[Senate Hearing 110-1253]
[From the U.S. Government Publishing Office]






                                                       S. Hrg. 110-1253

                       SURFACE TRANSPORTATION AND
                           THE GLOBAL ECONOMY

=======================================================================

                                HEARING

                               before the

                    SUBCOMMITTEE ON TRANSPORTATION 
                           AND INFRASTRUCTURE

                                 of the

               COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS
                          UNITED STATES SENATE

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

                             APRIL 16, 2008

                               __________

  Printed for the use of the Committee on Environment and Public Works


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               COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS

                       ONE HUNDRED TENTH CONGRESS
                             SECOND SESSION

                  BARBARA BOXER, California, Chairman
MAX BAUCUS, Montana                  JAMES M. INHOFE, Oklahoma
JOSEPH I. LIEBERMAN, Connecticut     JOHN W. WARNER, Virginia
THOMAS R. CARPER, Delaware           GEORGE V. VOINOVICH, Ohio
HILLARY RODHAM CLINTON, New York     JOHNNY ISAKSON, Georgia
FRANK R. LAUTENBERG, New Jersey      DAVID VITTER, Louisiana
BENJAMIN L. CARDIN, Maryland         LARRY E. CRAIG, Idaho
BERNARD SANDERS, Vermont             LAMAR ALEXANDER, Tennessee
AMY KLOBUCHAR, Minnesota             CRAIG THOMAS, Wyoming
SHELDON WHITEHOUSE, Rhode Island     CHRISTOPHER S. BOND, Missouri

       Bettina Poirier, Majority Staff Director and Chief Counsel
                Andrew Wheeler, Minority Staff Director
                              ----------                              

           Subcommittee on Transportation and Infrustructure

                     BAUCUS, MAX, Montana, Chairman
THOMAS R. CARPER, Delaware           JOHNNY ISAKSON, Georgia
HILLARY RODHAM CLINTON, New York     JOHN WARNER, Virginia
BENJAMIN L. CARDIN, Maryland         GEORGE V. VOINOVICH, Ohio
BERNARD SANDERS, Vermont             DAVID VITTER, Louisiana
BARBARA BOXER, California (ex        JAMES M. INHOFE, Oklahoma (ex 
    officio)                             officio)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
                            C O N T E N T S

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                                                                   Page

                             APRIL 16, 2008
                           OPENING STATEMENTS

Baucus, Hon. Max, U.S. Senator from the State of Montana.........     1
Craig, Hon. Larry, U.S. Senator from the State of Idaho..........     4
Inhofe, Hon. James M., U.S. Senator from the State of Maryland...    63

                               WITNESSES

Yam, Siva, President, United States-China Chamber of Commerce....     5
    Prepared statement...........................................     8
Isbell, John, Global Director of Logistics, Nike.................    19
    Prepared statement...........................................    21
Responses to additional questions from:
    Senator Carper...............................................    24
    Senator Inhofe...............................................    24
Kuntz, Ray, Chief Executive Officer, Watkins and Shepard 
  Trucking, on Behalf of the American Trucking Associations......    24
    Prepared statement...........................................    27
Responses to additional questions from:
    Senator Carper...............................................    42
    Senator Inhofe...............................................    42
Wytkind, Edward, President, Transportation Trades Department, 
  AFL-CIO........................................................    43
    Prepared statement...........................................    46

 
                      SURFACE TRANSPORTATION AND 
                           THE GLOBAL ECONOMY

                              ----------                              


                       Wednesday, April 16, 2008

                               U.S. Senate,
         Committee on Environment and Public Works,
          Subcommittee on Transportation and Infrastructure
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10:05 a.m. in 
room 406, Dirksen Senate Office Building, Hon. Max Baucus 
(chairman of the subcommittee) presiding.
    Present: Senators Baucus and Craig.

             OPENING STATEMENT OF HON. MAX BAUCUS, 
             U.S. SENATOR FROM THE STATE OF MONTANA

    Senator Baucus. The hearing will come to order.
    Good morning, everybody. Thank you for being here today. I 
know some of you have changed your schedules to accommodate the 
hearing today, and we deeply appreciate that.
    Welcome to the first hearing of the Transportation and 
Infrastructure Subcommittee. A few years ago, I led a group of 
Montanans to China and to India on a trade mission. China now 
has capital markets that rival America's and Europe's, and as 
we discovered on our trip, their infrastructure is not far 
behind.
    We landed at Chongqing, China, the airport there. I was 
stunned. It is a modern, fancy airport in Chongqing, China, 
South-Central China. The counsel from Chungdo met us there and 
he was very upset that none of America's firms had participated 
in building that fancy airport. The Germans were there. I think 
the German engineers, maybe a German construction crew, but 
there were no Americans that helped build that airport.
    Then we got in the cars and drove to our hotel. I was 
stunned again at the fancy highways, the interState highway 
system at Chongqing. I mean, the American InterState system is 
not better. I was stunned. And there are miles and miles of 
ribbons of roads.
    Now, the city population I think is about 12 million or 13 
million. The province is about 33 million. And for whatever it 
is worth, at dinner that night I asked the Mayor: How did you 
pay for all of this? And he admitted that the central 
government in Beijing just gave him the money and wanted it 
built as part of the effort just to build out into Western 
China and get away from the coasts.
    So I have to tell you, I was just really stunned at what 
China is doing, and seeing that airport and seeing those 
highways made a huge big impression on me.
    The New York Times described the city of Chongqing as 
China's Chicago. I can say first-hand that it is reminiscent of 
Chicago's rail yards and docks that are carrying Western beef 
and barley for nearly a century. The Chinese government intends 
to invest nearly $200 billion in the next decade to develop 
Chongqing into a transportation hub. That is the equivalent in 
inflation-adjusted terms to what the U.S. spent to build the 
InterState Highway System in the 1950's in the whole Country.
    China and other countries such as India are planning for 
the future. Clearly, they have plans. They have seen what we 
have done in the U.S. They have taken some of what they think 
are the best features of the U.S., discarded what they think 
are not the best features of the U.S., and they are going their 
own way, as they should. I take my hat off to them for doing 
so.
    The question I have, are we Americans making the same 
commitment? Are we looking to the future as aggressively as are 
some other countries?
    Today's hearing focuses on that question: How do we plan 
our infrastructure for the more developed and connected and 
competitive world economy, not just today, but for the future? 
How do we plan to put a system together that anticipates the 
demands of the world in conjunction with the U.S.? By investing 
in U.S. infrastructure, we are investing in our own future. In 
the next half-century, the population of the U.S. is expected 
to increase by approximately 150 million people. This will mark 
an increase of 50 percent over current levels. Just think about 
that for a second--50 percent over a half-century. That is more 
people, more cars, more trucks, highway users.
    My State of Montana is a participant in the global economy. 
We are one of the few States in the Union that has a positive 
trade balance. We export a lot of our wheat, a lot of our 
barley. We export a lot of other manufactured products. We have 
a positive trade balance. We depend upon our transportation 
systems, whether it is surface, ports or shipping or air.
    This bill we are talking about, the highway bill, not only 
funds highways, roads and bridges, but also keeps rural 
communities connected to each other across vast distances. It 
keeps those communities connected to the rest of the Country 
and to the rest of the world.
    There are also a lot of minerals in my State of Montana 
which we export worldwide--the copper, the molybdenum being 
twos, as well as platinum and palladium for that matter.
    But serious tests for our Nation's transportation system 
are presenting themselves. We witnessed the tragic collapse of 
the bridge in Minnesota. We know that a lot of our bridges are 
worn out and need a lot of help. Some of our highways are in 
pretty rough shape. About one-third of our major roads are in 
poor or mediocre condition, and clearly we know that shoddy 
roads result in lots of costs to America. One estimate I saw is 
about $67 billion in extra vehicle repairs and operating costs 
due to inadequate highways and bridges. More important, poorly 
maintained roads contribute to one-third of all highway 
fatalities.
    With all these issues in mind, we have an excellent panel 
of witnesses. They will discuss infrastructure development in 
other countries. Mr. Yam clearly knows a lot about China. We 
will get to hear the perspectives of shippers and transporters 
in our global economy. And finally, we will get organized 
labor's viewpoint of indeed to fully fund infrastructure 
investment.
    I might say, too, and I know I am saying things that others 
have said before, but I am almost blown away with what China is 
doing at the Shanghai Harbor. About a couple of years ago, I 
was talking to the Business Roundtable about potential, if not 
threats over the horizon, but just concerns. You know, we 
Americans respond to crises. We do a good job. We are the can-
do Country. We are creative. We are entrepreneurial in our 
spirit more than any other country. We are just a can-do 
attitude and individuals can do it because there is more 
mobility in America. There is more opportunity in America than 
any other country so there is a greater opportunity for 
individuals and companies to do things in our Country.
    We respond to crises. Look at World War II, we responded. 
Pearl Harbor, we responded. Depression, Sputnik--we respond to 
crises. I think this is in the nature of a crisis, frankly. The 
trouble is this: It is a stealth crisis. It is harder to see. 
It is not like Sputnik. It is not like Pearl Harbor. It is not 
a physical event that galvanizes. It is not one event. It is 
just a series of lots of different developments.
    I was talking to the Business Roundtable about this, and 
actually there was one person who is the head of a major 
railroad, and he said, Senator, I have seen Sputnik; it is 
Shanghai Harbor.
    When you see it, you know it is true, what has developed 
there now and what China is thinking of developing. They are 
moving. It is like what I saw in Chongqing. And I know this is 
true in other countries as well. It is not just China. I think 
Mexicans are trying to develop the biggest port off the coast 
on the Pacific Coast to rival L.A. and Long Beach and other 
ports on the West Coast. They are moving.
    The hearings on this bill is to get a better understanding 
of what is going on, get a better understanding of what we can 
do as a Country, and to get a better understanding of what this 
Subcommittee can do. A lot of it has to do with funding, which 
is a whole other subject which we will address.
    I am excited, frankly, and relish taking up the challenge, 
so we are here doing and serving our people in our Country the 
way we should.
    Senator Baucus. Our first witness today is Mr. Siva Yam. He 
is President of the United States of America-China Chamber of 
Commerce. Mr. Yam has kindly postponed a trip to China in order 
to join us today. We deeply thank you for that, Mr. Yam. I am 
also very eager to hear your testimony about what China is and 
is not doing and why.
    Next, we will go through a little global management supply 
chain. We will first hear from Mr. John Isbell, the Global 
Director of Delivery Logistics for Nike, the shoe, apparel and 
sports equipment giant. He will share with us what Nike sees on 
the global stage, and he will give us his perspective for 
future business models that depend on the global economy.
    Then, we will hear from Ray Kuntz, the CEO of Watkins-
Shepard. Ray has two very important distinctions. For one 
thing, he is the Chairman of the American Trucking 
Associations. That is the trucking industry's leading 
association. But of greater importance to me personally, Ray is 
from Montana, a close friend, and I personally value Ray's 
friendship and contribution to our country.
    And finally to round out the panel, we will hear from Ed 
Wytkind of the Transportation Trades Department. Ed will 
discuss the labor community's role, both in constructing and 
using roads and highways and bridges.
    I will just finish where I started. We are a can-do people. 
We like challenges as Americans. We have done a lot for our 
Country. I am excited about in this year leading up to what we 
do, not only this year, but next year with the transportation 
bill to address these challenges.
    Senator Craig. Mr. Chairman.
    Senator Baucus. Yes, Senator Craig.
    Senator Craig. Before we turn to our panelists, let me add 
a couple of comments.
    Senator Baucus. Sorry, I neglected to----
    Senator Craig. No, that is fine.

