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Trade Economist Urges U.S. Infrastructure Investment
Monday, 01 February 2010 00:00
Global trade poised for rebound; investment needed now, says Walter Kemmsies

The United States should expand its goods movement infrastructure with a sense of urgency because global trade is poised for a rebound, said a trade and transportation economist who addressed the Georgia Foreign Trade Conference Monday.

"Now is the time to make the investment. Don't wait for two years when everything is fine," Walter Kemmsies, chief economist at Moffatt & Nichol Engineers, told the annual trade event in Sea Island, Ga.

Although the United States last year experienced an unprecedented decline in containerized imports and a softening in exports, the U.S. and world economies today are showing signs of growth. The U.S. container trade could return to its 2007 peak level by 2012, Kemmsies said.

Stabilizing the financial system will be a key precursor of growth. "The financial system is not yet stable, but we will see loan expansion in the second quarter," he said. This will have a positive effect on U.S. business, which is already stabilizing.

Exports, which began to pick up last fall, will help lead the U.S. economy into a new growth phase. U.S. export growth would be enhanced if China did not maintain its currency at an artificially low level in order to boost its own exports, Kemmsies said.

U.S. imports will pick up again as the employment situation improves and consumers start spending again. New claims for unemployment are already going down, and this will translate to increased trade and transportation in the next few months.

Since consumer spending accounts for 70 percent of U.S. gross domestic product and 18 percent of the world's GDP, the return of the American consumer will have a profound global impact on trade and transportation.

As China and other developing nations expand production, they will require more raw materials and agricultural commodities, both of which are sourced in the United States. Therefore, U.S. export growth will accelerate, and it will be weighted heavily toward bulk commodities. "What we trade through our ports will shift," Kemmsies said.

Some of these exports will move in bulk vessels, but an increasing share of the commodity trade is also moving in containers.

These developments indicate that significant investments in port, marine terminal and inland transportation infrastructure will be required because today's over-capacity situation could change, and infrastructure could quickly become a trade bottleneck.

"The world really wants to trade. That's the long-term trend. Transportation will grow," he said.

Journal of Commerce Online, 2/1/2010