International trade long has been a bright spot in L.A.’s economy, a source of vitality even during the darkest days of the recession.
But recent statistics suggest that a dark cloud may be gathering on the region’s trade horizon.
For the first time in two decades, seaports on the East and Gulf Coasts have captured the lion’s share of the nation’s container trades a sector long dominated by their West Coast counterparts.
According to the Pacific Maritime Association, an organization of West Coast waterfront employers, the West Coast’s share of U.S. container trade has declined to 49.9 percent from 53 percent in 1994.
No one is suggesting that Southern California is in danger of losing its status as a leading global gateway. But for many trade officials, the drop below the 50 percent mark represents a significant psychological milestone as well as a portent of trouble ahead unless the region rethinks its trade strategies.
“Cargo that we otherwise would have gotten is going to the East Coast,” said Pacific Maritime Association President Joe Miniace. “I’m not concerned about tomorrow. I’m concerned about 10 years from now.”
Trade experts cite several reasons for the gradual shift in container traffic:
– A move in manufacturing from North Asian countries like Japan and Korea to less expensive South and East Asian nations such as Singapore and India, which has made shipping directly to the East Coast through the Suez Canal an increasingly attractive option.
– Higher labor costs and more militant waterfront unions on the West Coast, which have led shippers and ocean carriers to seek East Coast alternatives.
– A boom in trade with Latin America that has much stronger geographic and economic links with the East and Gulf Coasts than with the West Coast.
Those factors could spell trouble for Southern California, trade analysts say. The region is spending millions of dollars on trade infrastructure projects, including the Alameda Corridor and new shipping terminals at the ports of L.A. and Long Beach all of which are based on projections of a continued increase in cargo growth and could prove costly should that growth fail to materialize.
“We have to be careful,” said Jack Kyser, chief economist at the Economic Development Corp. of L.A. County. “We need to be a little more aggressive. We need to remember that nothing lasts forever.”
Officials at Southern California’s seaports were unfazed by the East Coast’s recent resurgence. Indeed, both L.A. and Long Beach have posted strong, double-digit trade growth in recent months, as a result of a surge in import activity.
“The Suez Canal is impacting us very little,” said Albert Fierstine, director of business development at the Port of L.A. “The carriers have invested megabucks into their terminals in L.A. and will be pushing all the cargo they can through those terminals.”
But Miniace maintains that the future remains very much in question largely as a result of growing problems with the West Coast’s strong waterfront unions.
According to the PMA, worker productivity at West Coast ports leveled off three years ago, and actually declined in 1996. At the same time, average earnings for West Coast longshoremen have shot up by more than $11,000, about $83,000 annually.
Miniace also cited such work actions as a Sept. 8 work stoppage by West Coast longshoremen, part of a worldwide show of solidarity with 329 Liverpool dockworkers who were fired two years ago. The 8-hour walkout idled 32 vessels at the ports of L.A. and Long Beach.
“Our productivity is down and our dependability is down,” Miniace said. “Labor issues are at the heart of it.”
Steve Stallone, a spokesman at the International Longshore and Warehouse Union headquarters in San Francisco, dismissed Miniace’s comments as “chest-thumping and positioning for future contract negotiations.”
Rather than snatching cargo from the West Coast, he said, the East Coast is simply reaping the benefits of a surge in the economies of Latin America, which ships to the Eastern Uniuted States for reasons of geography.
Whether or not the East Coast is capturing cargo that otherwise would come here, the growth in Latin American trade and the continuing move of manufacturing to South and East Asia poses significant challenges for Southern California, where growth has been tagged primarily to North Asian economies such as China, Japan and Korea, industry experts say.
“There is an emormous amount of cheap labor available in India and Bangladesh,” said Karsten Lemke, vice president of Western Coast for Zim American Israeli Shipping Co. Inc. “That makes the Suez more attractive. Most of the global carriers are taking advantage of it.”
Added Kyser: “New relationships are emerging. The trade flows might start going in different directions. We’ve been dazzled by Asia for so long that it is hard to get the stars out of our eyes.”