            OPENING STATEMENT OF HON. LARRY CRAIG, 
              U.S. SENATOR FROM THE STATE OF IDAHO

    Senator Craig. I certainly in no way disagree with anything 
you have just said. As we move toward the reauthorization of 
our Surface Transportation Act, SAFETEA-LU, there is no 
question that we have to look at the future and look at the 
funding. That is going to be critical.
    I will ask unanimous consent that my full statement become 
a part of the record, but I think it is important to recognize 
that in the world of global competitiveness, a report that was 
done by the World Economic Forum listed infrastructure as one 
of the nine elements critical to a country's sustained 
productivity and competitiveness. However, the World Economic 
Forum also noted that the U.S. has slid from first to sixth in 
global competitiveness behind Switzerland, Finland, Sweden, 
Denmark and Singapore.
    Now, I know you were focused on China, and I have been 
there and I agree with you. As it relates to impact in the 
world economy and growth, there is no equal at this moment. At 
the same time, clearly what is happening in the European 
Community today and the growth that is occurring there, 
although in a different way, is critically important. We cannot 
continue to neglect our infrastructure as other nations with 
whom we compete in business and global marketplaces are making 
the kind of investments they are making. Some would argue they 
are simply catching up. No, I don't think that is the case. I 
think you mentioned it with the Singapore Harbor. That isn't 
catching up. That is going well beyond the capacity of a 
variety of our ports and it is phenomenally significant.
    The road structures of China, 53,000 miles of national 
expressway system are under construction in China now. India 
has its own national system that is being looked at and 
reviewed.
    So it is appropriate for this Committee under your 
leadership, Mr. Chairman, to get out in front of this with the 
best possible knowledge we can muster and challenge this 
Congress to do what we do well, as you have mentioned, but more 
importantly, the appropriate funding and the funding mechanisms 
that will help drive modernization and the restructuring of 
some of our older structures as we move into the 21st century.
    So thank you for the hearing. I look forward to the 
witnesses, and thank you for being with us today.
    [The prepared statement of Senator Craig follows:]

              Statement of Hon. Larry Craig, U.S. Senator 
                        from the State of Idaho

    I'll be brief so that we may get to the panel, but I 
welcome our witnesses to the Subcommittee, and look forward to 
working with you Mr. Chairman, and the full Committee as we 
begin the process toward reauthorizing our surface 
transportation programs and the SAFETEA-LU bill in 2009.
    This hearing, Mr. Chairman, is a good opportunity for us to 
hear first hand the comparisons between the investment the 
United States is making in its infrastructure, and the 
investments being made by the rest of the world. These 
witnesses can provide first hand information on the advances 
they have seen around the world, and give us their views on how 
those advances compare to the investment we are making here in 
the United States.
    Trading partners like China, India, and others around the 
globe are realizing that one of the keys to economic prosperity 
and growth is a strong surface transportation and port 
infrastructure. These are the necessary arteries for the free 
flow of people, goods and information; three things necessary 
in a manufacturing and export economy.
    In fact, the U.S. Chamber of Commerce has noted that the 
five major economic sectors of manufacturing, services, retail, 
agriculture and natural resources account for 84 percent of the 
overall U.S. economy and each is heavily depending on our 
transportation infrastructure.
    In its 2006-2007 Global Competitiveness Report, the World 
Economic Forum listed infrastructure as one of nine elements 
crucial to a country's sustained productivity and 
competitiveness. However, the World Economic Forum also noted 
that the U.S. has slid from first to sixth in global 
competitiveness behind Switzerland, Finland, Sweden, Denmark 
and Singapore. Similarly, in its recent Logistic Performance 
Index, the World Bank ranked U.S. infrastructure as only 
seventh in the world, behind that of the Netherlands, 
Singapore, Germany, Switzerland, Sweden and Japan. We cannot 
continue to neglect our infrastructure as other nations with 
whom we compete for business in the global marketplace make 
significant investments in their infrastructure.
    China and India are prime examples of nations who have 
recognized the importance of making these investments. China 
has dramatically increased its investment in transportation and 
is generating between 8 and 10 percent in economic growth each 
year over the past several years. China has begun construction 
on a 53,000 mile National Expressway System to connect all 
large and medium-sized cities. When completed, this system will 
be larger then our own interState system. The impact of these 
investments are already being felt on the West Coast, where 
Chinese shipping containers are already filling ports.
    If our nation cannot provide quality infrastructure to 
facilitate the free flow of goods, manufacturers and other 
businesses will move their operations to nations that can. This 
body and this Committee have a responsibility to the American 
people to continue the significant investments we have made in 
our infrastructure in the past. Failure to do so will be 
catastrophic to our economy.
    Thank you Mr. Chairman, I yield back.

    Senator Baucus. Thank you, Senator, very much. I appreciate 
that.
    Mr. Yam, proceed. Your statements will automatically be 
included in the record, as will yours, Senator, and we 
encourage you to stick within 5 minutes when you are giving 
your testimony. Thank you very much.

