council, the Economic and Social Committee and
the Committee of the Regions on the implementation of the guidelines for the
development of the trans-European transport network, Decision 1692/96/EC,
DG VII, Brussels.
European Commission (2000), ‘eEurope Action Plan 2002 – an information society
for all’, Feira Council, June, accessed at http://europa.eu.int/information_
society/eeurope/action_plan/index_en.htm.
European Commission (2001a), European Transport Policy for 2010: Time to Decide,
Luxembourg: Office for Official Publications of the European Communities.
European Commission (2001b), Directives 2001/12EC, 2001/13EC and 2001/14EC
(The First Railway Package), European Commission: Brussels.
European Commission (2002a), Towards an Integrated European Railway Area:
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European Commission (2002b), eEurope 2005: An Information Society for All,

COM (2002), 263, action plan presented to the Sevilla European Council, 21/22
June.
European Commission (2003), ‘High level group on the trans-European transport
network’, report to the European Commission, Brussels.
European Commission (2004a), Further Integration of the European Rail System:
Third Railway Package, COM (2004) 140, Brussels: European Commission.
European Commission (2004b), The EU Economy: 2004 Review, COM (2004) 723,
Brussels: European Commission.
Financial Times (2005), ‘World ports: a survey’, 23 May.
Hummels, D. (2004), ‘Transportation costs and trade over time’, in Transport and
International Trade, Economic Research Centre Round Table 131, European
Conference of Ministers of Transport, Paris: OECD.
Kok, W. (2004), ‘Facing the challenge: the Lisbon strategy for growth and employ-
ment’, report from the European Commission High Level Group chaired by Wim
Kok, Brussels.
Quinet, E. and R. Vickerman (2004), Principles of Transport Economics,
Northampton, MA, USA and Cheltenham, UK: Edward Elgar.
Rietveld, P. and R. Vickerman (2004), ‘Transport and regional science: is the “death
of distance” premature?’, Papers in Regional Science, 83, 229–48.
Sapir, A. (2004), An Agenda for a Growing Europe: Making the EU Economic System
Deliver, report of an independent high-level study group established on the ini-
tiative of the President of the European Commission chaired by André Sapir,
Oxford: Oxford University Press.
Van Reeven, P. (2005), ‘Transport policy in the European Union’, in K.J. Button,
and D.A. Hensher (eds), Handbook of Transport Strategy, Policy and Institutions,
Handbooks in Transport Volume 6, Oxford: Elsevier.
Venables, A.J. (2004), ‘Infrastructure, trade costs and the gains from international
trade’, in Transport and International Trade, Economic Research Centre Round
Table 131, European Conference of Ministers of Transport, Paris: OECD.
Venables, A.J. and N. Limao (2002), ‘Geographical disadvantage: a Heckscher-
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Transport Demand, proceedings of the International Seminar of the European
Conference of Ministers of Transport, December 2002, Paris: OECD.
9. Policy implications of dynamic
globalized freight flows in
North America
Mark Maggio and Roger Stough
TRANSPORT POLICIES, FREIGHT MOVEMENTS

AND TRADE
The scope of transport and the transactions costs that facilitate and enable
trade are a reflection of the existing technology and institutional infra-
structure that support the international trading system, which is seen to be
mutually beneficial to both buyer and seller. The theory of these costs and
benefits (Ricardo 1817) was seemingly well understood in the comparative
advantage era of trade of the early and mid-twentieth century.1 However,
recent forces have driven a renewed and dynamically changing interest in
international trade, and these developments have obscured this under-
standing and have, indeed, driven the development of alternative theory
(Fujita and Hu 2001; Fujita et al. 2001; Krugman 1991).
Global trade policy negotiations over the last 15 years, from the US
perspective, have centered on the so-called ‘Washington Consensus’ items,
a term coined in 1990 by John Williamson, now taken as synonymous with
‘globalization’ (see Williamson 2002). There have been a number of criti-
ques of what was seen as a policy agenda, including Naím (2000, 2002)
and Stiglitz (2002). However, Williamson (2002) suggests that the compon-
ents of the Washington Consensus were never intended to be a policy
agenda. It comprises suggestions for the management of trading partner
economies that include fiscal discipline and redirection of public expend-
iture priorities toward fields offering both high economic returns and
the potential to improve income distribution such as primary health care,
primary education, and infrastructure and a host of other potential
targets such as tax reform (to lower marginal rates and broaden the tax
base), interest rate liberalization, competitive exchange rates, trade liberal-
ization (reducing trade barriers using tariffs, quotas, and non-tariff barri-
ers), liberalization of inflows of foreign direct investment, privatization,
238
Policy implications in North America 239
deregulation (to abolish barriers to entry and exit) and securing property
rights.
In addition many of the following items have been suggested to be a part
of trade policy promotion for the US: suggestions for corporate governance
improvements, anticorruption measures, flexible labor markets, WTO agree-
ments, financial codes and standards, ‘prudent’ capital-account opening,
non-intermediate exchange rate regimes, independent central banks/inflation
targeting, social safety nets and targeted poverty reduction. And finally,
more generally, environmental consequences, wages and labor standards,
and sustainable development policies are needed to promote trade.
It is difficult to conceptualize any trade regime that would be able to
satisfy all the above criteria, but given this complex of trade policy targets
it is not surprising that both theoretical and operational turbulence in
transport and transaction costs of trade exist today. The purpose of this
chapter is not to provide a full understanding of the above factors and how
they impact logistics and transactions costs but to provide some insight into
the nature and scope of trade in an era of renewed global trade, facilitated
by rapidly expanding intermodal transport, from the perspective of the US
and its related policy perspectives and issues.
The forces driving globalization are creating considerable challenges and
dynamics in the international trading system. As a consequence, changes in
transport and related transaction costs (for example, logistics, communica-
tion, tracking) are likewise dynamic and in continual adjustment. Because
the forces driving these changes are relatively well understood (Nijkamp
2003; Stough 2005) they are only briefly summarized here. They include a
rapid growth of information and computer technology (ICT) that has
greatly increased the availability and capacity to generate and use new
information and knowledge. As this technology evolved over the past 30
years it has diffused into all sectors of the economy and has greatly
enhanced the opportunity for innovative new solutions and thus new busi-
nesses. Further, political change has opened many new markets in Eastern
and Central Europe and East and Central Asia. On top of this, liberaliza-
tion of economic and social policies in many developing countries has
unleashed economic growth in many developing countries and in particu-
lar in the two largest nations of the world, India and China.
Theoretical critique of the neo-classical growth model (Marshall 1890;
Solow 1957) has led to an economic growth theory called the new growth
theory or the endogenous growth theory (Romer 1986) that provides a
renewed rationale for adopting liberalization policies and for making the
kind of internal institutional change that has propelled such growth. In
sum, new technology, political and ideological change, new theory and
adoption of better-understood methods for supporting growth have all
contributed to the rise of globalization and thus general expansion of trade

worldwide.
The forces of globalization and the impact they have had on international
and particularly intermodal transport operations and costs and their
related transaction costs are the rationale for the examination of recent
developments in trade and transport in the US. The following analysis pre-
sents the basic policy facts of the US trade activity over the past decade.
Profile of US Global Trade and Freight
The US is the single largest trading country in the world, accounting for
more than 20 per cent of world trade and thus about the same as the largest
trading bloc in the world, the European Union. Over the past decade or so
the value of its exports increased nearly 70 per cent (Figure 9.1) and volume
increased slightly (Figure 9.2). Openness to trade of the US during this
period of increasing trade expanded with a 4 per cent increase in share of
trade in GDP (Figure 9.3). Like throughout much of the world including
the European Union, the relative openness of the US economy dropped
slightly in 2000 remaining stable thereafter at about 14 per cent.
Despite the fact that the US trade with other nations and trading blocs
such as the EU has increased significantly during the past decade, it is not
so nearly balanced as for the EU, where growth in value of imports has been
very nearly the same as for exports. In the US, a small gap between imports
and exports in 1992 grew to a huge gap of some $400 billion by 2003. This
excess of imports amounted to about 4 per cent of GDP in 2003.
1 800000
1 600000
1 400000
Million of dollars
1 200000
1 000000
800000
600000
400000
Exports Imports
200000
0
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Years
Source: Bureau of Economic Analysis.
Figure 9.1 US international trade in goods and services (millions of

dollars), 1992–2003
Kilograms (millions) 200 000
150 000
100 000
Exports Imports
50 000
0
96
98
00
02
04
19
19
20
20
20
Years
Source: US Department of Commerce and the US International Trade Commission.
Figure 9.2 Total US imports and exports (by volume in kilograms)
16
Imports/GDP Exports/GDP
14
12
Percentage
10
8
6
4
2
0
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Years
Source: Bureau of Economic Analysis.
Figure 9.3 Share of trade in GDP, 1992–2003
Growth of the US foreign trade deficit has continued unabated into 2005,
reaching about 6 per cent of GDP (Blustein 2005). Factors responsible
include a continued expansion of fuel consumption relative to most other
parts of the world (especially oil and natural gas), huge new demand for
imported products in the US, including automobiles and auto parts, indus-
trial components, and continued massive growing demand for consumer
products.
Some would argue that the US is selling its future. However, others,
including President George W. Bush and the US Treasury Department,
argue that the United States, as by far the fastest-growing major economy,
will remain attractive to investors for the foreseeable future. The Treasury
Department reiterated its position that the trade gap is a symptom of the
US economy’s relative strength (Blustein 2005). Others have suggested that
the gap is to some extent an artificial one, because many service exports are
not effectively recorded and thus do not show up in the trade accounts.
Data presented in Figure 9.4 show the role of transportation in the US
economy to be relatively stable at about 10.7 to 10.8 per cent from 1990
until 1999 but dropping noticeably to 10.6 per cent in 2000 and then again
to 10.5 per cent in 2001. Data does not exist to track this trend further
but certainly the change is likely due to the ICT or technology economy
downturn in 2000 and 2001, which initiated a concern over the appropri-
ateness of corporate governance, considerable tightening of the availability
of capital to fuel the growth of new ventures, a large drop in consumer
confidence and a general slow-down of consumer demand for most
commodities.
There is significant evidence that productivity was increasing in the
transport and related logistics sectors since airfreight deregulation in 1977,2
passenger airline deregulation in 19783 and deregulation of motor carriers4
and railroads5 in 1980. One study estimates the productivity increase from
motor carrier deregulation alone to be $30 billion, just during its first
decade – the 1980s (Farris 2005). This improved productivity is a function
10.85
10.8
10.75
10.7
Percentage
10.65
10.6
10.55
10.5
10.45
10.4
10.35
1990 1995 1996 1997 1998 1999 2000 2001
Years
Source: US Department of Transportation, Bureau of Transportation statistics; based on

data from US Department of Commerce, Bureau of Economic Analysis, National Income
and Products Accounts, accessed at http://www.bea.doc.gove/bea/dn1.htm.
Figure 9.4 US transportation in GDP, total (per cent)

of market-based rationalization of rates and routes as well as improved

vehicle technology, including truck size and weight (Bronzini and
Middendorf 1994) and also greatly improved logistics and other support-
ing services such as information and communications systems (McMullen
2004) as well as the substitution of communication for transport, that is,
‘bytes’ substituted for freight or personal travel.
Productivity and traditional methods of productivity analysis for public-
sector transport assets such as highways and airports have been formally
reported, as well (Transportation Research Board 1991) and they bolster
the argument that there have been significant improvements in transport
and logistics efficiency, taken as a system.
Ocean Shipping
Given the vast trading footprint of the US that includes considerable trade
with Europe and Asia as well as Latin America and Africa, it is not sur-
prising that the largest modal share of internationally traded goods is
ocean or sea shipping which accounts for about 40 per cent by value and a
whopping 78 per cent by weight in 2001 (Figure 9.5). One reason for this
stems from the fact that the US exports and imports a surprisingly large
volume of resources and fuels (oil, natural gas, coal and ores of various
sorts). The ocean-shipping share has been relatively stable for some time as
100%
90% Other
80% Pipeline
Rail
70% Truck
60% Air
Water
50%
40%
30%
20%
10%
0%
Value (billion of dollars) Quantity (million of tonnes)
Source: US Department of Transportation, Bureau of Transportation Statistics

(May 2002).
Figure 9.5 Modal shares of US international merchandise trade by value

and weight, 2001
100%
90% Other
80% Pipeline
Rail
70% Truck
60% Air
Water
50%
40%
30%
20%
10%
0%
Value (billion of dollars) Quantity (million of tonnes)
Source: US Department of Transportation, Bureau of Transportation Statistics (May 2002).
Figure 9.6 Modal shares of US international merchandise trade by value

and weight, 1997
shown by comparing data presented in Figure 9.6, which presents the

modal split data for 1997 with that of Figure 9.5.
US international trade and logistics is supported through the strong and
dominant role played by maritime transport in a network that includes
some of the largest seaports in the world. Primary among these are the port
of Los Angeles, the port of Long Beach (both in California) and the port
of New York and New Jersey. While considerable bulk commodities (grain,
raw materials, and fuel such as coal) are shipped from these ports, a focus
on container traffic is evident, including 1 500 000, 1 800 000 and 2 200 000
TEU6 respectively for the three ports in 1995 (Figure 9.7). The TEU
throughput volumes increased to 2 200 000, 3 450 000 and 3 200 000 respect-
ively by 2001, evidencing an average increase in TEUs for these three very
large ports of about 42 per cent over the period.
The remaining top ten container-centric ports include Charleston (South
Carolina), Oakland (California), Norfolk (Virginia), Seattle (Washington),
Savannah (Georgia), Houston (Texas) and Miami (Florida). The volume
handled by these ports collectively is not much greater than that handled
by the port of Los Angeles or the port of Long Beach. Further, there has
been little growth in the volume of containers in these ports.
It is important to note that three sets of ports service most of the US
international maritime-based trade. One set is found on the West Coast of
the US (Los Angeles, Long Beach, Oakland, Seattle), another on the East
4000
3500
3000
2500
TEU
2000
1500
1000
500
0
1995 1996 1997 1998 1999 2000 2001
Years
Los Angeles, CA Norfolk, VA

