Freight Railroads & International Trade

Posted by Content Coordinator on Thursday, April 6th, 2017



Globalization, technological innovation and international trade dominated the 2016 presidential election and continue to drive U.S. policy debates, including those related to tax reform and free trade agreements. Most notably, President Trump has vowed to renegotiate multilateral and bilateral trade agreements, largely on his belief that current trade deals have hindered American manufacturing, labor and economic growth.

Globalization has harmed some U.S. workers, and policymakers should work to ameliorate that harm. However, shrinking from America’s central role in international trade would significantly weaken our nation’s economy, our standard of living and our quality of life. Policymakers must not deprive Americans of the tremendous advantages and opportunities brought about by engaging fully in the global economy.

Privately owned freight railroads — an industry that connects and serves nearly every industrial, wholesale, retail and resource-based sector of the economy — offers a distinct perspective on how trade powers our economy.

The Association of American Railroads (AAR) — the world’s leading railroad policy, research, standard setting and technology organization of the U.S. freight rail industry — assessed the role that trade plays for freight railroads. Prior analysis conducted in 2016 shows spending by Class I railroads (the seven largest U.S. freight railroads) created nearly $274 billion in economic activity, generated about $33 billion in state and federal tax revenues and supported almost 1.5 million jobs nationally in 2014 alone.

The new data regarding trade show a huge swath of freight rail operations — in terms of personnel, equipment and revenue — are directly supported by the international trade that American companies conduct. In fact, analysis shows: Freight Rail and International Trade

Helping American workers displaced by trade agreements is a worthy undertaking, but policymakers must be careful not to enact measures that roll back U.S. participation in trade and potentially harm more workers than they help. Doing so would undermine one of the nation’s most essential industries and an essential partner to so many other U.S. industries.

Railroads and International Trade

By linking businesses to each other here and abroad, freight railroads have played a crucial role in America’s economic development for more than 185 years.

American life is driven by employment and consumption, which is made possible by domestic and international trade. This trade depends on manufacturing and creating goods and services, transporting them to market and then selling them via various retail means — in person or through ecommerce.

The chain is integrated, which largely requires a free flow of goods. Undo part of it — including rail, which the data show is key to the value chain — and policymakers risk undoing today’s economic framework and greatly affecting American life as it is experienced today.

Based on federal government data from the U.S. Surface Transportation Board and other government and industry sources, in 2014 international trade accounted for an estimated:

  • 35% of U.S. rail revenue — $26.4 billion out of $75.1 billion in total revenue.
  • 27% of U.S. rail tonnage — 511 million tons out of a total of 1.88 billion tons.
  • 42% of the carloads and intermodal units U.S. railroads carried — 13.4 million units out of 32.2 million total units carried (Figure 1).

Key Takeaways

1. Simple import-export models of trade do not reflect the complexities of modern production processes where goods may cross borders several times during production with the final product being distributed worldwide.

2. Trade patterns reflect the deep integration of the three North American economies over the last two decades.

3. Rail trade patterns are complex and becoming more so as innovative customer logistics solutions are developed in the marketplace.

4. New production processes and products have provided new international rail movement opportunities.

What the Numbers Mean

The 511 million rail tons associated with international trade in 2014 included:

  • 329 million tons of exports
  • 171 million tons of imports.
  • 11 million tons that pass through the United States without going to U.S. market and begin and end their journey elsewhere (e.g., Canada to Mexico or Mexico to Canada, or Canadian or Mexican goods imported or exported through U.S. ports).

Of the $26.4 billion in U.S. freight rail revenue associated with international trade in 2014, $9.6 billion was from intermodal containers and trailers, and $16.8 billion was from carload traffic — freight carried by boxcars, hopper cars, tanks cars or other types of rail cars (Figure 2). Rail revenue associated with exports ($13.3 billion) exceeded rail revenue associated with imports ($12.4 billion).

aar-4Because of data limitations, some rail traffic associated with international trade is not included in Figures 1 and 2. If it was, the share of rail traffic associated with international trade would be considerably higher. This rail traffic includes:

  • Near-port transloading of imports to domestic containers
  • Shipments of domestic goods that are used as inputs to products that are ultimately exported.
  • Shipments of domestic goods that have imported components.
  • Shipments that are actually imports or exports but are not identifiable as such in available data.

How Trade Moves America

Rail movements associated with international trade include virtually every type of commodity railroads carry and involve every region of the country, including but not limited to:

  • Coal for export out of ports in Maryland, Virginia, the Gulf Coast and the Great Lakes.
  • Paper and forest products imported from Canada to the Midwest as well as produced in the Southeast U.S. and exported from the East and Gulf Coast.
  • Imports and exports of Canadian and Mexican automotive products to and from auto factories in dozens of U.S. states, reflecting the deep integration of the North American auto industry and the logistics processes of the North American nations.
  • Containers of consumer goods from Asia and Europe coming ashore in Los Angeles, Long Beach, Oakland, Seattle, Savannah, Norfolk, New York and many other ports.
  • Plastics shipped by rail from Texas and Louisiana to the East and West Coasts for export to Europe and Asia.
  • Grains and food products grown in America’s heartland and moved to market in Mexico, Europe and Asia.
  • Iron ore mined in Michigan and shipped by rail to Great Lakes ports.

Download full version (PDF): Freight Railroads & International Trade

About the Association of American Railroads
America’s freight railroads operate the safest, most efficient, cost-effective, and environmentally sound freight transportation system in the world — and the Association of American Railroads (AAR) is committed to keeping it that way. Founded in 1934, AAR is the world’s leading railroad policy, research, standard setting, and technology organization that focuses on the safety and productivity of the U.S. freight rail industry.

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