November 17, 2021
Washington, D.C. — The following are opening remarks, as prepared for delivery, from Chair of the House Committee on Transportation and Infrastructure Peter DeFazio (D-OR) during today’s hearing titled, “Industry and Labor Perspectives: A Further Look at North American Supply Chain Challenges.”
Video of DeFazio’s opening statement is here.
More information on the hearing can be found here.
Supply chain challenges stemming from new freight shipment patterns in a world impacted by COVID-19 continue to hamper businesses and consumers. Americans are buying more items from overseas instead of spending money on vacations, events, and other experiences. And no one knows if these changes are temporary or permanent as we dig out from under the pandemic.
While some try to blame the Biden administration for these woes, let’s all remember the supply chain is dominated by private businesses who are enjoying robust profits across the freight sector. They are responsible for their business decisions on whether to pursue capital and labor investments needed to accommodate freight demand. That’s why I am eager to hear from our witnesses today about what they are doing to overcome the freight chokepoints we’ve been experiencing for months.
We held a hearing in the Coast Guard and Maritime Transportation Subcommittee in June on this issue, but the freight challenges remain and are projected to continue into next year. At the same time as these challenges persist, the freight industries—ocean carriers, railroads and trucking companies—continued to earn robust profits in 2020, earning more than $800 billion collectively. It seems like congestion isn’t terrible for big business.
Let’s start this hearing by stipulating some facts:
- The freight industry is trying to meet record demand for consumer goods, particularly moving from Asia into West Coast ports by ship and through the rest of the country via truck and rail.
- Ocean shipping rates have increased by over 500 percent since this surge in demand began last year, taking a toll on companies and consumers.
- The freight network is now inundated, and disruption in one part of the supply chain has a ripple effect across all parts of the chain, from manufacturers to suppliers and distributors.
- Some of the current issues the supply chain is facing have been exacerbated by “just in time” practices being unable to withstand the changes in demand over the last two years.
- U.S. port congestion is not new. Ports need serious capital investments to keep up with the rest of the world, as well as better data sharing capabilities across the supply chain.
- Railroads are struggling to move these containers too. Since 2015, Class I railroads have slashed their workforce by almost 30 percent and closed several rail yards. In 2020 Class I railroads reinvested $6.3 billion less in their capital programs than they did in 2015 and Wall Street pushed operating ratios and stock buybacks ever higher.
- Trucking companies have been struggling for a decade to retain truckers, a direct result of real wages and working conditions that are obstacles to attracting and retaining qualified drivers.
I am astonished that our supply chain industry representatives are still calling the time we’re in unprecedented. I thought business metrics were done on a quarterly basis—I thought businesses were nimble and able to turn on a dime, it’s what I hear from colleagues all the time on why we should reduce regulations on companies, but we’re eight quarters in and it appears to me that businesses are still waiting for it to be 2019 again.
The freight network requires continued investment in capital, private and public, and a skilled workforce that is adequately compensated with reasonable working conditions. I am grateful to the men and women in our transportation workforce who have remained on the job despite the pandemic.
Today my colleagues on the other side will offer up a litany of reasons why this is the Democrats’ fault. They will offer solutions that encourage low wages and abysmal working conditions. I expect to hear that vaccine mandates, unemployment benefits, federal spending, and climate emission reductions are worsening freight congestion. None of that is true.
The simple answer is the private sector needs to be more nimble, focus less on quarterly profits to appease Wall Street bigwigs, and retain the resilience to meet surges in demand. The transportation sector needs to invest more of their robust profits back into their capital programs and should refrain from burdening employees with impossible productivity metrics and unreasonable working conditions that further the labor shortage.
Thinking about the big picture, I think this debate is another clear example of the downside to unfettered free trade, where the U.S. is now dependent on Asian nations for manufacturing. We wouldn’t have these levels of port congestion challenges if we made more products here in the U.S.
I look forward to hearing from our witnesses about how they are working together to address the short-term supply chain challenges. I have no doubt that a number of them will use the opportunity today to press for perennial priorities they have long sought, pandemic or supply-chain challenges or not. For our part, Congress recently passed the Infrastructure Investment and Jobs Act signed on Monday by President Biden. We’re doing our part to make billions of dollars in long-term investments in our freight supply chain, and I hope to hear from witnesses how they will amplify those investments for future generations.
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