Getting in Shipshape

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By JOHN R. McLAURIN

Economists have documented that global trade and related logistics industries have replaced California’s long lost manufacturing base in terms of providing good paying jobs. The ports of Los Angeles and Long Beach contribute more than $3 billion in state and local taxes, and account for more than 300,000 jobs in the Southern California area. But a combination of factors, heightened by a growing global recession, is shifting cargo and the logistics industry to locations outside of California.

A recently issued report by Drewry Shipping Consultants noted the threat to the historic dominance of West Coast ports. According to Drewry’s report, “The changes we are seeing in patterns of trade are fundamental. While the present downturn and the recession that might follow will hurt everybody, the ports of the U.S. West Coast will not recover so easily because their decline is part of a deeper malaise.”

The report notes that declines in cargo volume for West Coast ports began prior to the current “credit crunch.” Indeed, while West Coast port volumes have declined over the past several years, volumes for ports on the East Coast have increased a function of growing dissatisfaction among cargo owners with West Coast port policies. As a result, highly paid longshore wages, amounting to approximately $1 billion a year in California, are seeing their first declines in decades.

In addition, as a result of regulatory infighting and competing political agendas, California has been unable to develop port projects or the supporting inland infrastructure needed to effectively move goods from the port to the consumer. This kind of modernization would improve both efficiency and environmental protection. By contrast, the international trade community is finding willing partners and moving ahead with port infrastructure development projects in states like Virginia, the Carolinas, Georgia, Florida, Alabama and Texas. We have seen the development of projects and expansion of facilities in Canada and Mexico all in an effort to provide alternative gateways to California. The competition is real.

As Mexico moves forward with expanding current port facilities and starting the process to build a multibillion megaport in Baja, the Port of Los Angeles can only manage to construct a $14 million Las Vegas-style fountain. The Gerald Desmond Bridge, one of the most seismically unsafe bridges in California (over which 10 percent of the nation’s trade passes), complete with a “diaper” underneath to catch falling concrete, is a generation away from being replaced because of political infighting.

The impediments to being able to plan and move forward with construction projects to attract and handle international trade are many. Legitimate issues involving environmental mitigation and land-use planning are major concerns but are being addressed. But the politics surrounding port governance and development of inland infrastructure projects have devolved into a dysfunctional and surreal process. Until recently, the working assumption seemed to be that international trade had to come through California’s ports. The Port of Los Angeles’ recently announced “incentive” program to pay for cargo to come to Los Angeles is an example of a changing attitude and changing realities around us.

Unfortunately, many policymakers and others still retain a level of arrogance and fail to understand the long-term implications of failing to make strategic investments to keep trade flowing through California ports.

If California does not move aggressively to invest in trade-related infrastructure in the months ahead, we may lose our ability to compete as a global trade gateway. The warning signs are clear, but what’s needed is a coordinated response that recognizes the importance of global trade to California’s economy.


John R. McLaurin is president of the Pacific Merchant Shipping Association, based in San Francisco.

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