The ports of Los Angeles and Long Beach are the country’s two busiest. When you consider all the local businesses that depend on the ports – the warehouses and export companies and trucking firms, to name a few – the port complex is among L.A.’s most important economic assets. Maybe the most important.
But the situation is getting perilous.
Consider the long-term threat. The widened Panama Canal is to open in about five years, and suddenly all those container ships from Asia that are now more or less forced to go to the South Bay ports will be free to go elsewhere. Places like Jacksonville, Fla.; Mobile, Ala.; and Houston have built or are expanding their ports to accommodate a surge in traffic.
Consider the short-term threat. Shippers in this economic storm would love to find a port – any port – other than the South Bay complex.
Look at it from the shippers’ standpoint. A year ago, they got about $2,100 to transport a container across the Pacific Ocean. Now, they’re getting $1,400 or less. They need low-cost ports.
But what they face in South Bay are the most expensive ports. Terminal operators reportedly pay lease rates that are far higher than anywhere else, including New York; those high costs get passed on to the customers. And look at the per-container fees. Here, a shipper can pay close to $200 in various fees on each standard 40-foot shipping container. In Seattle, such per-container fees are zero – a fact that port is touting in new advertisements that seek to lure business away from the South Bay complex.
So are the ports of Los Angeles and Long Beach crafting a bold plan to lower costs and attract business? Nope. In fact, Port of Los Angeles is doing the opposite.
As reported last week in the Business Journal, the L.A. port has hired former Congressman Dick Gephardt’s lobbying firm to try to change a law with the goal of helping the Teamsters get established as truck drivers at the port. This expenditure of time and money is coming at the same time the port is looking to lop off 10 percent of its staff for budget reasons.
The port’s quest to help the union rather than its customers will, if successful, kill many or most of what’s left of the 1,000 small trucking companies that serve the ports. And, of course, it’d raise the cost of doing business there.
In fact, the Agriculture Transportation Coalition, which represents shippers of farm products, last week sent a letter to the port of Seattle saying that if Los Angeles succeeds, it will raise costs by about $300 per container.
You could quibble with the math but you can’t argue that the port’s act is fundamentally hostile to its customers.
The Port of Los Angeles is owned by the city, and Mayor Antonio Villaraigosa has a lot of pull in the port’s operation. I understand where he’s coming from. He is a former union organizer, and he thinks he’s doing a good thing by trying to help the Teamsters get rooted at the port. He probably does not comprehend the economic carnage he’s creating.
But I do not understand the business community. Why do they sit silent as Villaraigosa monkeys with one of L.A.’s biggest economic assets? The answer to that question is beyond me.
Charles Crumpley is editor of the Business Journal. He can be reached at [email protected].