Long Beach, CA Seattle, WA
New York, NY/NJ Savannah, GA
Charleston, SC Houston, TX
Oakland, CA Miami, FL
Source: US Department of Transportation, Maritime Administration (May 2002);

based on Journal of Commerce (PIERS 2001).
Figure 9.7 Traffic by top 10 US maritime container ports, 1995–2004

(thousands of TEUs)
Coast (New York/New Jersey, Charleston, Norfolk and Savannah) and the
final set on the Gulf of Mexico (Miami – also with access to the Atlantic
Ocean, and Houston). The port of New Orleans should be added to the
Gulf of Mexico list as it is a port that supports large bulk cargo shipments
(for example, grains, coal and petrochemicals) and it is intermodal with
respect to ocean ship, truck, rail and intracoastal barge movement, but it
does not have a large volume of container traffic. Hurricanes Katrina and
Rita critically compromised operations at the port of New Orleans in 2005.
Three months after the hurricanes, the port was operating at about 40 per
cent of its pre-hurricane capacity, with two of its three container terminals
still shut down. Freight has been diverted to Houston, various Florida
ports, and Mobile, Alabama, among other logistical options (White 2005).
Other Modes
Trade in high-value commodities is carried primarily by two modes: air

(about 28 per cent) and truck (about 20 per cent). The tonnage shipped by
air is scarcely measurable, with trucks accounting for about 10 per cent of
all tonnage. Rail is responsible for about 4 to 5 per cent of value shipped.
Finally, although the value of goods or material shipped by pipeline is very
small, this mode accounts for about 5 per cent of all tonnage shipped.
A recent work has estimated the value of international trade on US high-

ways (National Research Council 2005).
The high value of trade shipped by air is supported by a large and densely
interconnected network of airports that are spread across the US and tied to
its major producing and consuming markets. At the same time, it is of inter-
est to note that the three largest cargo airports in the US, by volume, are all
located on the edge of the US system thus serving as ports of exit and entry
for goods shipped to and from other parts of the world (Figure 9.8). Airports
located in Miami serve as a gateway to and from Latin America, airports in
Alaska serve as a gateway to the Orient, and airports in the New York region
serve as consolidation centers and gateways to and from Europe. The fact that
the Anchorage, Alaska, airport showed considerable growth in trade between
1995 and 2000 is indicative of the huge growth in trade volume between the
Orient in general, and China in particular, during this period and since.
However, improved airplanes and engine performance are likely to have
slowed this development with Los Angeles, San Francisco and Chicago,
increasingly taking freight that would have been routed through Anchorage.
Other airports that have significant international freight shipping func-
tions include Los Angeles, Chicago, San Francisco, Newark (New Jersey),
Atlanta, Memphis and Fairbanks (Alaska). Freight volume from these air-
ports has been increasing steadily (Figure 9.7).
2 500 000
2 000 000
Tonnes
1 500 000
1 000 000
500 000
0
1990 1995 2000
Years
Anchorage, AK Miami, FL New York JFK, NY Atlanta Hartsfield, GA

Chicago O’Hare, IL San Francisco SFO, CA Newark, NJ
Memphis, TN1 Fairbanks, AK Los Angeles LAX, CA
Source: US Department of Transportation, Bureau of Transportation Statistics, Office of

Airline Information (May 2002).
Figure 9.8 Top 10 US airports for international freight by weight, 1990,

1995, 2000 (short tonnes)
The above data and assessment have shown the impact the forces of
globalization have had on various aspects of international trade originat-
ing or arriving in the US. Both imports and to a lesser extent exports have
increased steadily both in absolute terms and relative to GDP. However, a
significant trade gap has arisen that may be masked to some extent from an
inability to measure service exports from the US. Infrastructure capacity of
both airports and seaports has increased dramatically over the past decade.
At the same time, the modal distribution of international freight has
remained relatively constant. Surprisingly, transport’s share of GDP has
decreased slightly due in part to increased efficiency in transport and
related services such as logistics.
Intermodal Policies and Consequences
About 60 per cent of freight (tonne miles) transport inside the US is

handled by truck and rail with truck having the larger share in 2002 at
about 32 per cent (Figure 9.9). The combined truck and rail share is
up from about 52 per cent in 1993. The inland waterway transport share
(26 per cent) was about the same as truck and rail in 1993 but decreased to
100%
90%
80%
70%
Percentage
60%
50%
40%
30%
20%
10%
0%
1993 1997 2002
Years
Other and unknown modes Pipeline Water Truck
Multimodal combinations (1) Air (includes truck and air) Rail
Source: US Department of Transportation, Bureau of Transportation Statistics (May 2002).
Figure 9.9 Modal split of US intra-trade by weight (tonne-miles)

about 18 per cent by 2002. The pipeline share has remained stable at about
18 per cent.7 The relative equivalence between demand for truck and rail
transport in the US is generally a function of on the one hand great dis-
tances and tonnages that favor rail, and on the other hand, the timeliness
and door-to-door characteristics that favor truck transport.
Unlike the European Union, the US has not adopted specific policies
to, for example, move the system toward a more sustainable vision, that
is, as in Europe where the policy focus is upon trying to rebalance the
modal freight split so that the more fuel-efficient systems such as rail and
inland waterways could increase their share and thus presumably enhance
sustainability of the freight transport system. Standard rail gauge8
throughout the US, plus significant voluntary industrial cooperation on
interchange standards and voluntary interline agreements,9 and the more
market-oriented environment in the US have resulted in a quicker adjust-
ment of the demands that globalization has placed on the transport
infrastructure, especially rail. For example, while freight cannot move as
quickly by rail as by truck, rail achieves an advantage once distances are
greater than 500 to 750 miles (which are quite common in the US). This
modal split, as opposed to one at greater distances, has occurred because
improved logistics and other transport support services have adjusted
to support truck by rail and inland waterway transport systems and
because the physical infrastructure (interoperability) is standard through-
out the US.
Intermodality has been a goal of the freight transport system in the US,
unlike in Europe; this development has been driven more by market
response and industrial cooperation than by government policy. Some
states such as Indiana, Iowa, and Virginia have promoted rail/truck trans-
fer terminals and/or inland port services that provide the same transfer
potential, and such ventures have been mostly left to the private sector. The
next part of this chapter provides some key policy tools that promote and
enable intermodal and international freight operations.
Intermodal Transport Policies
The US exhibits relatively few government policies that benefit intermodal

freight movement compared with other industrialized nations such as
Europe and Japan. The market model has wide acceptance in US industry,
and as a result policy tools and policy leverage is limited. Some policies
involve subsidies; others do not. Many of the policy choices are taken not
at the federal level but at state, regional, and local levels by government
or often by quasi-government organizations. Several policy options are
utilized in the US. They include:
1. subsidies and financial earmarks for highway and railway improve-

ments (ramps, access roads, sidings) for ports, airports, and truck-rail
intermodal terminals;
2. duty-free trade zones with intermodal capabilities (tax and/or tariff
deferral or hiatus);
3. public-sector equity participation in intermodal yards, parking, and
transfer facilities, including air, truck, rail, and ocean;
4. financial participation to include tax increment financing, or bonded
indebtedness on the part of the state or municipality;
5. public-sector participation in intermodal facilities in the form of favor-
able zoning decisions, tax abatements, and utilities rights-of-way and
provision;
6. favorable tax policies on some capital equipment and rolling stock,
including accelerated depreciation;
7. cargo, container, and vehicle pre-clearance systems (for tolls, security,
customs, and immigration purposes);
8. a small fraction of government freight is shipped intermodally (for
example mail);
9. cargo preference laws that could have the unintended effect of shifting
freight to intermodal means for part of the journey.
Effects of these policies can be important at the firm level and in a local
or limited regional economy but are not thought to be large if seen on the
national level. No national study estimating the value of these subsidies
and other policy levers has been conducted.
However, a committee of the US National Research Council, Trans-
portation Research Board, has very recently concluded that the criteria for
any level of government participation in intermodal projects are unclear.10
They propose guidelines to help agencies evaluate proposals for public
investment in intermodal freight facility projects. They also examined gov-
ernment policies beyond infrastructure investment that affect freight effi-
ciency, including regulations and operating practices for public roads, ports
and waterways (Transportation Research Board 2005).
The Committee adopted a simple cost–benefit rationale for government
participation intermodal projects – that the project has benefits that exceed
its costs. Furthermore, it suggested that each project with public-sector par-
ticipation also meet one or more of the following conditions:
1. reduce externalities of transport, such as pollution and traffic conges-

tion;
2. yield economic development benefits (or jobs) beyond those to users of
the facility;
3. redress any imbalance caused by subsidies to carriers or competing

freight facilities;
4. be necessary for national defense or public safety;
5. fall within established government purview, such as government-
owned highways, ports, waterways, and airports.
As these types of partnership-based intermodal infrastructure facilities

have evolved so have the logistics support infrastructures that enable quick
multi-modal transfers of standardized containers, coordinated from origin
to destination with RFID11 and related satellite tracking technology. A
deep and well-developed logistics and related communication infrastruc-
ture is in place to support the continued evolution of the intermodal
system. Although a few such facilities are under way in Europe, for
example, Interporto Bologna SpA,12 the intermodal terminal in Bologna,
Italy, most are in early stages of development. What is less clear in both
Europe and the US is the degree to which the intermodal infrastructure has
evolved between air and truck modes. In conclusion, it is expected that the
US intermodal infrastructure will continue to develop robustly in a market-
mediated, generally without economic regulation, widely dispersed link-
and-node pattern, both organizationally and geographically.
Logistical and E-commerce Development and Policy
The knowledge age has brought new technology that has created multiple
waves of change in the logistics industry. Even by 1995, transaction costs in
logistics had been reduced by broad acceptance and adoption of technolo-
gies such as barcodes, warehouse management systems, enterprise planning
and communication systems (for example, Oracle, PeopleSoft, SAP.com), as
well as RFID systems, satellite tracking of vehicles and global positioning
systems, and third- and fourth-party logistics load consolidation and
booking companies. Despite the belief that the maturation of these tech-
nologies and organizational approaches would lead to industry consolida-
tion, it is decentralizing (Cooke 2000b). This decentralization has occurred
because innovation in information technology has not slowed and with the
rise of the Internet and supporting e-commerce technology. These develop-
ments and continuing innovation of them have helped create and maintain
a partnering business model that enables a more decentralized decision-
making model but at the same time a more integrated control of costs and
provision of logistics services up and down the process and value-delivery
chain. Thus, as in many other industries, in transport and logistics the
continued evolution of ICT and its diffusion into most industry sectors
continues to drive change in firm and industry operations and structure.
The remainder of this part of the paper reviews briefly some of the tech-
nology developments that support the movement of goods and services in
general and logistics in particular. First, the technology applications are
briefly described and assessed for their contribution to the evolution of
logistics and the related reduction of transaction and transport costs. Then,
the policy framework or lack thereof in the US is considered. It is import-
ant to note from the outset, however, that the US has taken a generally
market-oriented or mediated approach to international and intermodal
transport and logistics.
Logistics is the ‘process of planning, implementing, and controlling the
efficient, effective forward and reverse flow and storage of goods, services
and related information between the point of origin and the point of con-
sumption in order to meet customers’ requirements according to the
Council for Supply Chain Management Professionals.13 So logistics deals
with supply chains, including their management, planning, buying, raw
materials management, production, stock management, distribution and
recycling and management integration. The base information and commu-
nications technologies that have impacted logistics include vehicle tech-
nologies (location and tracking, sensors, fuel injection systems, safety
devices as well as such basic attributes as tires, batteries, paint and light
weight materials). Beyond these technologies those that more directly
impact logistics management are computer-aided dispatch systems, bar-
codes, RFID, GPS and ICT hardware and software (see Stough 2001,
515–16, for a full description).
E-commerce is having a large and diverse impact on logistics operations
and management, as it has provided a completely new framework for con-
ducting business in which customers interact with the total business system
made up of the total web or business system, including all companies and
industries, thus going far beyond the individual business establishment
(Fingar 2000). In so doing, all business processes are becoming organized
around the customer, thus diverging greatly from the more linear and trad-
itional supply chain that initiates with the sourcing of products, materials
and services.
The above referenced technologies and related processes have achieved a
degree of time compression in value delivery, therefore making time com-
pression the most important variable in profitability and customer satis-
faction (Kash 1990). That much of this has been achieved to date suggests
that even larger changes in cycle time are on the horizon.
For business-to-business transactions, the move toward just-in-time
delivery, enabled by leapfrog improvements in logistics information and
communications, has been impressive. For example, Stiglitz (2000) shows
that the average lead-time for ordering materials and supplies ahead of
production has dropped from 72 days in 1961 to fewer than 50 days in 1999.
Inventories have fallen from roughly 1.6 times monthly sales in the mid-
1970s to about 1.2 times monthly sales or less today.
Logistics costs (excluding transportation) represented 19.1 per cent of US
GDP in 1990; these costs had fallen to less than 11 per cent of GDP by the
turn of the century. Investment in advanced logistics is self-perpetuating due
to the networked interrelatedness of firms and their inter-industry supply
chains. As such, the concept of a ‘virtual’ supply chain, after Finger (2000)
that envisions a web of organizations that source, produce and distribute
products and services may become the single central institutional infra-
structure supporting a new form of competition that occurs across the
whole value chain with the supply chains of different companies competing
against each other. Such a vision supports a view of logistics support oper-
ating a set of dynamic and interrelated trading networks. The view of com-
petition around and over a vastly extended supply chain led Cooke (2000b)
to the view of ‘supply chain communities’ that enable conduct of business
electronically in real time. In limited areas of some industrial sectors
including foods, auto parts, and chemicals, this approach is no longer a
vision but a reality.
There are some constraints facing the evolution and achievement of the
vision outlined above. First, order fulfillment in the explosive growth of on-
line sales has not been accompanied by a growth in distribution capacity
(Jedd 2000; Stough 2001: 517). Recent efforts to address this situation
have focused primarily on disintermediation or bypassing intermediaries
between buyer and seller via the middleman. Second, considerable empha-
sis is being placed on technologies to reduce costs associated with reverse
logistics (returns and recycling). Third, utilization of electronic data inter-
change (EDI) technology has been limited to relatively large firms that have
the enterprise platforms or communication systems capable of supporting
it. However, problems continue to exist in the participation of contractors
in the larger company supply chains. Recently, ‘extensible mark-up lan-
guage’ or (XML) has provided some expectation of a low-cost alternative
for supporting EDI in a way that could enable the evolution of ‘logistics
communities’ (Cooke 2000a) and also for easier participation of especially
smaller contractors in the supply chain.
Finally, parallel and related technology in the form of intelligent trans-
portation systems (ITS in the US and Road Telematics in Europe and many
other parts of the world) is another group of technology applications that
have contributed to the evolution of new and more integrated logistical
systems and services. ITS are a complex of interrelated technologies erected
on basic ICT that has been applied to transport vehicles and infrastructure
(Cambridge Systematics 1999). These technologies often include or depend
on the aforementioned technologies (for example, barcodes, RFID, GPS,

