America’s Air, Sea, and Land Ports Require Investment to be Globally Competitive

Ports—air, sea, and land—are the lifeblood of commerce, both domestic and international. Vitally important to trade, the efficiency and effectiveness of port services have a direct impact on the competitiveness of industrial sectors, industries, and entire nations. This policy brief provides an overview and analysis of the status of, and challenges facing, America’s ports, and recommendations to improve port infrastructure.

Airports

Adequate infrastructure is essential to airport and airline operations. The National Plan of Integrated Airport Systems, an inventory of US aviation infrastructure assets developed and maintained by the Federal Aviation Administration, or FAA, has categorized more than 3,300 public-use airports in the US, including 520 commercial service airports. And while COVID-19 had an enormous, negative impact on air passenger traffic, cargo volumes have not only held their own but have increased substantially to date, thanks to the expansion of e-commerce. Nevertheless, the aviation industry continues to be plagued by an increase in flights with poor time performance, attributed to late aircraft arrivals, national aviation system delays, air carrier delays, and weather-related issues.

Even before the onset of the pandemic, the nation’s airports were confronting serious capacity problems. According to the American Society of Civil Engineers, or ASCE, over a two-year period passenger travel jumped from 964.7 million to 1.2 billion per year; however, flight service increased by less than 5%, resulting in huge delays. The burgeoning customer base was outpacing the availability of terminal, gate, and ramp space. Customers have not been happy. J.D. Power surveys of airport satisfaction among travels continue to register stagnant traveler satisfaction rates.

Recognizing that airport infrastructure continues to struggle with capacity and needs to serve growing cohorts of customers, the Airports Council International—North America has determined that for the immediate future all categories of airports will need to invest in terminal buildings, access to terminals, airfield capacity, and airfield construction. Terminal buildings for airports of all sizes require the largest portion of investment, in some cases accounting for up to 50 percent of the investment needs. Since 2019, forecasts for airport expansions or terminal renovations have jumped by nearly two-thirds.

Despite the diverse sources of revenue and funding, American airports lack the financial resources needed to operate effectively. According to the Brookings Institution, transportation infrastructure in general has declined $4.2 billion since 2007 These resources include federal, state, and local grants; revenue from general obligation bonds; airport cash flow through concession fees and other revenue mechanisms; and public–private partnerships.

Meanwhile, technological advancements continue to play a critical role in improving airport service flexibility and efficiency. The FAA is presently rolling out its Next Generation Air Transportation System, or NextGen, that improves air travel safety, efficiency, and predictability. By replacing radar systems with satellite systems, less information needs to be processed by an air crew and will increase routing efficiency (shorten routes), save time and fuel, minimize traffic delays, increase capacity, and permit controllers to monitor and manage aircraft, all leading to greater safety. These NextGen capabilities are being implemented at 30 of the largest airports in the nation.

Most recently, Congress and the executive branch have taken action to improve airport and aviation infrastructure. On July 1, 2022, the FAA awarded $371 million for airfield, safety, and other improvement projects at 169 airports in 40 states. As part of the 2022 Airport Improvement Program, the money funds a variety of projects such as construction of new and improved airport facilities, repairs to runways and taxiways, maintenance of airfield elements like lighting or signage, and the purchase of equipment needed to operate and maintain airports.

Shortly after that allocation was announced, the FAA published a notice that it would award nearly $1 billion from President Biden’s Bipartisan Infrastructure Law to fund 85 airports across the country to improve terminals of all sizes. These grants not only boost capacity at US airport terminals, but also increase energy efficiency, promote competition, and provide greater accessibility for individuals with disabilities. The aim of improved airport terminals is better customer experiences and the movement of goods through the economy at lower prices and greater efficiency, all enhancing American competitiveness.

Market pressures on all airports have been increasing. These include new safety and security requirements from the FAA, Transportation Security Administration, and US Customs and Border Protection, new design guidelines from airport authorities, and changes in the fleet mix. Nearly every major airport has a multi-million dollar capital improvement campaign underway, such as Miami International Airport’s $5 billion for a terminal cargo optimization programs along with redevelopment and expansion.