 STATEMENT OF SIVA YAM, PRESIDENT, UNITED STATES-CHINA CHAMBER 
                          OF COMMERCE

    Mr. Yam. Thank you very much, Mr. Chairman, Senator Craig.
    On behalf of the U.S.-China Chamber of Commerce in Chicago, 
I would like to thank you for the opportunity to be here with 
you today to share a few observations that we have.
    Over the last 15 years, we have worked with hundreds of 
U.S. companies to help them to stay competitive with a focus on 
China. So we have learned something and would like to share 
with the Committee.
    In the last 15 years, we have seen there was a major change 
in the global economy. We believe that this was due to three 
major events: the collapse of the Soviet Union, the opening of 
the door of China, and also Internet, computer, and information 
technology that suddenly empowered the consumers. Now the 
consumers have multiple channels that they can go to compare 
prices, and they are looking for the lowest possible price on 
the products they purchase.
    So we have seen a shift in the production from developed 
countries to developing countries for basic manufacturing. And 
China has become the winner in this transformation.
    Many people will argue that the success of China was due to 
its labor, with 1.3 billion population, who make $1,000 U.S. 
dollars a year. However, if we just look at labor, and you can 
go to some other countries like Bangladesh, certain some 
African countries that have lower labor costs. So labor alone 
would not make China such a force in the global economy.
    It is the will, the planning of the government, the 
determination for export, the Chinese culture, and the wealth 
and knowledge of the millions of overseas Chinese that help to 
build the country. But most importantly, it is the Chinese 
government's investment in infrastructure and transportation 
systems that makes a difference.
    Since the year 2003, China has been consistently investing 
enormous amounts of money in infrastructure. The growth of 
investment has been over 25 percent. That happened year after 
year. It is one of the few countries in history that have done 
that. In the year 1988, China had zero miles of expressway. In 
1989, they had 168 miles. By the year 2005, they had 25,000 
miles of expressway. They are planning to link all cities with 
a population of over 200,000 by the year 2020.
    What China is able to do no other country can do. I say 
that because of the will of the government and the planning. 
One big difference is in China, there is no private 
landownership. The government owns all the land, so the 
government can move millions of people around, build an 
industrial park, build a highway, so forth and so on.
    Infrastructure for transportation is critical to the global 
economy, particularly for developing countries, because they 
have to rely on exports. They have to manufacture the goods at 
a competitive price, and also they need to be able to ship the 
goods from the factories to the ports. China has been able to 
do just that.
    If you look at the statistics, in the last couple of years 
China has substantially completed the construction of the 
highways. And even though China has been losing jobs in the 
manufacturing sector, they have become more efficient. Their 
exports have grown substantially, and they have the largest 
surplus in the history of China.
    Now, as China is moving from a developing country to a 
developed country, it is critical that they are able to 
integrate all parts of China, because costs in the coastal 
region have gotten very expensive. So they need to build 
highways to go to other areas. That is what they are planning 
to do that by the year 2020. By doing that, China will become 
more competitive We always compare China with India. In 1981, 
the GDPs of both countries were essentially the same. Both of 
them were under $250 billion. Today, China's GDP is three times 
as big as India's, and the length of highways in China is nine 
times as much as that of India.
    The the transportation system is critical to the global 
economy. For a developing country, they need that so that they 
can export to build a domestic economy. When they move one step 
further, they need to integrate to even-out the distribution of 
wealth.
    Thank you very much. I appreciate the opportunity.
    [The prepared statement of Mr. Yam follows:]
    
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
        
    Senator Baucus. Thank you, Mr. Yam, very much.
    Mr. Isbell.

               STATEMENT OF JOHN ISBELL, GLOBAL 
                  DIRECTOR OF LOGISTICS, NIKE

    Mr. Isbell. Chairman Baucus and Senator Craig, thank you 
for the opportunity to testify on the freight infrastructure 
problems facing our Nation.
    My name is John Isbell. I am responsible for overseeing the 
global flow of Nike cargo from sourcing origins to arrival at 
destination distribution facilities. My brief testimony will 
cover the need for a national freight transportation plan and 
freight transportation metrics, as well as insights on public-
private partnerships.
    Nike's U.S. footprint includes major distribution 
facilities in Tennessee, Oregon, California and New Hampshire. 
On an annual basis, Nike imports over 30,000 40-foot equivalent 
units of containers, making Nike the 23d largest container 
importer. Over 85 percent of our containers are imported 
through the West Coast ports, and nearly 85 percent of those 
containers move on rail to reach their final interior 
destination points.
    Our concerns about the State of the U.S. freight 
transportation infrastructure began in 2004 when the perfect 
storm hit Southern California and the Nation. The combination 
of record imports entering through the ports of Los Angeles and 
Long Beach, combined with the shortage of waterfront labor, and 
equipment and labor shortages experienced by our two western 
class I railroads, resulted in cargo delays from one to 3 weeks 
for most intermodal shippers.
    Responsive actions by all parties and the slower growth of 
the U.S. economy has averted a reoccurrence of the problem. 
However, the U.S. infrastructure continues to operate at near 
capacity in many sectors, so there is certainty that future 
supply chain delays will impact American business and 
ultimately U.S. consumers, especially given the fact that 
container import volumes will double by 2020.
    The problems will be particularly acute in Southern 
California, where the two ports account for 43.2 percent and 
24.4 percent of the Nation's container imports and exports 
respectively.
    Why should we be concerned about supply chain delays? 
Delays mean that just-in-time supply chains such as Nike's 
time-sensitive product launches, would need to produce products 
earlier in order to meet key delivery dates. This increases 
inventory carrying costs. For Nike, the cost to finance an 
additional week of inventory is a one-time cost of 
approximately $4 million.
    The absence of a national freight transportation plan 
leaves American business with no assurances that our 
international trade will be able to continue to flow at the 
speed of commerce. Some critics might say you only have to look 
at the current highway bill, SAFETEA-LU, to know that without a 
plan, needed freight infrastructure projects of national 
significance were shortchanged because the current system 
permits an earmarking process that diverts money to many less 
essential transportation projects.
    We believe by working in partnership with the 
Administration and this Congress we can develop a consensus 
blueprint for freight transportation that will provide 
mandatory funding for freight infrastructure projects of 
national significance. An important component of a national 
freight transportation plan is the development of freight 
metrics that can monitor transportation flow in key sectors in 
order to identify bottlenecks and capacity constraints. These 
metrics would include the measurement of marine terminal 
capacity, the average speed of container trains, and transit 
times in key truck freight corridors.
    Secretary of Transportation Mary Peters in her testimony in 
February before the full Committee said, ``Future 
transportation improvements should be paid for by a combination 
of tolls, vehicle mile taxes, and public-private investment.'' 
Nike and other shippers recognize we need to partner with the 
Federal Government to support the funding of freight 
infrastructure projects. Therefore, we are willing to work with 
Congress and the next Administration to develop a framework for 
public-private partnerships that meets the needs of all 
stakeholders. Private-public partnerships can take many forms, 
but we strongly believe the following underlying principles 
should apply to all partnerships.
    No. 1, projects should be of national significance as 
determined by a public-private stakeholder group. No. 2, the 
fees or contributions must be firewalled and used exclusively 
for the project. Funds cannot be reallocated for general 
revenue appropriations. Three, fees and contributions must be 
collected from the actual users of the infrastructure. Four, 
fees must be assessed on the physical unit of movement, and not 
on the dollar value of the cargo. And five, there must be 
accountability and transparency in the use of project funding.
    I conclude by using a quote in the recent U.S. Chamber of 
Commerce Transportation Report, ``If the United States 
continues to under-invest in its transportation system, and 
fails to meet the transportation needs of its key industry 
sectors, the U.S. economy will become less productive and less 
globally competitive.''
    We thank you for the Committee's leadership on this issue 
and the shipping community looks forward to working with you to 
build a better tomorrow.
    Thank you.
    [The prepared statement of Mr. Isbell follows:]
    
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
           Responses by John Isbell to additional questions 
                          from Senator Carper

    Question 1. Unfortunately, we do not have unlimited 
resources and there is a large demand on those resources. Much 
of our current surface transportation infrastructure is 
crumbling. But new communities are being built and need 
additional transportation capacity. Both have important 
implications for our competitiveness. In terms of 
competitiveness, is it more important to maintain our current 
transportation and bring it up to a State of good repair or to 
build new capacity?
    Response. With the projected doubling of container imports 
by the year 2020, the U.S. unfortunately has to do both the 
repair and build new capacity. Otherwise, congestion is going 
to get worse. This means adding more time to people's commute, 
increasing fuel consumption and causing American businesses to 
operate in a less than time environment. The latter could drive 
up the cost of products and services for Americans and make 
American companies globally less competitively.
    Question 2. We are currently spending about $30 billion a 
year on transportation and not coming close to meeting our 
needs with regard to maintenance and new capacity needs. Would 
that $30 billion go further if transportation decisions were 
made in conjunction with economic development and housing 
decisions?
    Response. In order to get a better return on transportation 
spending, the U.S. needs a National Freight Transportation Plan 
so money from the highway bills are spent wisely on projects of 
national significance. These projects need to be financed by 
mandatory funding in order to maintain America's economic 
global leadership.