geographic information systems – GIS, cellular and satellite communica-
tion systems and software, and sensors).
ITS are expected to continue to contribute considerable capacity expan-
sion to existing infrastructure by helping to manage and reduce congestion
(Johnson 1997). Further, ITS are already having a positive effect on travel
safety through such features as collision avoidance systems, photo radar
intersection monitoring and control, GIS and GPS and related communi-
cation capabilities. In general, the continued evolution and application of
these technologies are expected to have downstream effects that will reduce
transaction and transport costs and thereby improve the quality of the
business environment.
Unlike in the EU, ICT applications to logistics and other business
processes have deeply penetrated into the US business environment as
described above. This has evolved largely in a non-policy type of environ-
ment; rather, it has occurred in a relatively strong market-oriented envir-
onment. That is not to say that there have not been policy issues. Certainly,
there has been considerable concern over value conflict issues such as the
actual or potential invasiveness or privacy and equity impacts of ICT. Also,
there have been similar concerns on the adoption of electronic tolling and
photo traffic-control applications (traffic surveillance, signal violation and
speed enforcement). However, recent successful application of electronic
pricing schemes such as in central London have led to a reconsideration on
the part of elected officials of the ‘benefit split’ between equity use issues
and transport revenue and the imperative for congestion control.
Further, in the realm of ITS, there is an evolving view that new trans-
portation institutions for managing transport-related systems such as ITS
and traffic management systems that span whole metropolitan regions or
corridors are needed. More traditionally, transport management has often
been provided by the individual jurisdictions that make up metropolitan
area regions. Although this system worked well in an era where road con-
struction, maintenance, and enforcement were the primary functions of
local transport, it has proven to be less able to implement and manage ITS
systems, which for the most part provide optimal benefits only when imple-
mented and operated on a metropolitan-wide integrated basis.
Freight Transport Policies and Sustainability
Though environmental sustainability is an elusive concept, one may gener-

ally define sustainability as the long-term maintenance of ecosystem com-
ponents and functions such that future generations’ use and enjoyment is
not compromised. Definitional attempts for transport system sustainability
trace to the Brundtland Commission in Europe in the late 1980s, which

defined sustainable transport as: ‘A development that meets the needs of the
present generation without compromising the ability for future generations
to meet their needs’.14
In 1999, a working group of European experts found no strict definition of
sustainable transport but arrived at this definition of sustainable transport:
1. allows the basic access needs and development of individuals, com-

panies and societies to be met safely and in a manner consistent with
human and ecosystem health, promotes equity within and between
generations;
2. is affordable, operates efficiently, offers choice of transport mode, and
supports a vibrant economy and regional development;
3. limits emissions and waste within the planet’s ability to absorb them,
uses renewable resources at or below their rates of generation, and, uses
non-renewable resources at or below the rates of development of
renewable substitutes and minimizes the use of land and the generation
of noise. (EUROPA Working Group 2000)
And recently, in 2005, a United Nations food and ecosystems conference

proposed a more resource-oriented definition:
Environmental Sustainability. Meeting the needs of the present without com-

promising the ability of future generations to meet their needs. Encompasses,
e.g. keeping population densities below the carrying capacity of a region, facilit-
ating the renewal of renewable resources, conserving and establishing priorities
for the use of non-renewable resources, and keeping environmental impact
below the level required to allow affected systems to recover and continue to
evolve.15
However, ‘sustainability’ in the context of international and intermodal

freight policy necessarily must be broader. Sustainability of the economic
and productive systems as well as of the natural environment must be con-
sidered. Some will suggest the use of increasingly lower transport or logis-
tics costs (or improved cost efficiencies) as a proxy for sustainability. For
example, as lower truck rates, increased speeds and increased reliability per-
meate the motor carrier industry, firms will reconsider the amount of freight
transportation they purchase. One form this will take is that of reviewing
basic logistics arrangements such as the number and spacing of distribution
centers. If fewer, more widely spaced warehouses can serve the same set of
retail outlets or customers, a firm will be able to reduce inventory costs and
increase its sales. The reduced real cost of freight transport thereby allows
a shipper to buy more freight transport and reduce its inventory costs, thus
reducing total logistics costs, even though it would spend more on trans-
portation. The resulting efficiency gain results in reduced unit costs and
increased output (Federal Highway Administration 2004).
In a system with the potential for significant negative externalities (pollu-
tion, congestion, and terrorism), however, cost reductions or efficiency gains
alone will not tell the whole story. In international and intermodal trans-
port, these externality features are often unpriced or grossly underpriced.
Cost reductions (either as a share of GDP or as transport costs as a share
of total logistics costs) may achieve the economic sustainability goals, but
they will not achieve the social and environmental sustainability goals.
REMOVING BARRIERS TO SEAMLESS TRANSPORT

AND TRADE
Seamless transport and trade can be seen as ‘part illusion, part reality’ in
the US case. The ideal of ‘seamlessness’ in order to be complete has several
aspects:
1. seamless interchange of inventory, order, and shipment information

and documentation;
2. seamless transfer of freight between carriers;
3. seamless chain of custody and ownership;
4. seamless transfer of freight and documentation across international
frontiers;
5. seamless passage and transparency for externality costs between
national or multi-national or regional societies.
The chief source of illusion regarding seamlessness is that the US does not
have, and will probably not have, a central planning bureaucracy or strong
top-down national transport agency or even the political culture that would
support such institutions of central government leadership. So achieving sus-
tainability and removing trade and transport barriers will depend on con-
tinued industrial cooperation on standards and protocols and operating
procedures (which has been remarkably successful to date) and on continu-
ing technological development and deployment in transport and logistics as
well as on market forces of inter-firm competition to spur innovation. These
phenomena (cooperation, technology, competition) will most likely be the
‘reality’ of seamless global transport linkages in the US case.
It is important to note that there are historical exceptions to this conclu-
sion as the US federal government has implemented a strong top-down lead-
ership role in times of extreme stress, for example, war and disasters, but
these have been relatively short term in nature and the system has returned
to its usual state at the end of these exception periods. Some might argue that
the ‘war on terrorism’ is creating the conditions for a stronger federal role
and in fact in some regards this has occurred in efforts to protect the nation’s
critical infrastructure, which of course includes transport infrastructure. It
remains to be seen if this threat will be sufficient for the development of a
stronger and more lasting top-down transport policy culture in the US.
NOTES
1. In fact, Ricardo’s principle relies on a number of assumptions that are arguably false,
such as that there is no cost of transportation and no externalities such as environmen-
tal pollution or social inequalities.
2. Air Cargo Deregulation Act of 1977 [P.L. § 95–163].
3. Airline Deregulation Act of 1978 [P.L. § 95–504 et. seq.].
4. Motor Carrier Act of 1980 [ § 49 U.S.C. 10101 et. seq.].
5. Staggers Rail Act of 1980 [P.L. § 96–448 et. seq.].
6. Twenty-foot equivalent unit of containerized feight (TEU).
7. Although the role of airfreight transport inside the US by weight is negligible its role of
transporting higher value low bulk freight is much higher.
8. All US freight-hauling railroads operate on a common track gauge of 4 feet, 81⁄2
inches.
9. Unregulated voluntary car and equipment interchange standards and protocols are
well accepted in the US rail intermodal industry. Water, rail and truck industry groups
have developed standard interchange agreements for intermodal equipment. See
Uniform Intermodal Interchange and Facilities Access Agreement. Other rail car
interline arrangements are contractually negotiated and non-standard, covering oper-
ations including run-through trains, trackage rights, haulage agreements, reciprocal
switching rights and through-rates. For electronic data interchange, rail industry
groups under the ANSI umbrella have developed a fully compliant subset of the ASC
X12 standards in order to speed implementation of EDI applications among carriers
and shippers.
10. Committee for a Study of Policy Options to Address Intermodal Freight
Transportation, Edward K. Morlok, Chair.
11. Radio-frequency Identification tags.
12. See www.bo.interporto.it
13. See www.mi-clm.org/cscmp/about_cscmp.htm
14. The Brundtland Commission was formally known as the World Commission on the
Environment and Development. Gro Harlem Brundtland, the head of the commission
and formerly the Prime Minister of Norway, was appointed to lead the United Nations
effort in 1983.
15. Water for Food and Ecosystems. UN FAO conference at The Hague, January–February
2005.
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10. Globalized freight transport:
conclusions and future research
Cristina Capineri and Thomas R. Leinbach
INTRODUCTION
The themes addressed in this collection of original essays have highlighted

the emerging aspects of freight movements at a global scale in the context
of transport intensive economies. The overall picture that emerges from the
contributions reveals a global system of rapidly increasing traffic of
differentiated goods traveling over longer distances with specific time and
place utilities. These flows are especially driven by a highly competitive set
of multinational firms which are sourcing and distributing inputs and final
goods to growing worldwide markets. The pattern of global freight trade is
highly concentrated on select routes and through a relatively small number
of gateways. The implications of this spatial selectivity are enormous in
terms of externality effects. Moreover, in the long term, significant contin-
ued growth of global freight flows is expected. Although this growth will
be most conspicuous in the emerging Asian economies (especially China
and India), flows are expected at least to double in the first half of this
century in all regions of the world. Environmental effects related to this
growth will be significant. Road transport remains the most conspicuous
mode where infrastructural upgrading is continuous and polluting and
noise effects are significant.
Transport operations have become more sophisticated and complex both
in the provision and management of vehicles and infrastructure and in the
services offered. Related to this are the growing specialized needs associated
with cargo movements, which demand creative logistical solutions and ser-
vices. A common perspective for analysing transport operations is through
the complex patterns of global production networks (GPN), transactionally
linked sequences of functions where each stage adds value to the process of
goods and services production. The spatially defined international division
of labour has indeed excited a new geography of global production where
the East Asia–Pacific Rim has become an important player with Europe and
North America. An increasingly important goal is to understand more fully
259
the ways in which global freight transport arrangements through a set of

nodes impact and affect growth differences at the regional and local level.
These scale distinctions have important implications for the deepening of
the vitality of regional and local industrial clusters, especially through value
creation in the supply chain framework. Moreover, information technol-
ogies and related applications have enlarged markets and made transaction
and cycle times shorter and smoother. Management of traffic flows has
become more efficient and secure. Freight service providers, like a variety of
other producer service providers, have been relatively earlier adopters of all
forms of technology. The applications of e-commerce in the industry are
now especially important. The search for more efficient ways of moving
freight, in part the rationale for this volume, is captured by the notion of
seamlessness, which we discuss at the beginning of this volume.
SEAMLESSNESS REVISITED
Overall, four perspectives on seamlessness have emerged: technology-based

ones (change in vehicles and fuel, reduction of empty hauling, and so on);
infrastructure-based ones (improvements in efficiency of infrastructure
networks); flow-based ones (management of traffic and logistics); demand-
based ones (modal substitution, pricing incentives, regulatory measures).
The implications of intermodality, logistics, technology and sustainability
on seamlessness are discussed in the following paragraphs.
INTERMODALITY
Intermodality is considered one possible solution towards a seamless trans-

port system both in North America and Europe. But despite all the progress
realized over the last few decades in terms of liberalization, development of
common norms and rules, and improved infrastructure, there remains a
large number of obstacles to a more efficient and truly intermodal trans-
port system. In the United States the Intermodal Surface Transportation
and Efficiency Act (ISTEA) has governed major investments for six years,
where improvements are carried out by the private sector. Similarly the
European Commission is intent on promoting intermodality. To that effect,
it has promoted more efficient technical solutions and the improvement
of transport networks, including the development of short-sea routes.
Intermodal initiatives have been stimulated directly through projects such
as the PACT and Marco Polo programmes and through authorization of
national public authority interventions. In regards to technical solutions,
Conclusions and future research 261
the Commission is currently trying to promote a set of standardized