In ASCE’s evaluation, airport and aviation performance was given a grade of D+ and a number of concrete steps were recommended to improve the rating. Some of the most important are related to improving resilience to potential catastrophic events, investmenting in projected capacity needs, support for increases in federal funding for the Airport Improvement Program and public-private partnerships, and greater attention to innovative technology, like NextGen, that offers the ability to reduce congestion and improve capacity.

Seaports

America’s seaports are vitally important to the national economy and intermodal transportation system. US ports are gateways for domestic and international trade with more than 99 percent of the cargo entering the United States arriving by ship. More than 360 commercial seaports nationwide help to move these goods to their destinations in communities across the nation. US ports also serve as a significant resource for national defense and emergency preparedness. 

In dollar terms, over $6 billion in goods are handled each weekday by ports with $378 billion in tax revenue generated by port activity. The value of economic activity related to ports equals $5.4 trillion annually. Ports and port tenants plan to spend $163 billion from now until 2025. Investments are focused on capacity and efficiency enhancements as maximum vessel size has doubled over the last 15 years. When it comes to the national economy in 2021, the country’s nine largest ports handled a record of more than 50 million shipping containers, a 16 percent increase from 2020. But this huge volume of traffic caused problems at several US ports. Dozens of container ships with cargo to unload were forced to queue outside the ports of Los Angeles and Long Beach due to space constraints. As detailed in numerous reports, American ports and rail terminals are struggling to cope with unprecedented surges of Asian imports.

Ports constitute an especially important portion of economic activity in coastal areas, generating many direct and indirect jobs, and are an important source of tax revenue for communities. The more goods and passengers travel through seaports year-on-year, the more infrastructure, provisions, and associated services are required. These will bring varying degrees of benefits to the economy, and to the country. For example, the Port of Miami Tunnel, a 4,200-foot bored, undersea tunnel, improves access to the Port helping to keep it competitive and efficient, making sure that traffic does not get snarled to the point of slowing down cargo unloading.

In its recent evaluation, the ASCE awarded America’s seaports a grade of C-.The larger question is: how can infrastructure address the changing needs of clearance and making sure that freight moves more quickly through terminals? Certainly, the principal path is to adopt technologies that increase automation and end-to-end visibility.  Solutions center on improving fleet transport and routing with the help of advanced technology such as machine learning, AI, and predictive analytics. The use of GPS positioning platforms for tracking container locations, and the deployment of deep analytics for implementing and processing shipments, are all promising vehicles for clearing and expediting freight.

The capacity and condition of port infrastructure (docks, piers, channel harbors) varies across the nation. However, all ports are challenged to maintain their infrastructure in harsh marine environments. Corrosion from saltwater and deicing salts, constant wet and dry cycles, temperature variations, and more accelerate the rate of decline of everything from cranes to wharfs.

Funding for ports comes from a variety of sources, including federal, state, and local funding, as well as private sector revenue streams. In general, ports continue to invest in their own infrastructure and strive to incorporate innovation in their planning and operations with automated and semi-automated terminals increasing on both the East and West Coasts. One notable development is that ports are embracing advanced analytics such as blockchain and machine learning, and it is expected they will continue to draw upon advanced technologies to improve overall operations.

Poor port performance has ripple affects nationwide, not just for the port of entry. The cost of delays is a financial burden that is passed on to other parts of the supply chain, such as trucking or rail rates, and finally to consumers. All parts of the value chain are negatively affected. With the US the world’s largest importer in terms of dollars, ports that effectively move goods are crucial for the economy. Regrettably, American ports are not very efficient according to the Container Ports Performance Index, which ranks the US outside the top 20 ports. Out of the top 25 economies, the Journal of Commerce-HIS Market Port Productivity Program ranks the US 13th for efficiency, and a study last year by the University of Rhode Island found only 10 of 300 US ports have developed a resiliency plan.

A combination of union labor contracts, which expressly limit the number of hours that workers can work, the Jones Act (an archaic law that restricts the transport of cargo between US ports to ships that are owned, crewed, registered, and built in the US), and outdated management and operations systems, negatively impact the competitiveness of American ports. What’s more, the widespread failure to fully automate major US ports has hurt their efficiency. One analysis found, for example, that automated cranes in Rotterdam were almost twice as productive than those in Oakland.