           Responses by John Isbell to additional questions 
                          from Senator Inhofe

    Question 1. Much of the criticism of our nation's current 
transportation policy revolves around our lack of focus on 
National priorities such as large regional projects and freight 
movement corridors. As we prepare for reauthorization, what 
suggestions would you have for this Committee on how to 
structure a truly national freight (only change was to add 
``freight'') program?
    Response. We would encourage Congress and the Secretary of 
Transportation to work with industry stakeholders to develop a 
National Freight Transportation Plan. This plan will produce a 
consensus blueprint for freight transportation that will 
provide mandatory funding for freight infrastructure projects 
of national significance.
    Question 2. Many voices are calling for a new freight 
program funded outside of the current gas and diesel taxes. Do 
you think an increase in the diesel tax is the best way to pay 
for truly national freight transportation projects? If we do 
not increase motor fuel tax rates, how would you assess a new 
user fee to fund a new freight program?
    Response. The majority of industry leaders do not think 
increasing the diesel tax is the best way to fund national 
freight transportation projects. All users of the 
infrastructure need to pay its fair share of the project costs 
and environmental cleanup. Nike has taken an extra step in this 
effort and is a founding member of the Coalition for 
Responsible trucking, which was created for private sector 
companies to address environmental issues, to implement 
innovative solutions to alleviate diesel-related emissions, and 
to promote better business practices in communities surrounding 
our nation's blue-water ports.

    Senator Baucus. Thank you, Mr. Isbell.
    Mr. Kuntz.

 STATEMENT OF RAY KUNTZ, CHIEF EXECUTIVE OFFICER, WATKINS AND 
     SHEPARD TRUCKING, ON BEHALF OF THE AMERICAN TRUCKING 
                          ASSOCIATIONS

    Mr. Kuntz. Chairman Baucus, thank you for this opportunity 
to testify on a very important subject today. I am Ray Kuntz, 
Chairman of the Board of the American Trucking Associations, 
and Chairman and CEO of Watkins and Shepard Trucking in 
Montana.
    Our highway system connects all modes of transportation, 
all modes of mining, agriculture, manufacturing and 
warehousing. It plays a real key role in our global economy, 
and it is what allows a company like our own in Montana, which 
travels about only 13 percent of its miles in Montana, but 
employs a majority of Montanans to work in a global economy.
    The rest of the world also understands the importance 
infrastructure plays in the ability to compete in the global 
economy. The European Union has launched a coordinated long-
term initiative to address freight and other transportation 
needs. I also visited China last year and was able to visit the 
Shanghai Port, and what I saw is that China was building 
railroads, highways, and ports at an unbelievable pace. The 
alarming thing is that the port that they built in Shanghai 
that you mentioned, Mr. Chairman, that project took 3 years 
from start to finish. And we all know in America that we could 
never get something like that licensed in 3 years or 20 years. 
So we have other problems that we have to compete with in 
infrastructure.
    Today, that system is aging and overloaded. To maintain our 
position as the envy of the world, which we were with 
infrastructure, we have to get serious about investing in 
repair and expansion. The cost of infrastructure has grown 
dramatically in recent years, and we have not increased our 
main funding source, fuel taxes, since 1993. That puts us where 
we are today with the costs going up, and holding down flat we 
have this gap in what we need to spend and what we have.
    As a result, many of our States are facing large highway 
funding shortfalls and looking at alternative solutions, 
primarily tolling and privatization. The move toward 
privatization will create long-term costs that greatly exceed 
the short-term economic benefits. I use as an example in 2006, 
the State of Indiana agreed to a 75-year lease with Macquarie-
Cintra in exchange for $3.85 billion. How does that affect 
trucking? Prior to privatization, the toll rate for a five-axle 
truck traveling that toll road was $14.55. Today, just 2 years 
later, that same rate is $27.25. By 2010, we estimate it will 
be as high as $39.24. As this rate progresses, by 2016, it will 
be equivalent to a $2 per gallon fuel tax. By 2031, our 
estimates, based on their formulas, would put it at $4.42 per 
gallon.
    So to argue that privatization is an alternate funding that 
doesn't raise taxes is pretty simplistic thinking. That is why 
we take our position against privatization. We are also very 
concerned that it would hurt rural America, especially States 
like Montana, North Dakota, and Wyoming where we don't expect 
that private partnerships would have any interest.
    ATA believes that leasing highways to private interests is 
inconsistent with efficient and cost-effective movement of 
freight, not in the public interest, and represents a vision 
for our Nation's system that is short-sighted and ill-conceived 
and will hurt rural America.
    The other big problem that we are facing in this Country is 
congestion. A recent report of the Texas Transportation 
Institute shows that in 2005 drivers in metropolitan areas 
wasted 4.2 billion hours in traffic, burning 2.9 billion extra 
gallons of fuel, and adding annual congestion costs in urban 
America of $78 billion. A preliminary study of Federal highways 
shows that bottlenecks are costing trucking more than 243 
million hours a year, with a direct cost of $7.8 billion a 
year, growing a 8 percent a year. It is taking our guys longer 
to get from point A to point B every single year since 2002, so 
we are becoming less and less efficient as a trucking industry.
    ATA estimates of congestion in these areas were added over 
a 10-year period and over 32 billion gallons of fuel would be 
saved, and we would reduce our carbon emissions by 314 million 
tons. We believe, along with other groups, that a segregated 
program is needed to deal with congestion and funding should be 
walled-off from the highway trust fund.
    Currently, Senator, our Country is in a recession. We are 
facing an energy crisis, and many believe we are facing an 
environmental crisis. A long-term plan to rebuild our highway 
infrastructure and reduce congestion would stimulate our 
economy, reduce our fuel consumption, and reduce our carbon 
footprint, and ensure our ability to compete in global 
economics. The correct path, though not easy, seems pretty 
clear to me.
    Mr. Chairman, I appreciate this opportunity to come before 
you, and I hope that as we move forward that you have the 
political courage and will to get us an adequate infrastructure 
for the future.
    Thank you.
    [The prepared statement of Mr. Kuntz follows:]
    
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
        
            Responses by Ray Kuntz to Additional Questions 
                          from Senator Carper

    Question 1. Unfortunately, we do not have unlimited 
resources and there is a large demand on those resources. Much 
of our current surface transportation infrastructure is 
crumbling. But new communities are being built and need 
additional transportation capacity. Both have important 
implications for our competitiveness. In terms of 
competitiveness, is it more important to maintain our current 
transportation and bring it up to a State of good repair or to 
build new capacity?
    Response. Both infrastructure maintenance and capacity 
expansion are crucial, and investment decisions should be made 
on the basis of a cost-benefit analysis that allows agencies to 
determine which improvements would produce the best safety and 
economic benefits. Smooth pavement surfaces significantly 
reduce truck operating costs due to better fuel economy, less 
tire wear and fewer accidents. In addition, bridges that fail 
or are load-posted force trucks to take more circuitous 
alternate routes. However, as my testimony points out, 
congestion imposes an enormous cost on the trucking industry 
and the economy. Resources must be available to meet these 
needs. Recognizing the fact that resources are limited, it is 
imperative that future transportation authorization bills 
ensure that these resources arc invested in the most cost-
beneficial projects.
    Question 2. We are currently spending about $30 billion a 
year on transportation and not coming close to meeting our 
needs with regard to maintenance and new capacity needs. Would 
that $30 billion go further if transportation decisions are 
made in conjunction with economic development and housing 
decisions?
    Response. Unfortunately, planning for new development and 
planning for transportation facilities to serve new development 
do not always go hand-in-hand. It is imperative that when 
traffic-generating facilities an: being planned, opportunities 
to minimize traffic congestion arc considered through land-us? 
planning. Furthermore, transportation capacity expansion should 
occur in conjunction with development so that transportation 
agencies are not constantly playing catch-up..