European Intermodal Transport Units, that is, containers and swap bodies
that would be adjusted to the widely used EURO-pallets standards (ISO
1200/800 and 1200/1000) and provide a maximum loading capacity as well
as more efficient loading/unloading procedures.
European intermodal transport is concentrated on certain corridors. As
regards intermodal flows, short-sea shipping has a strong position in
feeders from and to the bigger container ports (Rotterdam, Antwerp,
Felixstowe, Hamburg); inland shipping has a strong market position in hin-
terland connections from Rotterdam and Antwerp; rail transport has a tra-
ditionally strong position on the North–South routes but is also used for
transport of maritime containers into Eastern Europe. In North America,
over 60 per cent of Canada–US trade is concentrated at the top three cross-
ings: Windsor–Detroit, Sarnia–Port Huron, and Fort Erie–Buffalo.
In North America, although air transportation has made huge gains, more
traditional freight modes continue to matter today. Indeed, seaports are still
critical influences upon patterns of development. The dominant intermodal
relationship is between rail and sea freight, but trucking is also critical. The
integration of air freight with rail and sea freight remains negligible, in part
because each of these modes is oriented to different sub-markets of long dis-
tance transportation. Recent initiatives as noted by Bowen and Slack, such
as the private Alliance development in Texas, points towards further modal
integration and may represent a development that could be replicated else-
where. The success of this facility and the traffic it has attracted suggests that
further integration between air and intermodal services are possible where
intermodal transport can offer the level of reliability and efficiency of BNSF
and at the same time a location where intermodal facilities can co-locate.
A major attraction of these inland hubs is their comparative freedom from
congestion and concomitantly the speed advantage they afford.
LOGISTICS
Changes in technology, markets, institutional structures and management

theory have led to new ways of tying transport into the production process.
One of the striking themes in the book is the degree to which logistics has
become so key in the movement of freight over GPNs. Larger firms on both
sides of the Atlantic have separate logistics units which often develop in-
house movement solutions but also outsource and contract with independ-
ent firms to derive solutions involving complex integrations. Solutions to
complex logistics affecting movements in diverse global regions may be
driven by a centralized unit at corporate headquarters or decentralized to
regional production units. Variations in the actors and the logistical

processes across different industries remain an important object for
research. There is a growing need for flexible logistics structures that aim
for cost and asset efficiency, responsiveness towards changing customer
requirements, and obtaining marketing advantage.
An important point developed in the Henstra, Ruijgrok and Tavasszy
chapter is the recognition of hybrid networks (which create different modal
and network configurations by which flows reach their final destination).
These hybrid networks seem especially critical to maintaining required
flexibility. Examples of these networks can be found which combine short-
sea shipping with road transport and where sea transport is combined with
air. As noted above firms increasingly have discovered that outsourcing
logistics to specialized service providers can produce economies of oper-
ation and improve production performance. These logistical providers offer
services that cater to outsourcing, recognize customized production runs,
aid in inventory management, enhance flexibility of resource access, and
capture economies of scope.
Air cargo shipments are increasingly important as we analyse the pattern
of evolving logistics. The air cargo flows declined as a result of the collapse
of the dot.com sector in 2000 and then worsened in 2001 (well before the
terrorist attacks of 11 September 2001) and by year-end major air trade
lanes linking North America, Europe and Asia had contracted by nearly
10 per cent. On a positive note, signs of a recovery have emerged in 2005
led by strong Asian trade lanes and stronger US and European markets.
Over the next two decades growth will expand at nearly 6.5 per cent annu-
ally. Recent Europe–North America air freight growth was 2.5 per cent per
annum while Asia to North America was 1.2 per cent and Europe to Asia
was 6.1 per cent (Boeing 2005).
Although economic activity remains the primary driver for the air cargo
industry, other factors affect the development of this traffic. Some of this
is airline controlled; for example, the express and small package market
growth led to acquisition of aircraft and expansion of services. But factors
beyond airline control have also acted favourably on growth. Developments
such as inventory management techniques, deregulation, market liberal-
ization, national development programmes and a stream of new air elig-
ible commodities (electronics components, perishable goods) have played
major roles in air cargo growth. Of these, a primary driver of air cargo
demand continues to be inventory or more appropriately supply-chain
management. A shift in corporate strategies over the last decade to the
externalization of production has made firms more and more reliant
on external resources. The role of suppliers has been elevated to a level
such that they are now strategically inseparable from internal aspects.
A dominant portion of competitive advantage now rests with the manage-

ment of external relations of production and the flow of resources from
source to consumer (Hall and Braithwaite 2001). On the other hand, forces
from outside the industry have had a constraining effect. Unfavourable
issues are debt burdens, high interest rates, trading blocs and protectionism,
commodity price weaknesses and political volatility. Positive influences
on the other hand are expanding Asian markets, currency strength, oil mar-
keting agreements and Middle East stability.
One of the most important developments in the movement of freight in
general has been the emergence of logistical hubs and providers. Freight
traffic is concentrated at a relatively small number of points in order to
achieve economies of scale. But in addition certain locations have evolved
with such a hub function critical to their development. Whether goods
travel to global markets by air or sea traffic they either arrive from multiple
locations, are repacked, then shipped to other locations or are stored for a
short or long term to serve a specific region or country as growth occurs.
Manufacturers that used to set up distribution points and manufacturing
plants for specific and immediate markets are now reexamining their
options. Time-based competition, information technology, multifunctional
outsourcing and the globalization of manufacturing are having a profound
impact on logistics, distribution and warehousing. The trend is clearly
toward indirect relationship management where third-party operators are
now corporate collaborators. By using a third-party logistics service
provider the manufacturer does not have to invest in land, buildings, hand-
ling equipment, and hiring and training of logistics personnel. Therefore
the manufacturer avoids the risk of disinvestments in case of major changes
in the market situation. Further, more companies are now locating near
their customers, especially those in the perishables business. The expanded
role between manufacturer and third-party logistics operators is also
having an impact on global site selection considerations. Not only are logis-
tics operators opening facilities around the world to accommodate their
growing base of clients, logistics centres such as Amsterdam Westpoint and
free trade zones such as Jebel Ali Free Zone in Dubai, the United Arab
Emirates, are being developed to attract these customers. Meanwhile, large
manufacturers are opening and operating regional distribution sites in
markets in which they serve (Thuermer 2000).
Another important development over the past decade in both Europe
and North America has been the rise of the integrator and time-definite
deliveries. Integrators, which both fly the cargo between airports and
handle ground pickup from and delivery to customers, have become a
booming business due to the time sensitivity associated with goods move-
ment. Firms such as Federal Express (FedEx) and United Parcel Services
(UPS) have become major instruments of competitive advantage for firms

in a variety of industries. Moreover the firms have developed hubs in
Europe, North America and Asia which provide a catalytic effect for
employment and local regional development. This is occurring in hubs and
locales as diverse as Memphis, Louisville, Subic Bay and Paris.
The definitions of express versus non-express air cargo are increasingly
blurred as traditional airlines expand their offerings of ‘time-definite’ ser-
vices (cargo services with a performance guarantee based on time which
often includes a refund of all or a portion of the payment made for same
service if the advertised time is not met) and government postal authorities
continue to make strides in becoming full-fledged ‘logistics providers’ (func-
tions involving the procurement, distribution, maintenance and replace-
ment of material and personnel) largely through the acquisition of
established firms. This area has become a lucrative source of revenue and the
heightened competition among firms such as FedEx, UPS, Airborne and
DHL means that the consumer will increasingly benefit from service options
and lower prices as competing products enter the market. The international
express market continues to grow at an extraordinary rate having grown
over 20 per cent per year since 1991 (Leinbach and Bowen 2004).
As part of the strategy to reinforce its competitive position in Europe in
2000, FedEx signed a cooperative agreement with Geopost, the Parcel and
Logistics Holding of La Poste (the French post office) to enhance service
in key European markets. In 2002, FedEx strengthened its service offering
between Europe and Asia Pacific once again by introducing an improved
westbound flight connecting the FedEx AsiaOne hub in Subic Bay, the
Philippines, to its EuroOne hub at Charles de Gaulle, Paris via Bombay and
Dubai. As part of FedEx’s international growth strategy, the company
expanded its network throughout Europe with a series of new station open-
ings and flight routes in 2004. FedEx also launched a new direct-service
flight into Greece that same year, strengthening its intercontinental services
to Europe and shortening transit times for customers exporting from Asia,
the US and many parts of Europe. This expansion has included improve-
ments such as the introduction of FedEx Europe First, an Intra-European
International Priority service providing customers with a premium, door-
to-door, customs cleared, next day express service, with early morning
delivery commitment. In addition, a new business model in Hungary,
Poland and the Czech Republic offers better connectivity between those
countries via the EuroOne network. FedEx now connects more than 80 per
cent of the European economy to its EuroOne Network.
From a territorial point of view, many gateway regions with large port
and airport complexes have developed a concentration of transport and
logistic services. Land gateways such as freight villages have a simple transit
function with some nearby logistics and manufacturing activities; air gate-
ways are generally linked with an important metropolitan area and with
regional air/road connections; maritime gateways are large terminals with
strong high capacity inland connections (rail and road). Due to congestion
and lack of space for logistical activities near maritime terminals (such as
Los Angeles, Long Beach, Oakland, Rotterdam, and so on) the emergence
of satellite terminals or inland freight distribution centres appears to be a
significant trend, well developed in Europe but emerging in North America
as noted earlier. In the US major bottlenecks in the freight transport system
occur at major gateways on the west coast, where flows from Asian origins
have increased significantly.
But in addition there are huge regional differences in the efficiency of rail
operations. To use one example while on average about 16 per cent of
freight moves by rail nationally in the US in the urban northeast corridor
(especially New York and northern New Jersey), rail movements are less
than one-tenth of that average. The region lags far behind in rail freight
capacity and this impacts road congestion and pollution. The answer here
as well as elsewhere is perhaps a combination of targeted investments in rail
freight combined with congestion pricing.
TECHNOLOGY
From a technological point of view, the applications of IT have fostered a

greater degree of seamlessness in transport and logistics. A number of
significant technological advances in equipment and information systems
over the past decade have had a profound impact on freight transportation
involving all modes. The most notable equipment advances include con-
tainerization, double-stack technology, automation and robotics, handling
and interchange systems, automated terminals, and conveyance design.
Advances in information systems include electronic data interchange
(EDI), automated equipment identification (AEI), applications of Intelli-
gent Transportation Systems (ITS) to commercial vehicle operations and
cargo/container routing and tracking systems.
One important practice affected by technology is ‘crossdocking’.
Crossdocking is an increasingly common practice in which goods arriving
on one vessel (for example, truck, freighter aircraft) at a hub or other
central facility are immediately dispatched on another vessel bound for the
goods’ final destination. Crossdocking depends on IT tools including
bar code scanners linked to complex database management systems. The
efficiency of many different transport modes has been enhanced through
the use of global positioning systems, permitting express firms, for instance,
to minimize pickup and delivery times. Still another example is warehouse

management information systems which permit the movement of goods
within transport hubs and terminals to be largely automated, minimizing
both handling costs and errors.
Of great significance too has been the emergence of a variety of forms of
e-commerce which have greatly impacted the procurement, transmission
and distribution aspects of freight systems. One can envision three cate-
gories of impacts. First, impacts on the freight industry itself: in fact in
North America and Europe transportation has been among the industries
with the fastest rate of e-commerce adoption. Second, impacts via shifts in
the spatial distribution of production that are induced, in whole or in part,
by the widespread adoption of e-commerce. Third, structural changes such
as shifts in the mix of goods and services, changes in production technol-
ogies and changes in the firm.
Most striking has been the growth of business-to-business (B2B)
e-commerce which represents 93 per cent of all e-transactions. While the
development of e-commerce has gained momentum in the US through
largely profit-driven motives of the private sector, the EU has adopted
general policies towards the wider adoption of ICT. This reflects both a
concern that the fragmentation of markets within the EU has militated
against the adoption of common standards and that less advanced
regions are lagging behind in the adoption of new technologies. The
growth of e-commerce coincides with the ‘logistics revolution’ whereby
new methods of coordinating materials and goods movement within
firms have made it possible to reduce inventories. For example, lean logis-
tics procedures call for materials and components to be delivered into the
production stream on a just-in-time (JIT) basis. While e-commerce adop-
tion seems to be a strategic choice for business firms across the globe, it is
not clear how the development of e-commerce will impact sustainability.
An important consideration here, of course, is the degree to which infor-
mation technology and virtual transactions will displace and at the same
time complement and in fact extend spatial interactions of freight.
SUSTAINABILITY
There is currently a significant debate surrounding issues of freight trans-

port sustainability. The problems to be faced are excessive emissions that
are detrimental to local and global environments, excessive fatalities and
injuries, excessive use of finite petroleum resources, excessive congestion
levels and the impact that these have on the non-sustainability of modern
supply chains. As regards sustainability, the first driver against it is the
imbalanced share of modes. The dominance of truck and road transport

