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Publication Number:      Date:  July/August 1999
Issue No: Vol. 63 No. 1
Date: July/August 1999


Highways and The New Wave of Economic Growth

by Walter L. Sutton Jr. and David Marks

Transportation improvements have preceded every stage of industrial development in human history. As Dr. John Kasarda at the University of North Carolina has noted, transportation was a critical ingredient in the four major waves of industrialization:

The first great cities developed around seaports and along trade routes.

As the 20th century ends, the United States is in a fifth wave of industrialization that is transforming the global market and changing traditional notions of development.1 This wave is based on innovations in logistics and manufacturing. Frequently, components are manufactured in distant countries, and then they are assembled into products near the point of their final consumption or use. Many companies use high-speed jets to ship components or products quickly to far-flung destinations, but all transactions depend on a fast and reliable transportation network that minimizes the cost of production. A recent report by a leading logistics company notes that nearly 80 percent of executives consider product delivery as important as product quality.2

Now, more than ever, businesses require a seamless, intermodal transportation system. Consider, for example, one of the fastest-growing distribution centers in the United States: the “Chesapeake Crescent” that stretches from Baltimore, Md., to Norfolk, Va. When goods arrive by air or sea, they can be shipped overnight on interstate highways or rail lines to more than 30 percent of the nation’s population. Intermodal access has been a major asset for the area near Baltimore/Washington International Airport.

A study by The Johns Hopkins University Institute for Policy Studies showed that the sector of Maryland’s economy that is oriented around logistics and distribution grew by 87 percent between 1977 and 1992. This was significantly higher than the 65 percent growth rate for Maryland as a whole.3 Just as highway infrastructure made the fourth wave possible in the United States, the country’s success during the fifth wave will depend on whether we have a seamless, intermodal transportation system.

The Federal Highway Administration (FHWA) is prepared to meet this challenge. Our commitment begins with improving highway infrastructure, the backbone of our intermodal network.

ICTF in the Port of Baltimore.The Intermodal Container Transfer Facility (ICTF) at Seagirt Marine Terminal in the Port of Baltimore raises intermodalism to an art form. Only 100-feet from the bulkhead to the railhead insures that cargo arriving by ship speeds through the marine terminal to the rail yard, and on to the heartland of America. Seagirt is a terminal designed to move cargo as guickly as possible over the piers. Domesitc cargo is also processed through ICTF. Cargo leaving the ICTF in Baltimore can be in Chicago in 30 hours.

The Transportation Equity Act for the 21st Century (TEA-21) boosts surface transportation investment by 40 percent over the next five years. Among other programs, TEA-21 authorizes $28.6 billion for the National Highway System (NHS), $23.8 billion for interstate highway maintenance, $33.3 billion for the Surface Transportation Program, and $4.1 billion for the construction and maintenance of highways on federal lands. TEA-21 also authorizes $20.4 billion for bridges, and some of this money will be used to reconstruct spans that are too small for freight transportation. Weight restrictions for bridges and height limitations for tunnels are a persistent problem for freight companies.

Improving the National Highway System becomes more important as adjacent communities become natural incubators for warehouses and distribution centers. Many of these areas are abandoned industrial sites, but they have a promising future through the “brownfields” initiative, through which most states now offer some combination of financial incentives, simplified clean-up standards, or liability relief for developers of these underused properties. (See “Brownfields and Bikeways: Making a Clean Start” in the March/April 1999 issue of Public Roads.)

In Providence, R.I., city officials have appealed to logistics companies who need proximity to Interstate 95 to consider participating in a brownfields project. Brownfields are a perfect fit for many fifth-wave businesses and a perfect example of how FHWA and other partners, including the Environmental Protection Agency and the General Services Administration, can spur employment in depressed areas of our cities.

In addition to improving our core highway infrastructure, another goal is to improve intermodal connections. As mandated by TEA-21, FHWA is developing a report on the status of NHS connectors to seaports, airports, and other freight facilities. The report will address impediments to the free flow of goods on our intermodal system.

Through funding and technical assistance, the U.S. Department of Transportation is a strong supporter of the Alameda Corridor, one of the largest intermodal projects in American history. The Alameda Corridor is a 32-kilometer railway that will carry freight from the ports of Los Angeles and Long Beach to Southern California railheads. Four overpasses and three underpasses will be built to improve vehicular mobility, and nearly 200 at-grade intersections of roads and railways will be replaced by grade-separated crossings. These improvements will better position California for fifth-wave business development. Local officials estimate that the Alameda Corridor will support 700,000 new jobs in Southern California by 2020.4

Alameda Corridor
The Alameda Corridor will reduce congestion and support the intermodalism necessary for fifth-wave businesses.

