Transportation Economics Essay

Pages: 4 (1460 words)  ·  Bibliography Sources: 5  ·  Level: College Senior  ·  Topic: Transportation

Transportation Economics

Despite the fact that NAFTA was passed under the leadership of a Democratic president, it became a contentious issue in the race for the Democratic primary of 2010: Barak Obama said he opposed the basic principles of NAFTA, while Hillary Clinton supported them. NAFTA has been one of the most controversial trade treaties in recent memory, despite the fact that it has been estimated to have increased U.S. GDP by as much as .5% a year. NAFTA eliminated trade barriers in critical areas of international commerce: for example, Mexican agricultural products, which were once subject to heavy tariffs, became much cheaper for American consumers (Amadeo 2010).

Imported oil from Mexico and Canada became much cheaper for the U.S. -- and thus NAFTA reduced U.S. dependence upon Venezuelan and Middle Eastern oil. It increased foreign direct investment by guaranteeing foreign investors had the same legal rights as local investors and eliminated barriers related to services in healthcare and the financial industries, thus increasing the flow of knowledge between nations. However, NAFTA also had substantial disadvantages: it drove down the price of American labor, given that wages were far lower in Mexico and American companies could more easily expand their operations across the border. Additionally, Mexican farmers struggled to compete with heavily government-subsidized American corn, soybeans, and other products (Amadeo 2010).

Q2. Despite the ubiquity of the American automobile, the energy crisis of the 1970s combined with the environmentalist movement and traffic congestion drove many urban areas to try to incentivize the use of public transportation. However, this move to going 'car free' was far from problem-free (Murga, 2002, pp. 10-11). Every major transit project was announced as "the solution" to users' reluctance to give up daily car use (Murga, 2002, p. 16). But urban life is constantly changing: the number of commuters who must rather than choose to use public transportation, population growth, and the financial feasibility of extensive government investment will all shape how transportation projects are viewed. Additionally, convenience, safety, and affordability for the user must be balanced in an often uncomfortable equation. Finally, the environmental and social impact of mass transit projects on residents must be evaluated, to ensure the continuing good will of the people, especially if construction is a lengthy process. The long-term nature of most projects can easily thwart community generosity, if residents see all of the negatives of construction but none of the benefits of enhanced transportation.

Q3. Southwest Airlines was famously proclaimed to be 'nuts' -- plane crazy, was its slogan, because of its low fares. It was able to adopt such a business model by 'thinking small.' Instead of offering a wide range of amenities, Southwest offered bare-bones service -- no meals or fancy pillows and blankets. Everyone was treated as an equal -- everyone effectively 'flew coach.' Also, the carrier for many years remained stubbornly regional in its orientation and focused on serving lower-cost, less trafficked airports that had lower wait times, to minimize delays on connecting flights as well as airfares. "In 1971, air travel was a luxury business, but Southwest's founders went bargain basement. They cut overhead by flying only one model of plane, operating out of cheaper, second-tier airports and minimizing the time their planes spent languishing in airports (by doing away with logistical headaches such as assigned seating and complicated meal service)" (Messing with success, 2007, LA Times).

Other carriers adopted the opposite technique: United Airlines and American Airlines focused on business travelers and offering extra amenities to individuals who flew first class. Such major carriers hoped to secure loyalty from frequent fliers with generous rewards packages. However, when the fortunes of the airline industry soured in the wake of fears of terrorism after 2001, and the subsequent recession, such an exclusive, segmented business model no longer proved effective for the major carriers. Yet Southwest's low-cost formula was far from foolproof. When fuel costs spiked, making bargain-basement fares impossible, Southwest found it difficult to compete with other budget carriers such as JetBlue on price. "Southwest can no longer streamline its way to competitive advantage. To stay on top, it needs more revenue. So it's setting its sights on business travelers, who typically pay more for a ticket but who also demand flights from mainstream airports, easier boarding and more generous loyalty programs" (Messing with success, 2007, LA Times).

This suggests that the major carriers are… [END OF PREVIEW]

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Transportation Economics.  (2010, April 20).  Retrieved December 12, 2018, from https://www.essaytown.com/subjects/paper/transportation-economics/7900555

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