particularly for domestic flows is evident both in the US and in the EU
although with some differences. The value-weighted mean distance of US
trade is higher than Europe (7500 km versus 3000), but this difference is
partially due to the urban patterns. This difference has functional implica-
tions for network connectivity and complementary relationship among the
nodes of transport networks. The result is that trucking permits more rapid
door-to-door movements of goods compared with rail, which requires
longer transfer times; the localization of distribution and wholesale infra-
structures in suburban belts certainly favours trucking as well as cheap
prices of oil and low infrastructure taxes for trucks.
Rail transport is used both in the US and the EU for lower-value com-
modities (grain, iron ore and concentrates, coal, forest products, auto-
mobiles and auto and refined petroleum products) and on longer hauls. But
rail transport has not progressed as rapidly in terms of seamlessness for a
variety of reasons. For example in implementing e-commerce, railways
suffer from insufficient customer or supplier readiness and attachment to
legacy systems, reducing the seamlessness of information through the
supply chain. In addition gaps in the supply chain where a carrier is not
using the Internet create ‘black holes’ in shipment information. Too often
the lack of standardized data procedures and formats decrease shippers’
abilities to move from one railway to another. Finally collaboration
between railways remains foreign to the culture of many companies, espe-
cially where potentially sensitive commercial data are involved (Canada
Transport Act Review 2001). Nevertheless, the trend towards containeriza-
tion of goods and the introduction of the rail container shuttle concept
have resulted in a considerable increase in the volume of European inter-
modal rail transport in the past decades. Rail transport now plays an
important role in the hinterland transport of maritime containers from/to
container terminals.
If the current trends are maintained, road freight transport in Europe
would increase by 41 per cent, while the overall transport growth would be
at the level of 28 per cent (Eurostat 2005). As a consequence, road would
further increase its market share in 2010, and all the other modes would
decline in share. Given the situation in terms of pollutants emission, con-
gestion and accidents on the roads and the prospects of an even worse
situation in 2010, the European Commission proposed a set of policies for
curbing this unfavourable evolution and reaching a better equilibrium
between modes. The process of globalization where transport movements
are intensified has produced a stronger urgency to deal with sustainability
although different policies actions with different approaches contrast the
responses in Europe and North America.
POLICY ISSUES AND DISTINCTIONS
As we have noted, there are numerous barriers to seamless transport and

trade. Physical or infrastructural barriers as well as regulatory barriers can
be addressed by national and international policies. However market-
induced or competitive barriers are more problematic.
While many obstacles continue to interfere with intermodal transport,
two main policy actions can be applied to improve it. These involve the
quality of services and pricing. For example, a taxation policy on
differential external costs of various modes could be effective for the trans-
port of some commodities. This however may promote modal shift and
clearly may impact intermodal balance. The promotion of shipping poten-
tially increases road haulage to and from ports except in cases where barge
or rail connections are possible. For example both Rotterdam and Antwerp
are investing in rail connections. In the case of Rotterdam, the completely
new Betuwe line has been designed to carry freight into the German hin-
terland as a parallel route to the Rhine.
The European Union is developing its own support policy for intermodal
transport, even if no directive is specifically devoted to it. Through the
Marco Polo Programme, the European Commission supports the launch of
freight services by using short-sea, rail and inland waterway transport to
reduce road congestion and improve the environmental performance of the
whole transport system. Through the Trans-European Transport Networks
(TEN-T) programme the European Commission co-funds infrastructure
investments to improve the interconnectivity and interoperability of the
several national networks.
Intermodality may also be promoted by consolidation and stronger col-
laboration (horizontal as well as vertical cooperation between chain part-
ners) as these represent logical ways to generate lower per unit freight costs.
For example through consolidation of flows, larger vehicles can be used
and the loading efficiency is optimized. At the same time the stronger appli-
cation of existing technology in a variety of ways can produce more
efficient transport by all modes.
Finally it is clear that the long-term trend of rising oil prices as well as
the convergence of supply, distribution and refining constraints will have
an undeniable mark on the economic sustainability of the transport indus-
try and force substantial adjustments. Among these, a shift to more energy-
efficient modes can be expected, notably where possible towards rail. In this
context, it is interesting to also speculate on the dynamics and possible
reorientation of global production networks that reflect energy costs and
risks within the broad worldwide transport network. The more restricted
transportation infrastructure and efficiency becomes the more incentive
there will be to search for options of reorganization and regionalization.

The problem is becoming more acute every year and is likely to be solved
only by applying a range of remedial measures: better land-use planning of
economic activities, the construction of new infrastructure and a variety of
regulatory and pricing measures that may help to moderate traffic flow.
These would induce a more efficient use of infrastructure by taking into
account the external costs of transport. In that respect, these measures
could also channel freight towards modal combinations with fewer envir-
onmental and social negative externalities. However, these alternative
transport solutions may need restructuring and reorganization to provide
services that are competitive with road transport.
Moreover, this restructuring of global production networks may indeed
impact sustainability. A relevant point here is that in order for transport
policies to be successful, their scale of application and the differential
impact this produces on sustainability must be recognized. Although
freight flows are not sustainable as currently handled, we believe that these
can become ‘more’ sustainable in the future. In this context, a move from
sustainability to eco-efficiency with less input of energy should be con-
sidered, a principle applicable also to the freight transport sector.
RESEARCH FUTURES
As we reflect on the findings throughout this volume it appears that a

number of issues are ripe for research especially in terms of a trans-Atlantic
comparative perspective. These issues are discussed below.
First, given the importance of global supply chains it seems clear that
more research must be directed to the ways in which these networks are
held together by transport and produce competitive advantage. Firms that
have been integrated into GPNs face intense pressures with respect to cost,
quality and speed. The demands to do more with less time and less money
affect not only firms but also places. Places that no longer offer an envir-
onment conducive to meeting those demands risk being excised from
GPNs. Evidence from Asia which is certainly potentially applicable to
Europe and North America suggests that some places and firms are able
to move to new positions along value chains as rapidly as their old posi-
tions become untenable (Bowen and Leinbach 2006). The difference
between firms and places that succeed, on the one hand, and those that do
not, on the other, can be attributed to the kinds of determinants Porter
(1990) has discussed. Such developments have also been aided by transport
liberalization, specialized infrastructure development and the cultivation
of logistics expertise through training and education. Given the uneven
internationalization of production processes and the amplification of

time-based competition, there is a largely unmet need for closer scrutiny
of the role that transport services play in value creation across a variety of
geographic and industrial contexts. In turn, contemporary transportation
systems can be better understood when viewed as simultaneously weaving
together and shaping patterns of competitive advantage in production net-
works across multiple scales.
Second, the implementation of intermodality in both the EU and North
America must receive stronger attention. Perhaps especially important is
the critical nature of gateways in both Europe and North America so that
flows can hardly avoid the congestion of these principal hubs and corridors.
Preventing these conduits of commerce from becoming chokepoints will
require further creativity in financing new infrastructure and implementing
new technologies and policies. But the inadequacy of current capacity is
only one of the challenges facing major transport facilities and the oper-
ators who use them. The prospect of higher real fuel prices, labor shortages,
the fear of terrorism and the financial precariousness that has accompanied
deregulation could each have important effects on leading modes, their rel-
ative importance, and their spatial articulation in European and North
American transportation.
Third, e-commerce is already having significant impacts as B2B trans-
actions expand. Especially important are the ways that virtual transactions
will impact the physical movement of goods. As Anderson and Leinbach
have noted above e-commerce has many features. Among these is the
enabling of companies to operate more efficiently in a competitive envir-
onment. Especially important perhaps is the way in which electronic trans-
actions permit small firms to compete and participate in a global market.
E-commerce operates beyond national borders and thereby brings together
supply and demand at a global level. This feature may lead to changes in the
structure of supply chains as global sourcing increases. In this light, pro-
curement can be carried out with a supplier or a host of suppliers regard-
less of location. Negotiations can be expedited as a result of the online
transmission of documents (OECD 2001). E-commerce has also brought
about the ability to tailor products to consumers needs and has driven the
‘build to order’ approach whereby the whole stream will be pushed closer
to customers. This approach also is already changing supplier–customer
relations. But the specific impact of e-commerce under varying conditions,
for example type of mode, product value, e-business model, and so on is
not clear. Much more research must be carried out in both European and
North American contexts on this theme.
But perhaps one of the most significant ways in which freight transport
will be affected is through changes in the supply chain of many products
and services where e-commerce is now driving changes in supply chain

management (SCM). It is impacting vertical integration between trading
partners (both shippers and logistic services providers) and the appearance
of completely new functions and companies. The former relates to infor-
mation sharing, common planning and exchange of existing functions by
way of supply-chain integration. Yet we now know too little about the
dynamics of supply-chain evolution as e-commerce begins to take hold in
various industries. Detailed case studies defined at the level of the supply
chain, rather than the firm or industry would be helpful. The goal of such
case studies should be to understand the types of supply-chain transfor-
mations that are encouraged by e-commerce and other complementary
trends and to measure the incremental effects of those transformations on
both the quantity and quality of freight services demanded.
Fourth, it seems especially critical that we devise more coherent strategies
to cope with global risks within the transport sector. These risks may involve
security breaches but also global breakdown of interconnected systems.
Finally institutional impediments continue to constrain the degree to
which intermodality and more broadly seamlessness is progressing. We
need to examine constraint points for mobility at different levels of govern-
ance. To what extent has decentralization been of value? Are there par-
ticular decision support systems which should be promoted for more
widespread use by political and governing entities?
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Index
Abbey, D. 126 domestic 20, 23, 42, 44, 46, 108,
Abdelwahab, W.M. 86–7 109
accidents 58, 193, 206, 213–14, 267 gateways 26, 27, 46–9, 50, 109, 110,
agreements 18, 21–2, 23, 43, 106–7, 111, 114, 115, 246, 265
233, 235–6, 248, 264 geography of freight flows 46–9
Air France 60, 61, 64, 65, 233 history 40–43
air freight hubs 43–4, 46–9, 61–3, 65–6, intercontinental 25, 26, 41, 42, 43–4,
114, 115, 126, 233, 264 46, 108, 109
air freight transport modal share 243, 244, 245, 247
Asia 264 trends 108–9, 246, 262
Canada 24, 25, 26, 42, 45, 46 volume and value 25, 245, 246
costs 41, 42, 47, 60 air passenger transport 46, 61, 242
and e-commerce 43, 185 air pollution see emissions
as ‘fifth wave’ 49–50 aircraft 41, 44–5, 46, 60, 61, 62
global trends 1–2 aircraft noise 233
high value freight 41, 60, 222, 224, airlines 43–6, 60, 61–2, 63–4, 75, 233
245, 246 airports 26, 27, 46–9, 61–4, 224–5, 226,
liberalization 41, 43, 75, 233, 235–6 233, 246
logistics 44, 61, 66, 262–3 see also individual airports
strategic alliances 61, 65, 233 all-freight airlines 46, 61–2
time factors 41, 42, 43, 45, 60 Alliance 50, 261
types 60–61 Alameda corridor 39, 122, 124, 125,
see also air freight transport of 129, 203
Europe; air freight transport of Alps 72, 73, 78, 80, 83, 146
North America Amsterdam airport 61–2, 63, 65–6,
air freight transport of Europe 224, 226, 233
concentration 61–3 Anchorage 27, 46, 49, 246
congestion 66 Antwerp 91–2, 145, 146, 204, 223, 224,
EU policies 75, 233, 235–6 225, 232, 261, 268
geography of freight flows 60, 61, APL (American President Lines) 27,
63–4 29, 34, 35
hybrid networks 156–8 Asia 119, 120, 197, 199–200, 211, 223,
importance 60, 224–5, 226 264
infrastructure development 66 see also China; India; international
intercontinental 60, 61, 63–4 trade with Asia
strategic developments 65–7, 233 atmosphere, impact on sustainability
trends 60, 262 191–2
air freight transport of North America Austria 73, 78, 83
combination carriers, integrators
and all-freight airlines 43–6 B2B (business-to-business) e-commerce
crossborder 24, 108, 109 43, 167–8, 170–79, 182, 184,
deregulation 242 251–2, 266
273
274 Index
B2C (business-to-consumer) capacity 41, 129