Another priority for fifth-wave businesses is congestion relief. A recent study by the Texas Transportation Institute showed that Americans in metropolitan areas waste $74 billion annually because of congestion.5 While fuel consumption is a large cost for logistics companies, an even greater burden is the time lost because of congestion. In a business where time is money, congestion increases production costs and deprives companies of resources that they might otherwise invest in research or firm expansion.

FHWA recognizes its critical role in increasing productivity. That’s why one of FHWA’s five strategic goals in its National Strategic Plan is to continuously improve the economic efficiency of the nation’s transportation system to enhance America’s position in the global economy.

Last year, FHWA released a report that showed how highway improvements dramatically lower production costs in 35 sectors of the economy. They found that a $1 increase in highway capital historically generates about 30 cents of savings per year over the lifetime of the road improvement. The transportation and warehousing sectors were among the sectors with the largest cost savings.6

Aerial view of the port of Long Beach near Los Angeles.
The port of Long Beach is the busiest cargo container port in the United States. This 1,214-hectare site near Los Angeles depends on an excellent intermodal system to transfer products across Southern California.

TEA-21 allocates $8.1 billion for the Congestion Mitigation and Air Quality Improvement Program, which funds projects that ease congestion and reduce pollution in areas that have failed to meet one or more of the National Ambient Air Quality Standards established for six principal air pollutants. (See “Clean Air and Transportation: The Facts May Surprise You” in the July/August 1998 issue of Public Roads.) FHWA is also developing cutting-edge technologies to improve mobility. For example, our $1.3 billion Intelligent Transportation Systems initiative is identifying new navigation systems for vehicles, faster ways to clear accidents, and other ways to reduce delay.

Another FHWA initiative is the Value Pricing Pilot Program. TEA-21 provides $51 million to test pricing strategies in metropolitan corridors. On San Diego’s Interstate 15, for example, single-occupant vehicles are allowed to purchase entry into high-occupancy-vehicle lanes by paying a “congestion price” tabulated through vehicle transponders and overhead readers. This program has been very popular and may be copied by other cities seeking congestion relief. (See “Value Pricing Helps Reduce Congestion” in the March/April 1999 issue of Public Roads.)

In today’s economy, movement means improvement. How the United States solves its transportation challenges will determine whether the country advances in a fifth-wave economy. FHWA is aggressively improving the physical condition, connectivity, and use of infrastructure that is critical for the new economic frontier.


  1. John D. Kasarda. “Transportation Infrastructure for Competitive Success,” Transportation Quarterly. Vol. 50, No. 1, Winter 1996, pp. 35-50.
  2. Annual Report for Ryder System Inc., 1995.
  3. Maryann Feldman and Barbara Larcum. Maryland as a Distribution Center: An Assessment of Transportation and Communication Assets, The Johns Hopkins University Institute for Policy Studies, Baltimore, Md., 1996.
  4. James Flanagan. “Remaking L.A. Into the New City of Big Shoulders,” Los Angeles Times, Nov. 15, 1995.
  5. Timothy J. Lomax and David L. Schrank. Urban Roadway Congestion Annual Report, Texas Transportation Institute, College Station, Texas, 1998.
  6. M. Ishaq Nadiri and Theofanis P. Mamuneas. Contribution of Highway Capital to Output and Productivity Growth in the U.S. Economy and Industries, Federal Highway Administration, Office of Policy Development, Washington, D.C., 1998. This report may be downloaded at the FHWA World Wide Web site at http:// www.fhwa.dot.gov/aap/gro98cvr.htm.

Dr. Walter L. Sutton Jr. is the director of policy for the Federal Highway Administration. Before his appointment in 1998, he was senior environmental attorney with Fina Oil and Chemical Co. in Dallas. Before that, he was regional counsel and deputy regional counsel for the U.S. Environmental Protection Agency, and he practiced environmental law with Hughes and Luce, L.L.P., in Dallas. Dr. Sutton spent several years as adjunct professor at Southern Methodist University and was a lecturer at the University of Texas at Dallas. He has also held positions with Texas Instruments in Dallas, Tenneco Oil Co. in Houston, and Ford Motor Co. in Dearborn, Mich. He holds a bachelor’s degree in economics from the University of Denver, a master’s degree in business administration from the University of Dallas, a doctorate in management science from the University of Texas at Dallas, and a law degree from the University of Michigan.

David Marks is a transportation specialist in the Federal Highway Administration’s Office of Transportation Policy Studies. Before starting a Presidential Management Internship at FHWA, he graduated from The Johns Hopkins University Institute for Policy Studies in 1997 with a master’s degree in public policy. He also holds a bachelor’s degree in political science from the University of Maryland at College Park. Marks has also worked for the Maryland State Highway Administration’s Office of Highway Policy Assessment, and in 1996, he helped produce studies on the logistics industry in Maryland and the state’s transportation and communications assets.



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