            Responses by Ray Kuntz to Additional Questions 
                          from Senator Inhofe

    Question 1. Much of the criticism of our nation's current 
transportation policy revolves around our lack of focus on 
National priorities such as large regional projects and freight 
movement corridors. As we prepare for reauthorization, what 
suggestions would you have for this Committee on how to 
structure a truly national freight (only change was to add 
``freight'') program?
    Response. The next highway authorization bill must produce 
a more logical system for making investments in infrastructure 
that are in the national interest. SAFETEA-LU's ``Projects of 
National and Regional Significance Program'' was a positive 
step in that direction. Unfortunately, all of the money for 
this program was earmarked, eliminating the logical project 
selection process that Congress had created.
    Congress should empower the U.S. Department of 
Transportation with the authority and responsibility to develop 
a model which allows the department to determine where and how 
freight is moving today, and how freight movement is likely to 
evolve in future decades, and to then determine the most 
significant obstacles to moving freight efficiently. USDOT has 
effectively started this process through development of the 
Freight Analysis Framework and nationwide identification of 
freight bottlenecks on the highway system. These initial 
research tasks can and should be more fully developed. Based on 
this evaluation, resources should be focused on those projects 
that are likely to produce the greatest national or regional 
benefits according to criteria created by Congress. Funding for 
these projects should be merit-based. and a dedicated, fire 
walled revenue stream should be created to fund the projects.
    Question 2. Many voices are calling for a new freight 
program funded outside of the current gas and diesel taxes. Do 
you think an increase in the diesel tax is the best way to pay 
for truly national freight transportation projects? If we do 
not increase motor fuel tax rates, how would you assess a new 
user fee to fund a new freight program?
    Response. ATA supports increases in diesel taxes if the 
revenue is dedicated to addressing the most pressing obstacles 
to moving freight on the highway system. We would be very much 
opposed to a multimodal freight program that is funded solely 
or primarily by diesel taxes on trucks. This would run counter 
to the decades-old user pays principal that has been the 
hallmark of the Federal highway program, and which is a key 
factor in motorists' willingness to pay a fuel tax.
    Furthermore, we urge Congress to consider new freight-
related fees (e.g. container tax, bill of lading tax), with 
revenues dedicated to freight improvements. However, we are 
concerned about the significant legal and administrative 
obstacles to imposing these fees. In addition, we would oppose 
any new fees that placed the burden of payment or collection, 
or verification of payment, on motor carriers.

    Senator Baucus. Thank you, Mr. Kuntz.
    Mr. Wytkind.

 STATEMENT OF EDWARD WYTKIND, PRESIDENT, TRANSPORTATION TRADES 
                      DEPARTMENT, AFL-CIO

    Mr. Wytkind. Thank you, Senator, and thank you to the 
Committee for providing transportation labor an opportunity to 
appear before you on such an important subject.
    The labor movement has always been a very vocal proponent 
for aggressive Federal investment in the physical 
infrastructure of our Nation. The fact is that America's 
strength as an economic power has always been linked to its 
ability to transport goods and people safely and efficiently. 
Our transportation system and the employees of this great 
industry make this Country great, make its people and its 
businesses prosperous and form the backbone of our national 
economy.
    But absent a bipartisan commitment to developing and 
implementing a long-term strategy to rebuild our transportation 
infrastructure, we fear the Nation's economy and its workers 
will be at risk. Last year's collapse of a bridge in Minnesota 
reminded all Americans of the horrible State of our aging 
infrastructure. That horrific event also confronted the Nation 
with what we see as a very clear challenge. Will this be the 
generation that rebuilds America and the infrastructure beneath 
it? Or will we permit our infrastructure to deteriorate and 
crumble?
    I believe that is the question facing our leaders in 
Congress, and also serves, I believe, as a backdrop for today's 
hearing. Investing in transportation creates and sustains 
millions of good jobs in this Country, and at the same time 
provides a critical ingredient for our Nation's economic 
growth. Building and maintaining transit systems, roads, 
bridges, rail lines and ports puts millions of our members to 
work every day, and if you include the multiplier-effect, even 
more workers throughout the economy who all rely on the 
transportation system for their jobs.
    For every billion dollars we spend on transportation, 
34,000 to 41,000 good jobs are created in this Country. Thanks 
to strong collective bargaining rights and prevailing wage 
laws, these are good jobs with strong benefits. They are the 
type of quality jobs that are evading too many Americans, 
perhaps millions, in this national economy that is wracked by 
recession.
    Transportation investments are also a proven way to 
stimulate the economy immediately, and thus must be a part of 
what we hope will be a second stimulus package when Congress 
considers such legislation. There are billions of dollars in 
projects ready to go that are identified by departments of 
transportation, by transit and commuter rail systems and 
authorities, and by AMTRAK that could be implemented in short 
order. These are not initiatives that will take years to 
launch. They are ready-to-go projects that have the potential 
to deal with some of the very serious transportation and 
logistics problems facing the economy, but also to provide a 
much-needed boost to State and local economies that are 
suffering.
    It is time to put to rest the myth that transportation 
infrastructure investments have no immediate impact that would 
stimulate our economy. Our competitors abroad understand that 
global competitiveness depends on a comprehensive investment 
strategy. As my testimony points out, and as you have heard 
from the other witnesses, the European Union, China, India and 
countries across the globe are literally spending billions on 
their transportation system. I find the statistic to be 
starting that between 2006 and 2010, it is estimated that China 
will spend $200 billion on its railways. We spend about $1 
billion or $1.5 billion a year on our railways. We are not 
keeping up with the needs of the Nation across all the modes of 
transport.
    In contrast, the U.S. commitment overall to infrastructure 
improvements has been lacking if you look at what is happening 
globally. Since 1980, our transportation spending as a 
percentage of GDP is actually down 33 percent in the last 27 or 
28 years. This is all occurring at a time when all estimates 
show that we need about $1.6 trillion in infrastructure 
spending over the next 5 years just to bring our current system 
into good condition.
    These problems are exacerbated by the significant shift in 
the burden of spending away from the Federal Government onto 
States that quite frankly are not in a position, especially in 
this economy, to take on this financial burden. The needs of 
the old system are quite significant.
    Mass transit has reached a 50-year high in ridership, but 
we are spending one-third of what is projected to be needed to 
deal with the transit investment needs of the Country. Vehicle 
miles traveled are reaching a staggering 1.8 trillion by 2035, 
yet we are spending a fraction of the $142 billion a year 
needed to repair deficient highways and decaying bridges.
    Freight rail traffic will soar 50 percent by 2020, but the 
amount of investment in our freight rail system is 
insignificant compared to what the needs are. As a result, 
freight delays are choking interState commerce, and as a result 
it is costing people jobs and is creating congestion that is 
off the charts if you measure it against past situations.
    Similarly, AMTRAK is chronically underfunded, and will need 
no less than $60 billion over the next 20 years just to give 
our rail transportation infrastructure the opportunity to 
succeed and to give the employees of AMTRAK the right to not 
only have good jobs that are stable jobs, but good jobs with 
fair wages.
    While our 361 seaports see container volume grow by 7 
percent, we need to double terminal acreage. We must invest 
significant resources to widen and deepen navigation channels. 
And the spending we are doing pales in comparison to what our 
port infrastructure needs in this Country are.
    I would last end by just saying that election-year gimmicks 
like tax holidays are not going to help advance this debate. 
That would cost the highway trust fund and the transit account 
$9 billion, potentially risk 310,000 jobs, and would set back 
our ability to follow leaders like you, Chairman Baucus, to try 
to build a national dialog about the need to reinvest and 
expand our Nation's infrastructure. We hope that that proposal 
will not see the light of day.
    I will conclude with that, and look forward to any 
questions you may have.
    Thank you.
    [The prepared statement of Mr. Wytkind follows:]
    