e-commerce 167, 168–9, 171, 173 see also congestion; land use and
Belgium 62–3, 64, 81, 87, 91–2, 147, supply
225, 226, 233 cargo villages 61, 66, 203–4, 264–5
see also Antwerp centralization 261–2
bellyhold capacity, passenger aircraft Channel 72–4, 146
44–5, 60, 61, 62 Charleston 27, 31, 32, 38, 114, 245
Betuwe line 78, 91, 232, 268 Chicago 27, 34, 38, 39, 127, 246
Beuthe, Michel 81, 85, 87 China 39, 43–4, 45, 112, 119–20, 191,
Bhagwati, J. 201 223, 235, 239
Black, W.R. 190 Cisco 181
BNSF 36, 50, 261 climate change 191–2
Bogers, E. 143, 145 CN (Canadian National) 36, 40
Bouffioux, Ch. 85 Coase, Ronald H. 181
BRIC (Brazil, Russia, India, China) Coe, N. 103, 104
economies 43, 235 collaboration 152, 267
Britain see United Kingdom see also agreements; consortia;
British Airways 60, 64, 65, 233 mergers and acquisitions;
Brundland report 190, 254 strategic alliances
Brussels National airport 62–3, 64, Columbus 126
233 combination air freight carriers 41,
Byrne, P.M. 125 42–6
combined railroad transport
Canada Europe 55, 67–8, 69–70, 72, 74–5,
air freight transport 24, 25, 26, 42, 82–3, 92, 93, 97–9
45, 46 United States 247–8
domestic freight transport 17, 18, combined transport 91, 92, 93–4, 228
20–21, 22, 23 see also combination air freight
freight transport modal balance carriers; combined railroad
20–21, 22, 23–5 transport; intermodal transport
gasoline prices 17 competition
gateways 31, 32, 46, 109–10, 111, and air freight transport 41, 43, 75
116, 118 and B2B (business-to-business) e-
inland waterway freight transport commerce 178, 182
23, 24 from BRIC economies 235
intermodal transport see intermodal combined railroad transport 68
transport in North America inland waterway freight transport 84
international trade 17–18, 43, 45, 46, ports 72, 76–7
50, 107, 109–10, 116, 261 pricing of freight transport 86–7
pipelines 22, 24 and taxation 80
ports 31–2 concentration 61–3, 137, 140–41
rail freight transport 20, 21, 22, see also agreements; collaboration;
24–5, 28, 30, 33, 36–7, 40, 50, consortia; hubs; mergers and
207 acquisitions; strategic alliances
road freight transport 20–21, 24–5, congestion
109–10, 116, 118 air freight transport of Europe 66
sea freight transport 25, 26, 27–8 freight transport policies in United
see also NAFTA (North American States 128, 129, 130
Free Trade Agreement); North intermodal transport 37, 38, 39–40,
America 72, 78–9
Index 275
and ITS (intelligent transport e-commerce 178–9, 181, 182, 184,

systems) 253 185
ports in Europe 204, 232, 265 fuel 17, 130–31, 161, 210–211, 268–9
ports in North America 39–40, 112, intermodal transport in Europe
114, 121, 124–5, 194, 197–200, 71–2, 79, 83, 84, 85
202–3, 265 see also external costs; infrastructure
rail freight transport 38, 39, 121–2 costs; inventory costs; labor
road freight transport in Europe 58, costs; logistics costs; search
148, 194, 205–6, 267 costs; transaction costs;
road freight transport in United transport costs
States 37, 39, 121, 122–4, 128, CP (Canadian Pacific Rail) 30, 36, 40
129, 130, 194, 203 crossdocking 265
and sustainability 10, 194, 197–200,
202–4, 205–6, 214 Daly, H.E. 190
urban goods movement 194, 208 Danube 79, 146, 147, 150
congestion pricing 205–6, 265 DCs (distribution centers) 110, 124,
consortia 34, 35 125, 126, 127, 185, 254
consumer markets see B2C (business- decentralization 153, 154, 261–2, 271
to-consumer) e-commerce; delivery 182, 184, 194, 208, 251–2
demand; markets Dell 19, 43
containers demand 150–51, 155, 157, 159–60, 161,
double stacking 29, 40, 82, 227 174, 184, 241–2
intermodal transport in Europe Denmark 78, 79, 147, 208
70–71, 72, 77–8, 95, 96, 146, deregulation
227 Europe 107, 138
intermodal transport in North North America 2, 29, 34, 35–6, 50,
America 26–8, 30–35, 39–40, 107, 128, 129, 242
114, 127 developing countries 170, 173, 179–80,
rail freight transport 68, 127, 261, 186, 201, 239
267 DHL 64, 65, 177, 233, 264
sea freight transport of Europe 71, Dicken, P. 103, 106
147, 149, 196, 197–8, 200, distance 18, 19, 60, 151, 178, 210, 211,
223–4, 225, 232 248
sea freight transport of United domestic freight transport
States 26–7, 34–5, 112–13, 196, Canada 20–21, 22, 23
197–200, 244–5 Europe 63
size and standardization 70, 77–8, Group of Seven economies 17, 18
195–6, 261 United States 20, 21–3, 42, 44, 46,
storage 39, 204 108, 109
Cooke, J.B. 252 double stacking 29, 40, 82, 227
corridors and crossings drayage 29–30, 38
and congestion 203, 204
Europe 72–4, 83, 141, 149, 150, 204, e-commerce
261 and air freight transport 43, 185
North America 24–5, 50, 110, 116, B2B (business-to-business) 43,
118, 203, 261 167–8, 170–79, 182, 184, 251–2,
costs 266
air freight transport 41, 42, 47, 60 B2C (business-to-consumer) 167,
deregulated freight transport 107, 168–9, 171, 173
138 costs 178–9, 181, 182, 184, 185
276 Index
defined 167 see also congestion; emissions;

delivery 182, 184, 251–2 pollution; sustainability
developing countries 170, 173, EU-15
179–80, 186 air freight transport 63
and firm structures 180–82 e-commerce 167–8, 266
and freight transport policies external trade 220–22
229–30, 251–3 see also international trade with
future research directions 186, Europe
270–71 freight transport growth 140
impacts 266 freight transport policies see freight
and Internet 167, 178, 182 transport policies in EU
and large firms 179 inland waterway freight transport
penetration in EU 167–8 56, 57, 140
penetration in United States 167 intra-EU-15 modal split 225–6, 227
and seamlessness 6–8, 266 pipelines 56, 57, 140
and SMEs 170, 173, 178–9, 184 rail freight transport 56, 57, 140, 146
and spatial patterns 177–80 road freight transport 56–8, 140
stakeholders 183 sea freight transport 71
and supply chain 180, 184–5, 252 short-sea shipping 56, 57, 140
and sustainability 266 trade share in GDP 220–22
and time 175–6, 182, 185 see also EU-25; Europe
e-shopping 168–9 EU-25
Eastern Europe 59, 66–7, 179, 261 air freight transport 58, 59, 61, 63
eBay 171 e-commerce 167–8, 266
ECMT 194 freight transport policies see freight
economic growth 220–22, 239–40, 242 transport policies in EU
EDI (electronic data interchange) 168, ICT policies 229–30
170–71, 178–9, 252, 265 inland waterborne freight transport
eEurope 2002 Action Plan 229–30 58, 59
efficiency migration 137
intermodal transport 33–40, 84 pipelines 58, 59
logistics 150, 151, 152, 154, 162, 182, rail freight transport 58, 59
262, 265 road freight transport 58–9
and sustainability 254 trade share in GDP 222
elasticities of demand price 86–7 see also EU-15; Europe
electronic goods 41, 42, 262 Europe
electronic marketplaces 171–3, 179 air freight transport see air freight
emissions transport of Europe
EU policies 58 competition from BRIC economies
and globalization 201 138
rail freight transport 209 container traffic 197–8, 200
road freight transport 196, 209, 267 corridors and crossings 72–4, 83,
sea freight transport 197, 204–5, 208, 141, 149, 150, 261
209 de-industrialization 119
and sustainability 10, 191–3, 194, deregulation 107, 138
208–9, 213, 254 emissions 10, 192–3
energy 109, 130–31, 190, 191, 268–9 freight transport in selected
see also fuel; gasoline; oil; petroleum countries 91–9
environmental concerns 66, 72, 128, freight transport policies see freight
129, 131 transport policies in EU
Index 277
inland waterway freight transport see also DHL; FedEx; integrators;

see inland waterway freight UPS (United Parcel Service)
transport in Europe Fourth Party Logistics Service
intermodal transport see intermodal Providers (4PLs) 9, 176
transport in Europe France
international trade see international air freight transport 60, 61, 62, 63,
trade with Europe 64, 65, 224, 226, 233, 264
logistics 136, 137–8, 150–51, 154, intermodal transport 78, 79, 92–3
228, 230, 254 ports 223, 224
LSPs (Logistic Service Providers) 61, Frankfurt airport 61, 66, 224, 226, 233
66, 136, 144 free trade agreements 106–7
multimodal transport 55 see also NAFTA (North American
pipelines 56, 57, 58, 59, 140, 223 Free Trade Agreement)
ports see ports in Europe freight flows 46–9, 60–65, 195–6,
rail freight transport see rail freight 210–11
transport in Europe freight transport policies 127–31,
road freight transport see road 268–9
freight transport in Europe see also freight transport policies in
sea freight transport see sea freight EU; freight transport policies in
transport of Europe; short-sea United States
shipping of Europe freight transport policies in EU
taxation 79–80, 87, 268 air transport 75, 233, 235–6
trends and modal split in freight combined railroad transport 74–5
transport 56–9, 90 Common Transport Policy (CTP)
see also Eastern Europe; EU-15; 230–31
EU-25 European Transport Policy for 2010
European Commission 57–9, 68, 74, white paper 57–8, 76–9, 228
76–9, 80, 148–50, 228, 229–30, and globalization 232–6
231, 235, 260–61, 267, 268 inland waterway freight 75, 77,
European Transport Policy for 2010 149–50
white paper (European intermodal transport 58, 77–9,
Commission) 57–8, 76–9, 228 148–50, 227–8, 231–2, 260–61,
express freight transport 42, 60–61, 63, 268
67, 151, 264 liberalization 235–6
see also DHL; FedEx; mail, and logistics 229
packages and parcels; UPS ports 76–7
(United Parcel Service) quality of services 85–6
external costs 80–81, 86, 161 rail transport 75, 76, 78–9, 148–9,
227, 228, 267
fatalities and injuries 193, 206, 213–14, road transport 74, 77, 205
267 short-sea shipping 75, 149, 228, 260
FedEx 42, 44, 45, 46, 47, 48–9, 64, 67, Single Market 235, 236
126, 176–7, 181, 233, 263–4 and sustainability 58, 231–4, 235,
FEUs (40-foot equivalent unit 236
containers) 77, 196, 203 taxation 68, 74–5, 79–80, 87, 205–6,
Fingar, P. 251, 252 207, 268
firms 170, 173, 178–9, 180–82, 184 technical developments and
flexibility 150–51, 154, 155, 262 standards 77–9, 261
forwarders 9, 44, 45, 63, 64, 65, 66, freight transport policies in United
145 States
278 Index
intermodal transport 129–30, global production networks (GPNs)

248–50, 260 19, 103–7, 184, 195–6, 259, 269
logistical and e-commerce global trade 195–6
development 127–30, 250–53 globalization 201–2, 238–40
and seamlessness 255–6 goods and services
and sustainability 248, 249, 253–5 and air freight transport 41–2, 50,
taxation 207, 249, 268 67, 262
Washington Consensus 238–9 and B2C (business-to-consumer)
freight villages 61, 66, 203–4, 264–5 e-commerce 168, 173
fuel consumer demand 241–2
costs 17, 130–31, 161, 210–11, manufactured goods 18
268–9 and rail freight transport 267
prices 17, 50, 109, 130–31, 210–11, and sea freight transport 243, 244,
268 245
use 10, 190–191, 196, 206–8, 213, urban freight movement 194, 208
241 Gootehedde, B. 150, 155–6, 157
see also emissions; energy; gasoline; Gordon, D. 190
oil; petroleum GPNs (global production networks)
19, 103–7, 184, 195–6, 259, 269
Gallagher, J. 200, 202–3 GPS 250, 251, 253, 265–6
gasoline 17, 190–91, 211 Greece 94–5, 264
gateways 264–5 greenhouse gases 191–3, 194, 196, 197,
see also corridors and crossings; 204–5
freight villages; gateways in ground freight transport 42
North America; hubs see also combined railroad
gateways in North America transport; rail freight transport;
air freight 26, 27, 46–9, 50, 109, 110, road freight transport
111, 114, 115, 246
congestion 121–7 harbors see ports
ports 27, 30–32, 50, 107, 110, 111, Hestra, D.A. 143, 145, 157, 159–60
112–14, 121, 124–5, 244–5, high value freight 28, 41, 60, 138, 151,
265 222, 224, 245, 246
rail/road 27, 34, 50, 109–10, 111, Houston 27, 31, 32, 245
114, 116, 117–18, 122, 124 hubs 47, 266
Germany see also air freight hubs; corridors
air freight transport 60, 61–2, 63, and crossings; gateways; inland
64–5, 66, 224, 226, 233 hubs; integrator hubs; logistical
combined railroad transport 68 hubs; port hubs; rail hubs
fuel use 207, 208 Hummels, D. 220
gasoline prices 17 hybrid networks in EU 151–60, 161,
intermodal transport 78, 79, 93–4, 162, 262
149
ports 225 ICF 68, 70–71
rail freight transport 91, 98, 232, 268 ICT (information and communications
road freight transport taxation technologies)
79–80 and air freight transport 44
Gilbert, E.N. 201 developing countries 179–80
global atmosphere quality 191–2, 213 EU policies 229–30
global distribution networks 18–19, and global shift in GNP (global
105–6, 195 production networks) 104
Index 279
and globalization 239 Logistics Service Providers (LSPs)

