North American Trade Growth Continued in 2007
by Steven Beningo and Fahim Mohamed
Trade between the United States and its North American Free Trade Agreement (NAFTA) partners-Canada and Mexico-has more than doubled in dollar value since the inception of NAFTA in 1994. In 2007, U.S. trade with Canada and Mexico reached $909 billion-a 5 percent increase over the prior year's total trade value. Since 2001, U.S.-NAFTA trade has grown by an average annual rate of 7 percent. This report examines the rapid growth rates, modal distribution, top gateways, and major commodities of U.S.-NAFTA trade and looks at U.S.-NAFTA trade volume by state.
NAFTA Trade Volumes
In 2007, U.S. exports to NAFTA countries were valued at $385 billion, while imports were valued at $524 billion. U.S.-Canada trade accounted for 62 percent ($562 billion) and U.S. - Mexico trade 38 percent ($347 billion) of total U.S.-NAFTA trade.
Measured by value, U.S.-NAFTA trade moves primarily via land modes (table 1). In 2007, land transportation accounted for 88 percent ($797 billion) of the trade, a relatively stable proportion since 1995 (figure 2). Two-thirds of the remaining trade value was moved by water and one-third by air.
Box A: Growth in U.S.-China Trade is Upsetting Traditional Trade Patterns
Although Canada and Mexico, which are the focus of this report, have traditionally been the top two U.S. trade partners, the rapid 21 percent annual growth in U.S.-China trade from 2001 through 2007 resulted in China supplanting Mexico as the nation's number two trade partner in 2006. As seen in figure 1, despite dropping to third place as a U.S. trade partner, the value of Mexico's trade with the United States still rose throughout the 2001-2007 period.
In 2007, imports accounted for 56 percent of the U.S.-Canada trade, 61 percent of U.S. - Mexico trade, and 83 percent of U.S.-China trade. U.S. imports from China have more than tripled since 2001, and the value of imports from China now exceeds the value of imports from either Canada or Mexico. U.S. exports to China, however, still trail exports to either of the U.S. - NAFTA trade partners.
SOURCE: U.S. Department of Transportation, Research and Innovative Technology Administration, Bureau of Transportation Statistics, based on data from the U.S. Department of Commerce, U.S. Census Bureau, Foreign Trade Division, FT920 U.S. Merchandise Trade 2001-2006. U.S. Department of Transportation, Research and Innovative Technology Administration, Bureau of Transportation Statistics, Transborder Freight Data as of October 2008.
Measured by tonnage, water transportation carried more freight in 2007 than any other mode. An estimated 241 million short tons moved via water, accounting for 36 percent of the weight of NAFTA trade. In contrast, merchandise moved by water transportation accounted for only 8 percent of the total NAFTA trade in terms of value (figure 3)
U.S.-NAFTA Trade by Surface Modes: Trucks are the dominant land mode, accounting for nearly 70 percent ($555 billion) of land trade in 2007 (figure 4). Truck shipments as a percentage of freight traveling by land modes have been relatively stable since 2001. Texas, California, Michigan, New York, and Ohio, were the top states accounting for 51 percent of the total trade by truck in 2007.
Rail accounted for 17 percent ($138 billion) of the 2007 trade by land modes. Michigan accounted for 31 percent of the rail trade, followed by California with 11 percent and Texas with 10 percent.
Pipelines, mostly carrying petroleum and petroleum products, accounted for 7 percent ($59 billion) of surface trade in 2007 (figure 4). Virtually all of the pipeline trade (98 percent) was between the United States and Canada, with almost 50 percent of this trade being with firms in Illinois, Washington, and Minnesota.
Figure 5 shows the growth of U.S.-NAFTA trade by land modes between 1995 and 2007.
Key Land Border Gateways
In 2007, Detroit, Michigan, was the leading land border gateway1, accounting for 17 percent ($137 billion) of land trade, followed by Laredo, Texas, with 14 percent ($110 billion), and Buffalo-Niagara Falls, New York, with 10 percent ($79 billion).
Box B: Gateway Defined
A gateway is a port of entry across an international land border-consisting of one or more road, rail, or pipeline facilities. For example, the Detroit port of entry includes the Windsor Tunnel and the Ambassador Bridge, a rail tunnel, and a freight barge. The Windsor Tunnel has three highway lanes approaching the port facility, with nine dedicated passenger lanes and one dedicated commercial lane at the inspection facility. The Ambassador Bridge has 4 lanes, which lead to 12 inspection booths, of which 6 are dedicated to commercial traffic.
Northern Border: Detroit, Michigan; Buffalo-Niagara Falls, New York; and Port Huron, Michigan, were the top three ports of entry on the U.S.-Canada border, accounting for a combined 57 percent of land freight crossing the northern border. There are a total of 86 ports of entry on the U.S.- Canada border, with the top 10 handling 78 percent of the value ($397 billion) (table 2).
In 2007, the top three ports of entry handled 68 percent ($217 billion) of truck freight crossing the northern border. The percentage of freight traveling by truck and rail varied significantly between ports of entry. At Detroit, 84 percent of freight moved by truck and 16 percent by rail, with a similar split at Buffalo-Niagara Falls, where truck moved 79 percent and rail moved 13 percent of freight crossing the border. Rail handled a much higher percentage of the cross-border freight at Port Huron than at the other two ports of entry. At Port Huron, 38 percent of merchandise moved by rail freight compared to 52 percent by truck (figure 6).2
Southern Border: In dollar value, the top 2 of the 25 ports of entry on the U.S.-Mexico border, Laredo and El Paso, Texas, accounted for 56 percent of land freight crossing the southern border, while the top 10 ports accounted for 95 percent of that freight (table 2).