In November 2021, the White House announced a Biden-Harris Action Plan for America’s Ports and Waterways, recognizing that America’s underfunded port and waterway infrastructure has real costs for the US economy and the nation’s global competitiveness. Many US ports also have bridge or depth limitations that restrict their ability to receive the larger, post-Panamax vessels that are the future of ocean shipping. Further, the surge of cargo coming off larger vessels can also strain outdated landside infrastructure.

This announcement was followed up three months later with the release of $450 million to expand capacity and improve the movement of goods through supply chains. Grants will be made available through the Port Infrastructure Development Program with funds from the Bipartisan Infrastructure Law.

To compete effectively in the global economy, many are calling for a national freight strategy that undertakes a complete review of every mode of freight transportation, whether on the waterside or landside of seaport facilities. The American Association of Port Authorities recommends Congress and the administration pass a robust surface transportation authorization that prioritizes freight mobility and intermodal access to seaports. They argue for a national freight policy that considers cargo flowing through ports, both large and small, and that the integration of existing connectors between the Interstate Highway System and intermodal facilities, such as seaports, is of paramount importance. Other priorities are the identification of port-specific, freight movement measurement standards and the funding of intermodal freight (highway, maritime, rail) that are vital to port efficiency and cargo mobility.

In addition to the funding for Congressionally authorized projects, the ports themselves must adopt new technologies to reduce wait times at docks, boost efficiency, improve resilience, and increase security. Finally, to strengthen the entire freight system and reduce congestion that is costly to the economy when moving goods, the public and private sectors must cooperate more closely to improve freight and landside connections.

According to Mary Brooks, former chair of the Marine Board of the US Department of Transportation, rising population and more middle-class consumers are putting pressure on ports, as shipping lines continue to consolidate. Many ports will be relegated to feeder status. The major ports will maintain their position if they can exhibit high quality management, customer-focused leadership, strong societal license from their local community, and flexibility.

Land Ports of Entry

The US General Services Administration has identified 26 lands ports of entry that have the greatest need for modernization. With an average age of 40 years, these facilities have not been updated since the 1980s. Yet the volume and value of trade has skyrocketed. Since 1990, the value of freight shipments among the US-Mexico-Canada Trade Agreement countries has risen by 170 percent, growing an average of 8 percent annually.

Unfortunately, land border crossing infrastructure is an often overlooked but key factor in economic competitiveness—not just at the national level but locally. Modernizing the nation’s land ports can create good-paying jobs for working families, and small business opportunities. To illustrate, the $3.4 billion from the Bipartisan Infrastructure Law will support 6,000 jobs over 8 years, add $3.23 billion in total labor income across the US, and contribute an additional $4.5 billion to GDP, along with hundreds of millions of dollars in tax revenue for state, local, and federal governments.

On an average day, approximately $3.5 billion worth of goods move between the United States, Canada, and Mexico. Most of this freight—63 percent—travels by truck across US land ports of entry, so effective border-crossing infrastructure is critical to facilitate trade with our North American partners. When long lines at a border crossing stop goods from being transported, supply chains across the United States and North America are impacted. Moreover, these delays harm the US economy.

To illustrate, a 10-minute reduction in border wait times can have a positive annual impact of $5.4 million on the US economy due to purchases by additional families and individuals entering the US from Mexico. Recognizably, the immediate effect of these purchases is most evident in border communities, but the economic benefits would spread to the continental United States due to the economic linkages between local economies. In fact, approximately 25 percent of the total impact would reach non-border states.

Investing in land ports of entry is an important and necessary step to maintain the global competitiveness of North America. However, we need more effective planning and financing for land ports of entry and to operate them more effectively to sustain and grow our competitiveness over the long term.

Conclusion

While the outlook is improving for America’s ports—air and sea in particular—the present condition and performance of its present infrastructure is subpar, especially for seaports. Recognizably, some ports are in much better shape than others; however, overall US ports do not meet the test of a global economy that seeks to attain and maintain primacy in international commerce and optimal productivity and efficiency in domestic commerce. Only through significant investment of public and private dollars, a highly productive workforce, less burdensome regulations, and improved management and adoption of innovative technologies will US ports be able to improve their competitiveness.