and logistics 154, 161, 230, 250, 251, 143–5
252–3 piggybacking 28, 33, 67
and seamlessness 6, 9, 265–6 reliability 72, 82
see also B2B (business-to-business) and seamlessness 5–6, 260–61
e-commerce; B2C (business-to- see also intermodal transport in
consumer) e-commerce; e- Europe; intermodal transport in
commerce; Internet; web sites North America
India 43, 120, 235, 239, 264 intermodal transport in Europe
information 38, 154, 155, 161, 172, combined railroad transport 55,
173, 176, 251–2 67–8, 69–70, 72, 92, 93, 97–9
infrastructure concept 55
air freight transport in Europe 66 and containers 70–71, 72, 77–8, 95,
developing countries 180 96, 146, 227
development 78–9, 203 corridors and crossings 72–4, 83, 261
and freight transport and logistics costs 71–2, 79, 83, 84, 85
policies 128 definitions 55, 67
and intermodal transport in Europe EU policies 77–9, 85–6, 87–8,
69, 82, 83, 85, 227–8 148–50, 227–8, 231–2, 260–61,
rail freight transport 37–8, 39, 131, 268
203, 227–8, 232 frequency 72
road freight transport in United future research directions 270
States 22, 25 hybrid networks 151–60, 161, 162,
infrastructure costs 79–80 262
injuries 193, 206, 213–14, 267 infrastructure 69, 82, 83, 85, 227–8
inland hubs 50, 114, 126–7, 156 inland waterways 83–4, 91, 93, 98,
inland waterway freight transport 146, 147–8, 156, 157, 158,
Canada 23, 24 228
United States 20, 23, 24, 108, 109, liberalisation 60, 74–5, 85–6
226, 227, 247, 248 and logistics 228
inland waterway freight transport in ports 72, 75, 84, 91–2, 93, 96, 97,
Europe 98–9, 228
EU policies 75, 77, 149–50, 228 pricing 75, 80, 81, 86–7
importance 223, 224, 227 quality of services 85
intermodal transport 83–4, 91, 93, rail freight transport 55, 67–8,
98, 146, 147–8, 156, 157, 158, 69–70, 72, 73–4, 81–3, 85–6, 91,
228 92, 93, 94, 95, 96, 97–9, 145–7,
trends 56, 57, 58, 59, 140 227–8, 261
integrator hubs 61, 264 road freight transport 55, 67–8,
integrators 44–5, 48–9, 60, 61, 228, 69–70, 72, 73, 91, 92, 93, 95,
263–4 96–9 261
see also DHL; FedEx; forwarders; sea freight transport 71, 95, 228,
UPS (United Parcel Service) 231–2
intermodal transport short-sea shipping 72, 73, 84, 92,
accompanied and unaccompanied 94–5, 96–7, 98–9, 146, 147, 228,
transport 67, 83 261
concept 55, 67 and taxation 68, 74–5
and congestion 37, 38, 39–40, 72, time factors 72
78–9 intermodal transport in North
and labor supply 50, 82 America
280 Index
air freight transport 42–3, 49–50, North America 43, 45, 60, 61, 110,
247, 261 121, 139, 222, 246, 262
and containers 26–8, 29–34, 30–35, trends 220–22
39–40, 127 international trade with North
contemporary problems 36–8 America
contemporary solutions 38–40 Asia 28, 42, 43, 46, 50, 60, 61, 110,
early developments 27–8 119–20, 121, 262, 265
emergence of services and networks China 43–4, 45, 112, 119–20
(1980–2005) 28–30 cross-border 17–18, 50, 107, 109–10
future prospects 49–50 Europe 43, 45, 60, 61, 110, 121, 139,
future research directions 270 222, 262
and globalization 34, 49 Latin America 43, 61
growth of traffic 30–34, 49 North American trade gateways
interchanges 38–9 109–12
intercontinental sea freight transport trade imbalances 119–20, 241–2
27–8 see also NAFTA (North American
organizational restructuring 34–6 Free Trade Agreement)
policies 129–30, 248–50, 260 international trade with United States
ports 27–8, 29, 30–32, 35, 37, 38–9 Asia 18, 120, 246
rail freight transport 28, 29, 30, Canada 17–18, 107, 109–10, 261
33–4, 35–9, 40, 49, 50, 247–8, China 43–4, 112, 246
261 Europe 222, 246
road freight transport 28, 29–30, 38, freight shipments by volume and
42–3, 49, 50, 247–8, 261 value 108–9, 240–41
sea freight transport 27–8, 30–32, gateways 26, 27, 109–12
34–5, 49, 247, 261 Latin America 246
international trade Mexico 18, 107, 109
Canada 17–18, 43, 45, 46, 50, 107, as share of GDP 17, 240–41, 242,
109–10, 116, 261 247
China 43–4, 45, 112, 119–20, 139, see also NAFTA (North American
246 Free Trade Agreement)
Latin America 43, 61, 139 Internet 43, 167, 168, 170, 171–3, 178,
Mexico 18, 50, 107, 109, 116 179, 182, 229–30
trade imbalances 119–20, 241–2 inventories 151, 159, 161, 174, 184,
see also international trade with 262
Asia; international trade with inventory costs 151, 174–5, 254–5
Europe; international trade Italy 72, 78, 83, 95–6, 146, 157, 159–60,
with North America; 204, 223–4, 225
international trade with United ITS (intelligent transportation systems)
States 173, 182, 252–3, 265
international trade with Asia
Europe 60, 61, 63–4, 121, 139, 262 JIT (just-in-time) 21, 23, 30, 174, 175,
North America 28, 42, 43, 46, 50, 60, 184, 251–2, 266
61, 110, 119–20, 121, 262, 265 John F. Kennedy Airport (New York)
trade imbalances 119–20 26, 27, 46, 112
United States 18, 120, 121, 246
international trade with Europe Kasarda, John D. 49–50
Asia 60, 61, 63–4, 121, 139, 262 KLM 61, 64, 65, 233
East-West growth 138, 139 Köln/Bonn airport 62, 63, 64
intra-Europe 139 Kyoto 235, 236
Index 281
labor costs 120, 161, 176, 210, 211, 232 and supply chains 8, 142–3, 155–6,
labor organization 82, 107 174, 176, 178, 179, 251, 262–3
labor relations 37, 77, 82, 92 timeliness 155, 175–6, 178
labor supply 21–2, 37, 38, 50, 124, worldwide trends 137–8
202–3, 210–11 logistics costs
land bridges 116, 118 and e-commerce 174–5
land use and supply 121–7, 128, 269 in Europe 136, 150, 151, 152, 153,
Latin America 43, 61, 246 154, 155–6, 160, 161, 162
laws 28, 204, 249, 260 and sustainability 254–5
lean logistics 8–9, 138, 174–6, 266 in United States 252, 254–5
Li and Fung 181–2 Logistics Service Providers (LSPs)
liberalization and air freight transport 44, 61, 66,
air freight transport 41, 43, 75, 233, 263
235–6 and freight villages 61, 66, 204
combined railroad transport 68, hybrid networks in EU 155–6, 157,
74–5 159–60
in developing countries 239 and intermodal freight transport
inland waterway freight transport 75 143–5
rail freight transport 75, 85–6 outsourcing 136, 176–7
road freight transport 24, 60, 74 quality of services 136
sea freight transport 75 role 9
Liège airport 62, 63, 64, 66, 225 and SMEs 179
Limao, N. 220 United States 50, 172
logistical hubs 44, 50, 61, 66, 263 see also DHL; FedEx; UPS (United
logistics Parcel Service)
air freight transport 44, 61, 66, London Heathrow airport 61, 62, 63,
262–3 224, 226, 233
and B2B (business-to-business) e- Long Beach 26, 27, 30, 31, 37, 39, 110,
commerce 172, 174–7, 266 112, 121, 124–5, 127, 202–3, 244
centralized distribution 153, 154 Los Angeles 26, 27, 30, 31, 37, 38–9,
congestion see congestion 46, 47, 50, 110, 112, 121, 124–5,
costs see logistics costs 127, 202–3, 244
decentralized distribution 153, 154 Los Angeles International Airport 26,
definition 251 27, 112, 246
demand pull 150–51, 155, 157, Lufthansa 60, 64, 65, 233
159–60, 161, 174 Luxembourg airport 62, 63, 64, 225,
developing countries 180 226
efficiency 182, 262, 265
in Europe 136, 137–8, 150–151, 154, Madrid/Barajas airport 62, 63, 64
228, 230, 254 mail, packages and parcels 40, 42, 44,
hybrid networks 151–60, 161, 162, 60, 67, 233, 262
262 see also express freight transport
and modular production 105 manufacturing 18, 104–5, 167–8, 201
in North America 110, 121–30, Marco Polo Programme 77, 148, 149,
250–53, 254–5 228, 260, 268
processes 142 maritime freight transport see sea
and seamlessness 8–9, 261–5 freight transport; short-sea
sectors 153, 154, 252 shipping of Europe
and SMEs 179 markets 140–41, 150–51, 152
speed 155–6, 175–6, 178 Mediterranean 146, 147
282 Index
Memphis 47, 48, 246 labor supply 21–2, 37, 38, 50, 107,
mergers and acquisitions 34–7, 64, 233 124, 202–3, 210–11
methane 197, 205–6 land use and connectivity 121–7
Mexico 18, 21–2, 50, 107, 109, 116 logistics 110, 121–30, 250–53, 254–5
see also NAFTA (North American regulation 28
Free Trade Agreement) security 23, 24–5, 42, 210
Miami 27, 31, 32, 245, 246 suburban industrial parks 21
see also Canada; NAFTA (North
NAFTA (North American Free Trade American Free Trade
Agreement) 18, 21–2, 23 Agreement); United States
Netherlands
air freight transport 61–2, 63, 65–6, Oakland 27, 31, 32, 122, 123, 202–3,
224, 226, 233 244
freight villages 204 Ohio River Valley 126
intermodal transport 78, 98, 147 oil 22–3, 109, 197, 204, 268
ports 146, 204, 222–3, 224, 225, 232 Ontario 125
urban goods movement 208 open-skies agreements 233, 235–6
networks see global distribution operational and technical problems, of
networks; GPNs (global intermodal transport 37–8, 72,
production networks) 77–8, 81–2
New Jersey 110, 112, 122, 130, 245, 246 Oum, T.H. 86
New Orleans 27, 31, 32, 245 outsourcing 136, 176–7, 180, 261, 262
New York 26, 27, 31, 32, 38, 39, 46, 49,
50, 110, 112, 122, 127, 130, 245, packages, parcels and mail see mail,
246 packages and parcels
North America PACT (pilot action for combined
air freight transport see air freight transport) 77, 228, 260
transport of North America Panama Canal 28, 34, 114, 208
congestion 121–7 Paris-Charles de Gaulle airport 61, 62,
corridors and crossings 24–5, 50, 63, 64, 65, 224, 226, 233, 264
110, 116, 118, 203, 261 passenger aircraft, bellyhold capacity
crossborder freight transport modal 44–5, 60, 61, 62
balance 23–5 passenger transport 46, 47, 61, 75, 80,
de-industrialization 18, 107, 119 128–9, 242
deregulation 2, 29, 34, 35–6, 50, 128, perishable goods 42, 67, 262
129 petroleum 10, 130, 190–91, 192–3, 197,
domestic freight transport modal 204–5, 211
balance 20–23 piggybacking 28, 33, 67
energy costs 130–31 pipelines
freight transport and logistics Canada 22, 24
policies 127–31 Europe 56, 57, 58, 59, 140, 223
gasoline prices 17, 50, 130–31 United States 20, 22–3, 24, 226, 227,
gateways see gateways in North 243, 244, 245, 247, 248
America planning 128–9, 153–6, 161–2
intercontinental freight transport Poland 96, 264
modal balance 25–6 pollution 8, 197, 204, 205, 233
intermodal transport see intermodal see also emissions
transport in North America port gateways 112, 114, 121, 124–5,
international trade see international 194, 222–4, 225, 235
trade with North America port hubs 35, 124–5
Index 283
ports 192, 223 importance 223, 224, 226–7

ports gateways 27, 30–32, 50, 107, 110, infrastructure 131, 227–8, 232
111, 112–14, 121, 124–5, 244–5, intermodal transport 55, 67–8,
265 69–70, 72, 73–4, 81–3, 85–6, 91,
ports in Europe 92, 94–5, 96, 97–9, 145–7, 261
competition 72, 76–7 liberalization 75, 85–6
congestion 194, 197–8, 200, 204, 232 trends 56, 57, 58, 59, 267
gateways 222–4, 225 rail freight transport in United States
global operators 232–3 congestion 38, 121–2
growth 139–40 containers 127
importance 222–4, 225 crossborder 24–5, 108
ports in North America deregulation 242
congestion 39–40, 112, 114, 121, domestic 20, 22, 108
124–5, 194, 197–200, 202–3, 265 efficiency 265
gateways 27, 30–32, 50, 107, 110, gateways 27, 34, 37–8, 39, 50, 114,
111, 112–14, 121, 124–5, 244–5, 116, 117–18
265 importance 226, 227
intermodal transport 27–8, 29, infrastructure 37–8, 39, 203
30–32, 35, 37, 38–40 intermodal 28, 29, 30, 33, 34, 37–8,
labor supply 124, 202–3 247–8, 261
Portugal 78, 96–7 labor supply 37
prices, fuel 17, 50, 109, 130–31, 268 mergers and acquisitions 36–7
pricing 75, 80, 81, 86–7, 177–8, 205–6, modal share 25, 243, 244, 245, 267
265 rail hubs 30, 34, 127
product differentiation 178 trends 108, 109, 267
product flow scheduling 138 rail hubs 30, 34, 72, 127
production 19, 41, 104–5, 119, 120, regionalization 104, 106–7, 269
201, 202 regulation 28, 75, 232
Pyrennes 72, 73, 79 reliability 42, 72, 82
retailers 18–19, 167–8
Quinet, E. 86 returns and reverse logistics 8, 29, 175,
252
rail freight transport RFID systems 250, 251, 253
Canada 20, 21, 24–5, 28, 30, 33, Rhine 98, 149–50, 232
36–7, 40, 50, 207 Rickenbacker International Airport
and energy 131, 207 47, 48–9, 50, 126
intermodal transport in North Rietveld, P. 220
America 28, 29, 30, 33–4, 35–9, road freight transport
40, 50, 247–8 accidents, fatalities and injuries 193,
pollution 205, 209 206
sustainability 131, 196 Canada 20–21, 24–5, 109–10, 116,
see also combined railroad 118
transport; rail freight transport congestion 196
in Europe; rail freight transport emissions 191–3, 194, 196, 209, 267
in United States fuel use 190–91, 196, 206–8
rail freight transport in Europe intermodal transport in North
and containers 68, 261, 267 America 28, 29–30, 38, 42–3,
EU policies 75, 76, 78–9, 148–9, 227, 49, 50, 261
228, 267 labor supply 21–2, 38
hybrid networks 157, 159–60 liberalization 24, 60, 74
284 Index
and sustainability 196, 267 SCM (supply chain management)