As with the Canadian border, the split between truck and rail varied significantly among the various ports of entry on the U.S.-Mexico border. At Laredo, 75 percent of the freight moved by truck and 25 percent by rail. Trucks accounted for 89 percent of the trade at El Paso, while only 11 percent moved by rail. The highest percentage moved by rail among the top 10 southern ports occurred at Eagle Pass, Texas, where 60 percent of the freight moved by train and only 40 percent by truck. At Otay Mesa, California, trucks moved virtually all land freight due to the lack of rail service at that border crossing (figure 6).
U.S.-NAFTA Trade by Air: In 2007, the $38 billion in air cargo trade accounted for 4 percent of the total U.S.- NAFTA trade. Exports to Canada by air were almost twice that of imports from Canada. Air trade with Mexico exhibited a similar trend with exports being significantly larger than imports.
The top airports trading with the NAFTA partners are located in the Port District3 of Cleveland, Ohio (including Louisville International Airport, Kentucky, a UPS hub; Cleveland Hopkins International Airport, Ohio, a DHL hub; and seven small airports) with trade valued at $13 billion. The second largest port district trading by air is New Orleans, Louisiana (Memphis International Airport, Tennessee, a FedEx hub; and Louis Armstrong International Airport in New Orleans, Louisiana) with trade valued at $10 billion.
U.S.-NAFTA Trade by Vessel: Ships moved 8 percent ($74 billion) of total trade by value in 2007. The U.S. waterborne trade with Mexico was more than twice that with Canada, accounting for 67 percent of trade by vessel (table 1)
The number one port in terms of trade by vessel was Houston, Texas, accounting for 18 percent ($13 billion) of the total, followed by the port district of New Orleans, Louisiana, with $10 billion of trade.
Major Commodities Transported
Ten commodity groups accounted for 71 percent ($646 billion) of the total U.S.-NAFTA trade in 2007.4
About 17 percent of U.S.-NAFTA freight shipments ($158 billion) involved motor vehicles and parts. The dominance of motor vehicles and parts reflects the continued integration of automotive production across North America. Michigan accounted for 45 percent ($70 billion) of this trade. The second largest commodity traded was mineral fuels, oils, and waxes ($130 billion). The top 5 commodities accounted for 60 percent of U.S.-NAFTA trade. See figure 7 for the top commodities traded with Canada and Mexico, and figure 12 for the leading commodities that travel through the top 10 land gateways.
Of the $158 billion trade in motor vehicles and parts, $110 billion occurred between the United States and Canada, making it the top commodity group traded between the two countries. Electrical machinery, equipment, and parts ($80 billion) is the top commodity group traded between the United States and Mexico.
Figures 8, 9, 10 and 11 show the top five commodities moved by truck, rail, air, and vessel respectively. Table 4 shows the distribution of the top five commodities of NAFTA trade by top land gateways in 2007.
U.S. - NAFTA Trade by State
In 2007, Texas ($147 billion), Michigan ($110 billion), California ($92 billion), Illinois ($53 billion), and New York ($43 billion) were the top states for trade with the NAFTA countries. These five states accounted for 49 percent of the trade (see table 3). In 2007, Texas accounted for 16 percent of the total trade with the NAFTA countries, with exports and imports almost equally split. In fact, exports and imports are balanced in many of the states along Interstate 35, which originates at Laredo, Texas, on the U.S.-Mexico border and goes as far north as Duluth, Minnesota, about 160 miles from the U.S.-Canada border. By comparison, the northeastern states each import more merchandise from NAFTA partners than they export. Figure 12 shows U.S.-NAFTA exports and imports by state.
About 57 percent ($289 billion) of land trade between the United States and Canada has its origin or destination in Ontario. This proportion has not changed much since the inception of NAFTA. Figure 13 shows the trade value between the top 10 U.S. States and the Canadian provinces.
In 2007, Michigan was the top state trading with Canada, accounting for 15 percent ($77 billion) of the land trade. Of this trade, 91 percent was with the Province of Ontario. Illinois and New York ranked second and third with trade worth $39 billion and $34 billion, respectively.
Two states, Texas ($88 billion) and California ($49 billion), accounted for 48 percent of U.S.-Mexico merchandise trade in 2007. Michigan ($31 billion) was the third largest state trading with Mexico.
1 Gateway in this report refers to the Customs and Border Protection (CBP) port of entry between Canada and Mexico for land modes, where the mode of transportation (truck and rail) may be inspected while entering or leaving the United States. A port of entry denotes an individual port and not a port district-a port district can comprise multiple ports based on the geography of a region. Flows through individual ports are based on reported data collected from U.S. trade documents. Gateways are ports through which large volumes of merchandise in terms of value move between the United States and its NAFTA partners. For the purposes of this report, a port of entry includes locations at those ports where goods enter or exit the United States.
2 Totals do not equal 100 percent because some of the freight traffic at Buffalo-Niagara Falls and Port Huron moved by other modes.
3 A port district is a collection of large and small ports within a geographic area.
4 The commodity groups are defined in the Harmonized Tariff System (HTS) of nomenclature, which is an internationally standardized system of names and numbers for classifying traded products. HTS codes are developed and maintained by the World Customs Organization (WCO), of which the United States is a member.
About this Report
Steven Beningo, International Transportation Specialist of the Bureau of Transportation Statistics (BTS), and Fahim Mohamed, International Transportation Analyst, Macrosys, prepared this article. Zhi Liu of Macrosys provided special assistance in creating the maps. BTS is a component of the Department of Transportation's Research and Innovative Technology Administration.
This Special Report is primarily based on BTS TransBorder Freight Data. Released monthly, the TransBorder Freight Data program presents statistics on freight movements between the United States and its North American trading partners- Canada and Mexico.