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Senator Baucus. Thank you all very much, because you are 
accepting the challenge of coming up with analysis of where we 
are and what we need to do. That is something that was not done 
to any significant degree in previous transportation bills in 
the run-ups to them.
    Mr. Yam, if you could again just tell us what is happening, 
and I know this is a restatement, generally in other countries' 
infrastructure planning and spending? And what effect will that 
have on the U.S. if we pursue in the United States the same 
general kind of policies in the last transportation bill, but 
don't go much farther?
    Mr. Yam. Well, let me focus just on China. China has built 
an enormous infrastructure that no other country has done for 
the last several hundred years. They do that because they focus 
on the exports, and most of the wealth has been concentrated on 
the coastal region, so some of the people became 
disenfranchised. China had to expand the transportation network 
to the western inner areas. By doing that, China will stay 
competitive relative to some other countries.
    Because they understand that they need to get the raw 
material parts to the factories so that they can process 
efficiently, and they have to transport the finished goods or 
partsto the ports for export. And also now China is developing 
specialized industries in certain cities, just like if you look 
at the furniture industry, they are in the southern part of 
China and also in the Shanghai area. By doing that, they have 
created a more efficient economy. They also are trying to 
phaseout some of those industries that are not efficient.
    So as we see, China is going to link all the cities with a 
population of 200,000 by the year 2020. By doing that, China 
will continue to sustain the growth of the economy, will 
continue to dominate the manufacturing sector, even though 
labor costs are rising. They have become more efficient.
    If America does not improve the transportation system, I 
think that this would increase the cost of manufacturing. As 
the cost of manufacturing increases, we cannot compete with the 
model that China has created by learning from some other 
nations. They designate certain areas for specific industries, 
create the economy of scale, and improve efficiency.
    So I think it is very important that our Country, since I 
am a U.S. citizen, so when I talked about our Country, I refer 
to the U.S. to keep up the investment in infrastructure. By 
investing in the transportation, we create basically a few 
things: to make it more efficient, and make it more 
environmentally friendly. These are some of the challenges 
China is facing now. They built a highway system that was 
initially poorly designed, and now they have a lot of traffic 
jams. People don't follow the rules in China. So in China, they 
are trying to fix that.
    I think if America does will not make investments in 
infrastructure, this will hurt our economy in the future. We 
cannot compete efficiently on a global basis in the 
manufacturing sector.
    Senator Baucus. I would like to ask all of you. Assuming we 
had the money available to make very significant infrastructure 
investments, make that assumption, and whatever amount that is, 
let's assume it is quite significant and makes a big 
difference. My question is, how would you spend it? Let me ask 
each of the four. Let somebody get ready, and whoever wants to 
go first goes first. I am going to ask each of the four of you 
that question.
    Mr. Isbell?
    Mr. Isbell. I think the key is having a national freight 
plan. The current Administration has developed an outline of a 
national freight transportation plan. but it has not filled in 
the details. Without a plan, we won't know what projects are 
really significant so we won't have the priority right when it 
comes to spending money on freight infrastructure projects.
    Senator Baucus. And this is primarily rail?
    Mr. Isbell. No, rail is one component but highways and 
bridges are currently inadequate to handle the volume of 
freight expected in the years ahead.
    Senator Baucus. Surface?
    Ms. Isbell. Surface transportation, yes. If you look at the 
situation, you have rail, and if rail capacity is not adequate, 
if the train speeds are not adequate, and shippers like Nike 
are having unpredictable delays in moving their cargo, then 
they are going to shift it to road. That shift is just going to 
add to the problems of our highway network.
    So we need to work in conjunction with all modes of 
transportation. But rail is traditionally privately funded by 
the railroads. But the acceleration of developing rail capacity 
can be enhanced by the government providing investment tax 
credits to the railroads to encourage them to build that 
infrastructure faster then they normally would with their 
normal return on investment.
    To put the right focus on developing freight 
infrastructure, we need a stakeholder group of public and 
private individuals that are involved in the process to develop 
a list of projects of national significance. And then we need 
to make sure that in the next Highway bill, those projects have 
mandatory funding requirements so that the money isn't siphoned 
off to projects that are important to other areas of the 
country, but are less important when it comes to keeping the 
United States economically competitive.
    Senator Baucus. So it would be tax incentives to the rails, 
and then also make sure money is designated for highways of 
national significance.
    Mr. Isbell. Mandatory spending requirements in the next 
highway bill.
    Senator Baucus. OK. Who wants to go next? Mr. Kuntz.
    Mr. Kuntz. Yes.
    Senator Baucus. Where do we spend the money, assuming we 
have a significant amount?
    Mr. Kuntz. Yes, Senator, to begin with, coming from a rural 
State, it is very important that we maintain the ability of 
rural States to compete with highway funding. So a significant 
amount of money needs to be lying out in the same way we do 
today in such a way that rural America can compete.
    Montana, as you know, without the help that we get from the 
Federal Government, would not have much of a highway system at 
all. So we have to maintain that.
    Senator Baucus. That is right. Iowa would stop at the 
border.
    Mr. Kuntz. Right. However, as I said before, our company 
does a significant amount of business with Montana employees on 
other highways. The biggest problem that we are facing now is 
congestion, and the time it takes to get from A to B is getting 
longer and longer every year. We are burning more fuel. We are 
throwing our drivers out in a situation where the accident risk 
is a lot higher, and we have to deal with congestion. And so, 
as I said before, we believe we need a separate fund that 
focuses on congestion and fixing our bottlenecks. A lot of 
those bottlenecks are in places that aren't rural, but we need 
a two-pronged approach, one that fixes bottlenecks, takes care 
of freight corridors, and the other one that makes sure that 
the rural States like Montana are adequately funded to maintain 
their highway system.
    I agree that the railroads also need to be part of the key. 
I don't know that I would agree that giving them a tax credit 
is the way to go, because if you look at how we are asking 
trucking to fund the highways, it is through some kind of an 
increased tax, privatization, or whatever. In the railroads, 
the difference is they own their infrastructure and they get a 
return on whatever they invest.
    Senator Baucus. So you say spend money essentially on 
congestion.
    Mr. Kuntz. A significant chunk of the money has to be spent 
on congestion to get us out of the mess we are in, and allow us 
to compete in the global economy. However, we can't forget 
about rural America because there are some congested areas in 
rural America also, but not near what we face. If you look at 
the written testimony I submitted, if we just focused on the 
top 25 congested areas, we would dramatically reduce our 
congestion tomorrow. As I said before, we have an energy crisis 
and we are burning so much extra fuel in stop-and-go traffic. 
The amount of fuel it takes to speed up a truck that is heavily 
loaded, step on the brakes for traffic, and constantly do that 
is an incredible waste. And cars are doing the same issue.
    So congestion has to be fixed. The amount of carbon that we 
are throwing in the atmosphere is incredible, and we are all 
concerned about carbon footprint, and there is legislation 
looking at cap-and-trade and several other types of ways to 
deal with the carbon. This is a way we can deal with carbon 
that doesn't cost a whole new regulatory system to be 
implemented to deal with it.
    Senator Baucus. OK. Who wants to go next?
    Mr. Wytkind. I am happy to try. I am obviously not a 
planner and can't speak directly to every specific project. 
What I do know is----
    Senator Baucus. That is not obvious.
    [Laughter.]
    Mr. Wytkind. It is obvious to me. I view this a little 
differently. We have a job deficit in this Country. That 
deficit is one that is focused on the lack of good jobs. The 
transportation industry historically has provided some of the 
best jobs in the U.S. economy across all the modes of 
transport. I represent a fair amount of those workers.
    I think if you look at the national picture, I keep hearing 
that there are major freight bottlenecks. I keep hearing that 
our ports are under-invested. I keep hearing that public 
transit is breaking its ridership numbers each year, but they 
don't have the resources to buy the buses, to buy the subway 
cars, to hire the people and train them to operate the system 
that its people want in those particular cities that they 
operate in.
    I know from 17 years of advocating for a strong AMTRAK 
system that it is the most chronically underfunded 
transportation operator in the Country. It has had to live on 
about half of the funding that it needs to run a viable 
railroad, and yet when there are delays in trains, when there 
are not enough frequencies of trains, when there is a shortage 
of specifically skilled crafts in those trains, you wonder why 
AMTRAK can't hire the people they need or operate the trains it 
wants to.
    And so I come at it a little differently. I think America 
needs to have a debate like the one you are trying to spur 
through your Committee about what the priorities are of our 
Nation and what the priorities are of our economy, and until we 
have our national leaders, including those running for the 
highest office in the land, making transportation 
infrastructure a priority and making it a national issue that 
speaks to the national economic needs of this Country for the 
next 50 years or more, then it will continue to be a stepchild 
in Administration in both parties that doesn't get the focus 
that it needs to deal with all the problems you are hearing 
across this table, that you are hearing across the whole 
economy about a transportation system and infrastructure that 
is failing the Nation. As a result, workers in our economy 
suffer as well.
    Senator Baucus. You sound like a pretty good planner to me.
    [Laughter.]
    Senator Baucus. That is a plan.
    Mr. Yam.
    Mr. Yam. Mr. Chairman, I may not be able to answer your 
question directly, but I would like to share a couple of 
observations. The amazing thing about China is that even though 
they have spent an enormous amount of money in building the 
infrastructure, they still have a lot of foreign reserves. They 
still have a lot of money in the bank.
    Actually, the government does not really spend a lot of 
money. They use the private funding, like the BOT
    [phonetically] build, operate and transfer. Almost every 
highway in China is toll road. People have to pay the toll. And 
a lot of those toll roads are owned by companies set up by the 
government or by private individuals; for example, the world's 
longest bridge linking Shanghai and Ningbo--you will be driving 
on the bridge for 45 minutes to 1 hour. They even have gas 
stations on the bridge.
    Senator Baucus. What is beef?
    [Laughter.]
    Mr. Yam. Yes.
    Senator Baucus.
    [Remark off microphone.]
    Mr. Yam. Yes, that is right.
    Senator Baucus. No, I am asking. That is a joke. I am 
sorry.
    [Laughter.]
    Mr. Yam. And I am sorry.
    Senator Baucus. No, go ahead.
    Mr. Yam. So you see that in the Chinese model it is a 
little bit of difference. Like the bridge, it was built by a 
private company, not by the government. But what the government 
does is they give them the rights and they give them the land 
basically free of charge or minimum cost.
    Senator Baucus. Interesting.
    One of the problems in our Country that you mentioned, Mr. 
Kuntz, is the time it takes to get permits and so forth to get 
something done. How big of a problem is that in America? Either 
you, Ray, answer that, or Mr. Isbell or Mr. Yam or anybody. How 
big of a problem is that?
    Mr. Kuntz. I think it is a huge problem, Max. The time it 
takes and the money it takes to get a project license and ready 
to go, during that phase the cost of building that project 
sometimes is as much as doubled. And so somehow we have to look 
at why it takes so long to get these things licensed and see if 
we can maybe trim back some of these issues to speed up.
    As it sits right now, if we wanted to build some new lanes 
or add some lanes and stimulate our economy, the economy would 
be long down the road before any construction started unless we 
did what he suggested and pick on those projects that are ready 
to go, which is a good idea. But as far as any new lanes, new 
capacity, new bridges, new ports, it would take forever to get 
them licensed.
    And then if you look at it, when was the last time we built 
a new port? When was the last time we actually added a brand-
new highway of any significance? It is not happening now, and I 
think that is part of the reason why.
    Senator Baucus. Mr. Isbell?
    Mr. Isbell. First, I want to say to Ray's point about 
making sure rural highways are taken care of. I think that is a 
good point, particularly in Montana. I am a great fly fisherman 
and I appreciate good highway systems in your State.
    But speaking to the point about the environment, I will 
give you an incident. Down in Los Angeles, TraPac, one of the 
terminals, is trying to increase the size of their terminal, 
but environmental regulations have continually held up in that 
process. I think they have been trying to build this terminal 
for 3 or 4 years but they continue to run into one 
environmental hurdle after another. They finally have reached a 
point where they believe they can complete that terminal, but 
in the meantime they have completed a brand-new terminal in 
Jacksonville, FL while they were waiting. In other words, the 
environmental impact issues need to be addressed but they also 
need to be reasonable in order to prevent delaying construction 
of much needed infrastructure.
    Long Beach, Mayor Foster has said that until we deal with 