time factors 21 104–5, 142–3, 155–6, 184, 262–3
see also combined railroad sea freight transport
transport; road freight Canada 25, 26, 27–8
transport in Europe; road and containers 27–8, 147, 149, 196,
freight transport in United 197–200
States global volume 1
road freight transport in Europe intermodal transport in North
congestion 58, 148, 194, 205–6 America 27–8, 30–32, 34–5, 49,
EU policies 74, 77, 205, 267 261
fuel use 207 pollution 197, 204–5, 208, 209
hybrid networks 156, 157–60 and security 209–10
intermodal transport 55, 67–8, sustainability 196–7, 204–5, 208, 233
69–70, 72, 73, 91, 92, 93, 95, and time 232
96–9, 261 see also ports; sea freight transport
liberalization 60, 74 of Europe; sea freight transport
taxation and tolls 79–80, 205–6, 207 of United States; short-sea
travel time 140–41, 144 shipping of Europe
trends 1, 56–9, 138, 139, 267 sea freight transport of Europe
road freight transport in United States containerization 71, 147, 149, 196,
accidents, fatalities and injuries 206 197–8, 200, 223–4, 225, 232
congestion 37, 39, 121, 122–4, 128, fuel use 208
129, 130, 194, 203 hybrid networks 156–8
crossborder 24–5, 108 importance 222–4, 225, 226
deregulation 242 intermodal transport 71, 72, 73, 95,
domestic 20, 21–2, 108 228
fuel use 207–8 liberalization 75
gateways 27, 50, 108–9, 114, 116, out-flagged ships 232
117–18, 122, 124 see also short-sea shipping of
importance 226, 227, 267 Europe
infrastructure 22, 25 sea freight transport of United States
intermodal 30, 38–39, 49, 247–8, and containers 26–7, 34–5, 112–13,
261 196, 197–200, 244–5
modal share 25, 243, 244, 245, 267 gateways 112–13, 244–5, 265
policies 129–30 intercontinental 25, 26, 27–8
taxation 207 intermodal transport 27–8, 30–32,
trends 1, 108–9 261
rolling road 67, 82–3 modal share 25, 243–4
RoRo freight transport 84, 92, 146, organizational restructuring 34–5
147, 232 trends 108
Rotterdam 91, 98, 145, 146, 204, seawater pollution 197
222–3, 224, 225, 232, 261, 268 SeaLand 27, 35
Ruijgrok, C.J. 137–8 seamlessness 3–10, 255–6, 260–67
Russia 43, 66, 235 search costs 177–8, 181
Seattle 27, 31, 32, 38, 124, 129, 202–3,
safety 193, 206, 228, 232, 233, 253, 254 244
San Francisco 27, 46, 122, 123, 246 sectors 107, 153, 154, 252
satellite communications 78, 234, 250, security 23, 24–5, 42, 209–10, 255
253 shipping lines 27–8, 29, 34–5, 145
Savannah 31, 32, 112, 245 shopping 168–9
Index 285
short-sea shipping of Europe EU 231–4, 235, 236, 267

emissions 209 United States 248, 249, 253–5
EU policies 75, 149, 228, 260 and fuel prices 210–11
hybrid networks 156, 157, 159–60 and fuel use 190–91, 196, 206–8, 213
intermodal transport 72, 73, 84, 92, global freight transport sector
94–5, 96–7, 98–9, 146, 147, 228, 196–200
261 and globalization 201–2
liberalization 75 and rail freight transport 131, 196
and sustainability 232 and reorganization of GPN (global
trends 56, 57, 139–40 production networks) 269
see also sea freight transport of and road freight transport 196, 267
Europe and sea water pollution 197, 204
SMEs (small and medium enterprises) and seamlessness 9–10, 266–7
170, 173, 178–9, 184 and urban goods movement 194,
Sony multimodal hybrid network 157, 208
158 swap bodies 67–8, 77, 78, 83, 145, 261
South California 110, 112, 114, 121, Sweden 78, 97
200, 202–3 Switzerland 72, 73, 80, 97–8, 206
Southern Pacific 36–7
spatial patterns, and e-commerce Tacoma 31, 32, 124, 129, 202–3
177–80 taxation
Spain 62, 63, 64, 72, 73, 78, 79, 97, combined railroad transport 68,
223–4, 225 74–5
specialization, and B2B (business-to- Europe 68, 74–5, 79–80, 87, 205–6,
business) e-commerce 178 207, 268
speed 21, 155–6, 175–6, 178, 248 freight transport policies in United
standards, technical 77–8, 81–2, 261 States 207, 249, 268
Stiglitz, Joseph E. 251–2 passenger road transport in Europe
strategic alliances 34, 61, 65, 233 80
Sturgeon, T. 104–5 road freight transport in Europe
Suarez-Villa, L. 105 79–80, 205–6, 207
subsidies 99, 249 road freight transport in United
supply chain management (SCM) States 207
104–5, 142–3, 155–6, 184, 262–3 technical standards 77–8, 81–2, 261
supply chains technology 10, 77–8, 205–6, 213, 214,
described 195 265–6
and e-commerce 180, 184–5, 252 see also double stacking; EDI; GPS;
future research directions 270 ICT; ITS; piggybacking;
and logistics 8, 104–5, 142–3, 155–6, satellite communications; swap
174, 176, 178, 179, 251, 262–3 bodies; TOFC; tracking systems
sustainability TENs (Trans-European Networks)
and accidents, fatalities and injuries 148, 149, 150, 202, 228, 231, 234,
193, 206, 213–14, 267 235, 268
and congestion 194, 197–200, 202–4, terrorist attacks 23, 24–5, 42, 50, 209,
205–6, 214, 267 256
definitions 190, 253–4 TEUs (20-foot equivalent unit
and e-commerce 266 containers) 70, 77, 195–6, 198–200
and emissions see emissions Third Party Logistics Service Providers
freight transport and logistics (3PLs) see Logistics Service
policies 128, 129, 130, 131 Providers (LSPs)
286 Index
time air passenger transport 46

and air freight transport 41, 42, 43, consumer demand 241–2
45, 60–61, 263–4 container traffic 197–200
and e-commerce 175–6, 182, 185, crossborder freight transport modal
251–2 balance 23–5
and ground freight transport 42 de-industrialization 18, 110, 119
and hybrid networks in EU 151, debt 119–20
155–6 deregulation 242
and inland waterway freight domestic freight 17, 18, 20, 21–3
transport 42 e-commerce 167–8, 266
and intermodal transport in Europe emissions 193, 205
72 fatalities 193
and product flow scheduling 138 freight transport policies see freight
and road freight transport 21, transport policies in United
140–41, 144 States
and sea freight transport 232 gasoline prices 17
timeliness, in logistics 155, 175–6, 178 highway infrastructure 22, 25
TOFC (trailer-on-flat-car) rail freight inland waterway freight transport 20,
transport 28, 30, 33 23, 24, 108, 226, 227, 247, 248
tolls 79, 205–6, 207 intermodal transport see intermodal
Toronto 31, 32, 46, 110 transport in North America
tracking systems 28, 78, 173, 176, 182, international trade see international
234, 265 trade with United States
transaction costs 181, 182, 253 intra-US modal split 225–6, 227
Transport Canada 26, 42 land use and connectivity 121–7
transport costs 151, 154, 161, 174–5, logistics 250–53, 254–5
182, 185, 220, 253, 254, 255 LSPs (Logistics Service Providers)
Transportation Research Board (US) 50, 172
249–50 manufactured exports 18
Trilog study 142, 157, 158 pipelines 20, 22–3, 24, 226, 227, 243,
truck freight transport see road freight 244, 245, 247, 248
transport ports see ports in North America
productivity 242–3
UIRR (Union Internationale des rail freight transport see rail freight
Sociétés de Transport Combiné transport in United States
Rail-Route) 67, 70 road freight transport see road
unions 37, 77, 82 freight transport in United
United Kingdom States
air freight transport 60, 61, 62, 63, sea freight transport 25, 26, 30–32,
64, 65, 224, 226, 233 34–5, 37, 38–40, 108
Channel crossing 72–4 seamlessness 255–6
intermodal transport 77, 98–9, 149 trade distance 18
ports 223–4 see also NAFTA (North American
road freight transport emission Free Trade Agreement); North
reduction 209 America
short-sea freight transport 147 UP (Union Pacific) 36–7, 38
United Nations 179, 190, 254 UPS (United Parcel Service) 38, 42, 44,
United States 45, 47, 49, 64, 65, 67, 123, 176,
air freight transport see air freight 177, 263–4
transport of North America urban areas 192, 194, 208
Index 287
valuable freight 28, 41, 60, 138, 151, warehousing 124, 126, 127, 181, 185
222, 224, 245, 246 waterborne freight transport 108–9,
Van Goor, A.M. 151, 154 196–7, 207, 208
van Laarhoven, P. 138 see also inland waterway freight
Vancouver 31, 32, 46 transport; sea freight transport;
Venables, A.J. 220 short-sea shipping of Europe
vertical disintegration 137–8, 181 web sites 170, 171–2, 173, 179
vertical integration 181, 184 West Coast of America 107, 110,
Vickerman, R. 220 112–13, 121–2, 200, 202–3, 244,
virtual corporations 181–2 265
virtual supply chains 252 Williamson, John 238–9
Vos Logistics 157, 159–60 Williamson, Oliver E. 181

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Globalized Freight Transport

TRANSPORT ECONOMICS, MANAGEMENT AND POLICY

Structural Change in Transportation and Communications in the Knowledge Society

TRANSPORT ECONOMICS, MANAGEMENT AND POLICY

All rights reserved. No part of this publication may be reproduced, stored in

Edward Elgar Publishing, Inc.

A catalogue record for this book

Library of Congress Cataloguing in Publication Data

ISBN-13: 978 1 84542 502 9

1. The global economy and freight transport flows 1

PART I GLOBALIZED TRADE AND INTERMODALITY:

2. Shifting modes and spatial flows in North American

PART II GLOBALIZED TRADE AND LOGISTICS:

4. Globalized trade and logistics: North American

PART III GLOBALIZED FREIGHT, SUSTAINABILITY,

6. E-commerce, logistics and the future of globalized freight 167

7. Sustainable solutions for freight transport 189

PART IV GLOBALIZED FREIGHT AND POLICY

8. Policy implications of dynamic globalized freight flows in

5.12. The Sony multimodal hybrid network 158

6.3. B2B marketplaces 172

Indiana University (BCS-0211499). Funding for the European contribu-

Thomas R Leinbach and Cristina Capineri

For Marge and Amy and Fiore and Cesare

Freight transportation has always been an integral component of economic

largest economic groupings, collapse of the ‘technology bubble’ and ter-

level of production. Thus, the increase of competition has made it neces-

THE CONCEPT OF SEAMLESSNESS IN FREIGHT

Various adjustments and enhancements, both subtle and conspicuous, to

immensely important consideration for ﬁrms as they seek to maintain a

TOWARD SEAMLESSNESS IN FREIGHT TRANSPORT

The lack of seamlessness has numerous consequences and can be witnessed

where smooth ﬂows can become constrained or interrupted. This becomes

While individual transport modes have been transformed by technological

The growth of the digital economy has had important implications on

marketing, sale or delivery of goods and services by electronic means

1. E-commerce changes the demands for goods in terms of volume and

2. E-commerce suppliers make use of diﬀerent distribution concepts than

LOGISTICS AND GLOBAL PRODUCTION

Logistics has become an integral part of the modern production process.

Finally the theme of sustainability is critically important as we examine the

excessive emissions that are detrimental to local and global environments,

ORGANIZATION OF THE BOOK

an increasing need for consolidation and collaboration in supply chains

Nijkamp, Peter (2003), ‘Globalization, international transport and the global

Globalized trade and intermodality:

INTRODUCTION: THE FREIGHT TRANSPORT

Table 2.1 Domestic freight transportation in the Group of Seven economies

Country Inland freight Gross Domestic Inland Freight

Note: a GDP is shown in inﬂation-adjusted year 2000 dollars.

Source: OECD 2003.

Source: Authors’ calculations based on data in OECD (2005).

standardized array of goods continent-wide (for example, Andersen

exploration of the future trajectory of current trends in North American

THE BALANCE OF THE MODES IN NORTH

Against the background of North America’s high and rising dependence

Domestic Modal Balance

In North America, the truck dominates the domestic movement of goods

Table 2.2 Modal shares of commercial freight activity in the US

Mode 1993 2002

Source: BTS (2004).

Moreover, when this aspect of NAFTA is fully implemented, its impact on

Crossborder Modal Balance