Canadian Railroads Key to State’s Trade Future

Rail freight isn’t sexy, but it’s part of a complex trade network with Canada offering huge potential for Michigan

by John Foren
February 5, 2010

Editor’s note: In this increasingly global economy, Michigan’s most important “foreign” relationship is close at hand, with neighboring Canada. This is part of a regular series of features exploring major political, policy and cultural issues between Michigan and Canada and the importance of this relationship to the state’s future. The series is made possible through a sponsorship by the Canadian Studies Center at Michigan State University.

The freight cars lumber down from the port of Halifax, Nova Scotia, or from Montreal and emerge from the rail tunnels at Port Huron and Detroit or cross the bridge at Sault Ste. Marie.

They chug through Michigan’s towns and intersections, perhaps stopping here to pick up freight, but just as likely — and here’s what state economic development leaders want to change — heading on to Chicago or Toledo for unloading.

Rail freight might seem antiquated to some, a wheezing and dated symbol of a can-do industrial past. But it’s part of a complex trade network with Canada that offers huge potential and economic impact for Michigan, state business and trade experts say.

A crane prepares to load a container onto a train at CN’s Montreal Intermodal Terminal at Taschereau.

They see rail — and several new freight initiatives — as a sizable component of Michigan’s burgeoning trade exchange with Canada, which now totals $68 billion annually.

“Our relationship with Canada is very, very important,” said Carmine Palombo, transportation director for the Southeast Michigan Council of Governments (SEMCOG).

And freight is an often overlooked component of that relationship, business leaders say.

“There is huge potential,” said Sarah Hubbard, senior vice president of the Detroit Regional Chamber of Commerce. Freight is already important “and could be more significant,” she adds. “It’s just below the radar.”

It’s no accident that Canadian National Railway is taking a lead role in the 2010 CN Forum, a major trade policy gathering Feb. 9-10 at Michigan State University. CN is the biggest rail freight player in Michigan and is central to plans by state policymakers to build intermodal trade and to become a global logistics hub. In effect, that means turning the state into an inland port that’s a centerpiece for all kinds of goods — via rail, road and water — and creating thousands of new jobs and billions of dollars in investment.

Dozens of policymakers and experts are expected to attend the forum, which will focus on U.S. and Canadian border trade, travel and security, emphasizing the importance of the international border to Michigan’s economic well-being.

Karen Phillips, CN’s vice president for North American government affairs, is keynote speaker at Tuesday’s 4-7 p.m. legislative reception. Other speakers include Robert Noble, consul general of Canada in Michigan.

“One objective is how can we come together and really catapult Michigan into some great ideas on trade,” said AnnMarie Schneider, acting director of MSU’s Canadian Studies Center and an organizer of the conference.

The forum also aims to encourage policymakers to plan with an eye toward the economic similarities between Michigan and Canada.

“The state of Michigan and a certain region of Canada have very similar natural resources, as well as business resources and university resources, that we share on a day-to-day basis. The trend that’s up and rising is to look at the regional economy and how all of those different sectors can benefit from a regional outlook,” Schneider said.

CN provided an endowment for the forum, which also received support from the Canadian government, the Detroit Regional Chamber, and state associations and agencies.

Rail freight is only part of the Michigan-Canada trade picture, but it’s no afterthought. Michigan received about one-third of all rail freight traffic from Canada in 2005, some 10,000 trains and 730,000 containers, according to the U.S. Bureau of Transportation Statistics.

Those Amtrak passenger trains speeding through the intersections of Michigan towns are a relatively small piece of the transit picture. There are literally thousands of miles of train tracks in Michigan — about 3,900 in all — and nearly all of it is used for freight.

Nearly 20 percent of the freight tonnage that comes through Michigan is by rail; trucks still comprise the vast majority.

There are 25 private rail freight companies operating in the state, with dominant players CN and competitor Canadian Pacific hailing from across the border. CN is the leading presence on the freight scene, moving 30-40 trains through Michigan every day. Most come from Canada through Port Huron and the $200-million tunnel that opened in 1993 to accommodate larger loads.

Autos are the heart of CN’s Michigan business. “The auto industry wouldn’t be in Michigan unless you had good railroads,” said Robert Chaprnka, president of the Michigan Railroads Association, a trade group.

In fact, 70 percent of finished automobiles leave the state by rail. Much like Michigan’s economy, though, being so closely aligned to the struggling auto industry might seem like a death knell.

But business and transportation leaders hope to transition the Canadian rail traffic into a new area of economic growth in Michigan.

“In Michigan, as well as nationwide, there’s reason for optimism about rail freight,” said Larry Karnes, a freight policy specialist with the Michigan Department of Transportation. “Rail is very important to us, there’s no question about that.”

Karnes and other officials cite two potential developments, both of which rely on Canadian railroads.

Canadian Pacific hopes to build an expanded $400-million rail tunnel under the Detroit River at the Windsor crossing, permitting more and larger freight to come through.

“There are two functions at the border we have to try to balance,” says SEMCOG’s Palombo. “One is safety and security. One is free flow of traffic. We have to try to encourage as much freight across the border as possible.”

The other major project is a unique collaboration between the state, other agencies and the notoriously competitive railroad companies — including CN, Canadian Pacific, CSX and Norfolk Southern — on an intermodal freight terminal in southwest Detroit.

The potential $650-million project would be the largest public/private venture in Michigan history, state officials say, with the railroads paying some 40 percent of the cost. The goal is for the railroads to use the site as a stopping point to transport goods, linking rail and truck freight, instead of hustling it to other locales outside of Michigan.

“We have a lot of freight in this region that’s rubber-tired out of this state that goes to Chicago and other regions,” Palombo said.

For instance, officials explain, envision a rail car from Canada filled with containers of goods, such as auto parts. The so-called Detroit Intermodal Freight Terminal would have the space and capacity for those parts to be unloaded from the rail cars onto trucks and head on to Michigan highways.

About 300 acres of the property is already being used for intermodal operations, but the entire project — still awaiting federal environmental and other approvals — could take 10-15 years to complete.

A study by MDOT and the Federal Highway Administration projects the development will provide an average of 300 construction jobs over a 10-year period and create some 4,500 new jobs throughout Detroit and Michigan. MDOT’s Karnes said those jobs would include loaders and administrative staff to run the facility.

The intermodal project taps into TranslinkeD, a vision being pushed by the Detroit Regional Chamber to use southeast Michigan’s geographic advantages — and proximity to Canada— to refashion the state’s economy.

Chamber leaders say Detroit has all the right pieces — including transcontinental railroads — to be a global logistics hub, a stopping point for goods from all over the world. It’s a matter of better connecting railroads, waterways and roads, they say. The result could be lots of high-tech logistic jobs.

“We think we have the talent here to transition very well from manufacturing to those kinds of jobs,” said the Chamber’s Hubbard.

According to most policymakers, Canada and the freight trains running across its borders are at the center of that transition.

John Foren is the former editor of The Flint Journal and spent years as a reporter for Booth Newspapers in Washington D.C., Lansing and Flint. He is an instructor at the Michigan State University School of Journalism.