the diesel emission issue there will be no further 
infrastructure projects built. So that has prompted companies 
like Nike to form the Coalition for Responsible Transportation. 
This group is taking a private sector view on dealing with 
environmental issues and to develop innovative solutions to 
address and reduce the diesel emissions in Southern California.
    Nike has taken a leadership role in this area. We were one 
of the first companies to investigate the use of LNG trucks for 
the drayage business. We have committed 55 percent of our local 
drayage off the terminals using LNG trucks to distribution 
facilities in Southern California.
    So it is very important from the shipper's community that 
we really address the environmental issues because until we do 
so, there is not going to be any investment in infrastructure.
    Senator Baucus. Is it true that one of the L.A. problems is 
all that diesel burning is on ships waiting to unload, and 
those are foreign-flag carriers and we don't have jurisdiction 
over them. I am told that at one point that was about 20 
percent or 30 percent of the problem down there.
    Mr. Isbell. Well, the ports have adopted a clean air action 
plan. In that plan are provisions to clean up the ships. The 
plan requests that ships burn non-bunker fuel when they are 
within 20 nautical miles offshore.
    There is also the issue of diesel emissions and their 
carbon footprint, that is being imposed on the drayage trucks 
that access the terminals, as well as on the other vehicles 
that work on the terminal.
    Senator Baucus. OK. Thank you very much. I have taken more 
than my time.
    Senator Craig.
    Senator Craig. And I apologize for cutting out a couple of 
times. I had some constituents I needed to meet with.
    As we walk our way through what is necessary and look at 
new funding mechanisms, some of you might want to reflect on 
this. While it is not a big item in this Country yet, Mr. Yam's 
comment about the bridge reminded me of an experience I had in 
Madrid not long ago. We were being hosted by our Ambassador at 
a meeting and in walked a gentleman who said, we just took over 
the operations of a highway in your Country, a private company 
from Spain, a 70-plus-year lease or something like that. It was 
a Chicago-Indiana connector of some kind, where they took over 
the management of it, and in that management plan was 
maintenance and refurbishing and expansion. They are working 
with the State. It was a State-Federal highway.
    Are there impediments to this kind of an investment 
relationship? And if there are, is this something we ought to 
be looking at, along with looking at obviously other funding 
mechanisms including expansion of the current trust funds and 
all of that type of thing. Has that been part of your purview? 
Are we restricting a potential private investor or investors 
from new types of transportation or investments in 
transportation that otherwise might come?
    Ray.
    Mr. Kuntz. Senator Craig, if I could answer that. I last 
summer spoke at a safety conference in Brazil and met with the 
Brazilian Trucking Association. Brazil has a lot of public-
private partnership highways. What they told us is it was a 
huge mistake.
    Senator Craig. OK.
    Mr. Kuntz. At the time that they decided to build public-
private highways, it was a highway or no highway. But today, 
those highways cost almost a $1 a mile to drive a truck over. 
The trucks are all crowded on the secondary highway system. The 
fatality rate in Brazil is 10 times-per-mile what it is in the 
United States. As I like to say when I speak, in this Country 
we have a choice. It is not a highway or no highway. We have 
adequately funded our highways for years, and as I spoke 
earlier, the Indiana toll road, which was privatized, in 2 
years the cost of driving a truck over that has almost doubled.
    So a lot of questions need to be answered before we head 
down this path. If you look at the cost of collecting tolls, in 
the United States today it costs somewhere between 20 percent 
and 35 percent to collect tolls, and it costs 1 percent or less 
to collect the Federal fuels tax and around 2 percent for a 
State fuel tax.
    So if you just look at the math, if you are going to 
replace a system that cost 3 percent to collect with one that 
costs 30 percent to collect, and then build in a profit 
contingency for the private partnership, and even for the 
sales. The Indiana toll road, I have read numbers, I don't know 
exactly, is that the commission for that deal was $120 million. 
How many times do you have stop at a buck-a-crack to come up 
with $120 million? There are a whole lot of questions that have 
not been answered.
    Senator Craig. That is why I ask it, because obviously what 
is happening in Brazil would be a natural reaction. If there is 
another way to get there that is going to cost you less, you go 
to the least cost, potentially--time may be of value in that 
situation--but if you have toll roads and non-toll roads in 
this instance, I would guess you would gravitate toward the 
non-toll road. I think my Scotch blood would cause me to do 
something like that.
    OK. Thank you.
    Mr. Wytkind. Senator, if I could add something?
    Senator Craig. Yes?
    Mr. Wytkind. I have been really disheartened by the public 
comments made by the Secretary of Transportation on this 
because those comments have been suggesting that this is a 
choice between public-private partnerships and the status quo, 
and that there somehow isn't anything in between. The truth is 
that the private sector has always had a significant role in 
our transportation industry in this Country. But if I look at 
the privatization models across all the modes of transport over 
many years, I have seen one disaster after another that gives 
me pause about what these public-private partnerships actually 
mean.
    If you look at the British Rail experience. They handed the 
whole thing over to private interests. It is to this day one of 
the greatest political debacles in Great Britain in their 
transportation industry, and they literally undid the whole 
thing at a significant cost to the taxpayer in Great Britain. 
If you look at some of the mass transit privatizations, there 
have been many, many horror stories of over-promising and 
under-delivering once they get the service.
    So when you pivot to large infrastructure projects like 
highways and you see these massive projects like in Indiana and 
Chicago and the New Jersey Turnpike and elsewhere, we haven't 
taken a formal position against all of them. What we have said, 
though, is that there is a lot of very, very complicated public 
policy questions about what you do with the people's assets 
before you let private interests come in, write their check, 
take over something for 99 years, and then extract all the 
profit revenues out of it with very little accountability.
    So I think there has to be a pause here about what all this 
means. I am not speaking against all private sector 
involvement, nor am I speaking against innovative finance. In 
the last two highway transit authorization bills, the labor 
movement actually worked with the Republicans and Democrats on 
innovative finance and have been on record supporting a number 
of those initiatives.
    So it is not about whether the private sector belongs in 
the debate. It is whether we should be shoving this large 
public asset out there and giving it over to the private 
sector. I think that should give us some pause.
    Senator Craig. Yes, Mr. Yam.
    Mr. Yam. Senator Craig, I would like to share with you my 
opinions on how it may work in China. China is an exceptional 
situation because of the following. No. 1, is the Chinese 
culture. A lot of the toll roads started from the overseas 
Chinese who went back to China and built a toll road. Because 
of the Chinese culture, they always go back to their home 
country to build.
    Then the second thing is that Chinese are very speculative. 
They like to speculate and make money. Certainly toll roads are 
one of the ways for them to do that.
    Then the third thing is the characteristic of China. All 
land is owned by the government, so the government can get the 
land and give it to the investment company for zero dollars or 
at a minimum price. So day one, investors already make the 
money on the book. And then, because of that, they can go to 
the bank to get the financing.
    So this private-public and public-private partnership will 
work very well in China. Also the government always got 
involved, so if anything goes wrong, the government will 
immediately jump in and they don't have to go through a lot of 
legal procedures like other countries.
    So this system works very well in China particularly. In 
other countries, certainly the system may work, but would not 
work as well as the model in China.
    Senator Craig. Point well made. Thank you.
    Thank you, Mr. Chairman.
    Senator Baucus. I think we all agree we need significant 
additional investment in infrastructure. I don't think there is 
much doubt about that. You hear it here in the Congress talking 
to Senators on both sides of the aisle, people know that.
    The question is, how much to spend, how to raise the 
revenue, how to decide where to spend the money knowing it must 
be done, and how to get American public opinion--that is not 
fair, strike that--how to get this momentum going so that we 
can start to tackle this thing and start to not just talk about 
it, but do something about it in a positive way.
    Any thoughts on that? How are we going to get a little 
momentum here? I mentioned in my opening comments about a 
crisis. America responds to a crisis. We just do. We do a good 
job responding. We move quickly. We don't worry about the 
permits. When there is a crisis, we move.
    So the question is, how do you portray the crisis, in your 
judgments, what do you do, what do we say, how do we galvanize 
forces, momentum here to solve this thing?
    Mr. Wytkind. If I might, I have a couple of observations. 
First, I think public opinion is on the side of where you are 
coming from on this issue. Every poll I see, even when the poll 
asks would you pay a little more to help deal with our 
transportation gridlock problems in the Country, they are 
always overwhelmingly yes. Seventy percent of public 
transportation State initiatives in the last few years have 
passed. I think that is partly because of the absence----
    Senator Craig. Seven or seventy?
    Mr. Wytkind. Seventy.
    Senator Craig. Seventy. Thank you.
    Mr. Wytkind. I believe that is somewhat a product of the 
absence of action in Washington, not necessarily by Congress, 
but by the government more widely, Congress and the government. 
I would argue that public opinion is there. We just need to 
figure out a way to break through the noise. I keep saying 
that. I have been saying this now all year leading up to a 
Presidential election, is that transportation doesn't seem to 
find a way to break through the noise of all the other national 
issues that are being debated, whether it be health care, Iraq, 
whatever it is that the politicians are debating and trying to 
run for President. They are not debating who has a better plan 
to rebuild America and make our economy more competitive and 
deal with the global challenges.
    Senator Baucus. I agree with that. I agree.
    Mr. Wytkind. That is an important question.
    Senator Baucus. I agree with that.
    Senator Craig. Good point.
    Senator Baucus. Does anybody have an idea on that?
    You know, one thought I have, and this is a bad metaphor, 
but there is kind of a train wreck coming down the road here. 
It is not just an infrastructure train wreck. There are a 
couple, three train wrecks. The other ones are tax code. The 
2001 tax cut expires in 2010. The 2003 tax cut expires in 2010. 
The Federal eState tax is zero in 2010. The alternative minimum 
tax, the big 1,000-pound gorilla in the tax code, is going to 
be a 100,000-pound gorilla in 2010. It is just growing.
    Those all have to be addressed by whoever our next 
President is. Whoever is elected, he or she is going to have to 
make a major proposal to the Country in 2009 dealing with the 
tax code. These pressures are developing. This train wreck is 
developing. But everything is an opportunity. In 2009 is when 
we are going to take up this bill, the transportation bill next 
year.
    So I am just wondering out loud, it just occurred to me, if 
there is some way for the next Administration and for all of us 
who really care about all these things to be talking, whoever 
the nominees are, whoever the Democratic nominee is and Senator 
McCain, and whoever is elected President, to figure how to put 
two and two together here. The tax train wreck, the 
infrastructure train wreck, and there is also a health care 
train wreck coming down the road, too.
    There might be an opportunity to start putting a couple of 
things together here to solve some of this and prevent the 
train wrecks.
    Mr. Isbell. Senator, at Nike when we have a problem, we 
bring in the relevant stakeholders who are affected by the 
problem, and then we develop a plan. We get consensus on that 
plan, and then we work the plan. And we measure our results 
against our expected results and make corrections.
    Senator Baucus. As all good businesses do.
    Mr. Isbell. I think that is what is missing right now is an 
effective dialog with stakeholders who know what the issues are 
and who have ideas to solve those problems. Private industry, 
Congress and the Administration need to come together to 
engaged in a meaningful dialog that will develop this national 
freight transportation plan and make sure that adequate funding 
is made not only for freight corridors, but also for the safe 
movement of people because they are all competing with the same 
highway space, i.e., trucks, vehicles, and commuters.
    As a result, what we are dealing with are minority points 
of view instead of the consensus point of view from having the 
right stakeholders sitting at the table. I think getting the 
right stakeholders at the table to develop a national freight 
transportation plan, should be one of the key pillars of the 
next Administration.
    Then to your point, Senator, not everybody knows that the 
Sputnik is circling the globe. If you are not involved in the 
movement of goods, you do not understand what the problems are. 
If you are driving along side of a truck trying to get to work 
on a rainy morning, you are experiencing a problem you really 
don't want to have. You don't want that truck next to you. So 
we have to find ways to develop corridors by which we can move 
freight at the speed at which commerce needs to move and 
provide a safer experience for all drivers.
    Senator Baucus. This has all been very helpful. I am going 
to have to wrap up here. This is a very good kick-off hearing. 
We are going to have many more. Thank you to all of you for 
rearranging your schedules to be here today. We will be in 
touch. Thanks a lot.
    The hearing is adjourned.
    [Whereupon at 11:15 a.m., the subcommittee was adjourned.]

