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The U.S. Infrastructure Advantage

Posted by Content Coordinator on Monday, June 26th, 2017

ASSOCIATION OF EQUIPMENT MANUFACTURERS (AEM)

Introduction

AEM - The Infrastructure AdvantageThe backbone of America’s economy is its infrastructure. To have the strongest, most resilient economy in the world, America must have the best infrastructure in the world. In short, we must have an Infrastructure Advantage.

America’s competitors around the world understand this. They are making unprecedented infrastructure investments and working hard to overtake the United States. Meanwhile, America is underinvesting, and is on the verge of squandering the Infrastructure Advantage we inherited from the investments made by our grandparents and great-grandparents.

It is time for America to rebuild and modernize its vast infrastructure network—our roads, highways, bridges, transit systems, ports, waterways, locks and dams, water and wastewater pipelines, as well as broadband. We must renew and strengthen our Infrastructure Advantage if we are to have the world’s preeminent economy in the 21st Century and beyond.

As equipment manufacturers representing the agriculture, construction, forestry, mining, and utility sectors in North America, several factors impact our ability to manufacture and sell our products to customers inside and outside of the United States. These factors include labor force skill, trade policies that facilitate commerce in overseas markets, and federal tax credits that boost reinvestment and expansion. Another important factor, which is the focus of this report, involves the maintenance and modernization of the U.S. infrastructure system.

What makes American manufacturers competitive is not so different from what makes the country economically competitive, and maintaining our infrastructure in a good and updated state of repair is yet another shared factor. In the 2016–2017 Global Competitiveness Report by the World Economic Forum, the United States remained in 3rd place behind Switzerland and Singapore. More ominously, the U.S. ranked 11th in infrastructure competitiveness, with the report noting that “stagnating productivity has called for a downward revision of growth prospects, highlighting the need for a renewed competitiveness agenda.”

If the United States is to remain a global economic leader, its infrastructure competitiveness ranking must be improved. The gradual demotion and stagnation of the United States’ world infrastructure ranking is a direct consequence of an inability to strategically act on the opportunities that people, industry, and technology present in rethinking U.S. infrastructure.

This report makes the case for making U.S. infrastructure number one in the world and reclaiming the United States’ Infrastructure Advantage. It outlines the consequence of not taking meaningful steps to regain this advantage, and offers five policy areas that lawmakers and infrastructure stakeholders should reference when considering infrastructure policy proposals for modernizing U.S. infrastructure and identifying a sustainable funding source. Rather than re-litigate our infrastructure problems, this document offers solutions and moves the conversation forward.

For the past two years, AEM and its member companies have sought opinions from a broad range of diverse infrastructure stakeholders. Based on this feedback it is clear that the United States must support and promote the following vision in order to reclaim its Infrastructure Advantage—the safe and efficient movement of people and goods, connectivity between and within rural and urban America, as well as strong economic growth and robust job creation. To effectively compete in the global marketplace, America’s infrastructure must be the best in the world. That is the Infrastructure Advantage.

Why is the Infrastructure Advantage Important?

Rebuilding and modernizing America’s core infrastructure to reestablish an Infrastructure Advantage is not only important, it is essential if the United States is to maintain its position as the world’s strongest economy. It makes America more competitive internationally and puts domestic industry on the path to higher economic growth, greater productivity, and stronger private-sector job creation.

In today’s global marketplace, U.S. companies must compete with companies from around the world, including ones located in countries with much lower labor costs and regulatory costs than the United States. This puts U.S. companies at a competitive disadvantage, and it creates incentives for U.S. companies to move their operations to countries with lower costs in order to compete more effectively.

To level the playing field, the United States must invest in strengthening its comparative advantages. The smartest area to do this is through the country’s infrastructure system, which is central to international competitiveness. It is critical to moving goods, ideas, and workers quickly and efficiently and providing a safe, secure, and competitive climate for business operations.

Our competitors around the world understand this. They are spending enormous sums and expanding their infrastructure, with China and India leading the way.

Meanwhile, America is headed in the opposite direction. America’s infrastructure was once the envy of the world and gave U.S. companies a big competitive boost in the international marketplace. But in recent years we have been underinvesting in our infrastructure, resulting in a decline in our roads and bridges, transit systems, air traffic control systems, airports, railroads, ports and dams, and water infrastructure.

If America’s businesses are to grow and remain competitive, and if foreign investors are to invest in businesses in the United States, then America needs to reclaim its Infrastructure Advantage. America must modernize and rebuild its infrastructure so that it is once again the envy of the world and ranks first in infrastructure competitiveness.

China, India, and other countries with low labor and regulatory costs are looking to the future by building a 21st century infrastructure capable of supporting a strong 21st century economy. This should be a wake-up call for the United States. It is time to accept the challenge. It is time to rebuild and modernize our infrastructure to ensure that America’s 21st century economy is the world’s strongest economy.

In the short term, significant investment will be required to modernize and rebuild America’s core infrastructure. This infrastructure investment will create tens of thousands of jobs across a range of industries.

In the long term, the most important economic impact of the investment needed to create the Infrastructure Advantage comes as the investments are completed. The economic benefits of this investment are long-term competitiveness, productivity, innovation, lower prices, and higher incomes.

Consequences of Losing the Infrastructure Advantage

Every day Americans see the impact of underinvestment in our core infrastructure—congestion, potholes, transit outages, water main breaks, a sluggish economy, and the list goes on. This should not come as a surprise.

The United States is currently investing half of what it spent on transportation infrastructure more than 50 years ago as a percentage of the gross domestic product—close to 1.5% now compared with nearly 3% in the early 1960’s.

America is at a crossroads. We either significantly increase investment in the infrastructure that has driven our economy in the past, or we continue to underinvest. If we increase our investment to levels sufficient to reclaim an Infrastructure Advantage, the benefits will be significant.

But what if we instead simply maintain the status quo?

Over time, these impacts will affect businesses’ ability to provide well-paying jobs, further reducing incomes. If this investment gap is not addressed throughout the nation’s infrastructure sectors by 2025, the economy is expected to lose almost $4 trillion in GDP, resulting in a loss of 2.5 million jobs in 2025.

Upon completion of the Interstate Highway System, business logistics costs, as a percentage of United States GDP, were cut in half with a decrease from 16 percent in 1980 to eight percent in 2014. Failure to maintain and upgrade this system over the past 37 years has instead increased transportation costs for a variety of products, across many sectors. Congestion caused by highway systems that are at capacity and in disrepair cause 141 million hours to be wasted in freight truck productivity.

Failure to take meaningful action on upgrading United States infrastructure could also impact agricultural product transportation. Currently, America enjoys a trade surplus with it agricultural exports. However, steps are need to repair and upgrade the locks and dams system along U.S. inland waterways. These waterways serve as critical transportation channels that alleviate congestion on roads and rail by transporting agriculture commodities such as corn and soybean. For example, the agriculture sector could hypothetically see a 40% decrease in economic activity as the result of just one major lock disruption along the Upper Mississippi River and Illinois Waterway.

Download full version (PDF): The U.S. Infrastructure Advantage

About the Association of Equipment Manufacturers (AEM)
www.aem.org
“Advancing equipment manufacturers in the global marketplace; our passion is to not only see your business succeed, but to create a community where we, as an industry, can make positive and lasting change. AEM is 900+ members strong and growing, representing 200+ product lines.”

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