            Statement of Hon. James M. Inhofe, U.S. Senator 
                       from the State of Oklahoma

    Thank you, Mr. Chairman. I appreciate the opportunity to 
examine our nation's infrastructure investment and its 
contributions to our future competitive trade advantage with 
other nations. There is no denying that the level of commitment 
to our nation's infrastructure is directly linked to the United 
States continued place as a world economic leader. Thus, I am 
pleased, Mr. Chairman, that you have convened this hearing to 
get us thinking about how decisions we make with regard to 
transportation will eventually affect our place in the world 
market place.
    Nations like China and India now pose a serious threat to 
the United States as emerging world economic powers. To put 
this in perspective, China will be investing $200 billion in 
its railways over the next 3 years which will lay the 
groundwork for a sophisticated freight system that far exceeds 
our own freight movement capabilities. Additionally, China is 
planning almost 100 new airports and 190,000 miles of new 
roads, which doesn't include the 33,000 miles in highways built 
since 1990. I believe that these growing countries are 
experiencing an economic renaissance not unlike what our nation 
went through when President Eisenhower first conceived the 
National InterState System over 50 years ago. Our vision of a 
Federal network of highways, once coveted by the world for its 
innovative planning and connectivity, is now struggling to 
accommodate the exponential growth in people and goods 
movement.
    As I have said many times before, current funding of our 
highway program is barely enough to maintain the system, let 
alone provide for much needed new comprehensive investment in 
future infrastructure needs. We cannot afford to ignore the 
consequences of merely ``maintaining'' our transportation 
networks while the rest of the world continues to spend heavily 
on bigger and better ways of competing with our once superior 
highway system.
    As the rest of the world continues to finance new ports, 
highways, and sophisticated rail networks to attract new 
commerce, I am concerned about the impact this will have on our 
own industries. If we fail to provide a free-flowing 
transportation system to accommodate our ``just in time'' 
economy, our manufacturing industries will be forced to export 
much their operations abroad. Canada and Mexico are committing 
billions to the construction of new high capacity ports and 
rail systems of their own in an effort to divert foreign cargo 
trade away from our heavily congested ports in the Northeast 
and Southern California . The United States economy cannot 
afford to be outpaced in infrastructure spending by other 
rapidly growing countries, eager to attract new commerce to 
their economies.
    As we gear up for re-authorization of the Highway Bill, it 
is critical that we consider the above mentioned facts. Mr. 
Chairman, you are in a unique position in that you are not only 
the Chair of the authorizing subcommittee but also Chairman of 
the Finance Committee that will find the money to pay for what 
I hope will be an increased investment in transportation 
infrastructure. I look forward to working with you to write the 
authorization language and want to offer my support as you 
struggle with how we pay for transportation moving forward. As 
I understand it, the Commission established by SAFETEA designed 
to solely look at the financing of transportation has yet to 
issue their recommendations. My hope is they will be able to 
provide us with some useful and workable ideas.
  

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