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Wednesday, Feb 8, 2023

Doesn’t Stack Up

For more than 150 years, wide-eyed fortune seekers have been coming to California seeking easy pickings.

So now here comes Florida Gov. Rick Scott leading a “trade delegation” to entice the international trade and logistics industry to uproot and return with him to the Sunshine State.

The governor doesn’t really want the cargo, of course. What he wants are the tens of thousands of jobs and economic benefits in California that are associated with moving, tracking, storing and distributing goods – everything from lawn chairs to clothing to big-screen televisions.

In his excitement to strike out for California, the governor has put the proverbial “cart before the horse.” In short, he wants the cart, but doesn’t have a horse to pull it.

Florida doesn’t have anywhere near the demand, proximity to markets or infrastructure needed to support major port operations even remotely close to California’s port complexes.

In fact, Florida’s share of the U.S. container market “underperformed … compared to other U.S. Ports,” according to a new report by the Florida Ports Council.

To turn the tide and become a player in international trade, the report says, Florida needs to develop the necessary infrastructure for “growth and connectivity” – and it needs to attract import distribution centers, improve transportation and streamline its regulatory processes to make the state competitive.

The ports’ report recommends aggressively marketing Florida to cargo owners and shipping lines – but presumably the intent was to market the state after making the investments and changes needed to be competitive.

So I think Scott’s visit to California is premature, but still it’s a good thing. He’ll see exactly what it takes to build and maintain a world-class logistics system.

The first thing he’ll see is just how much money it takes – “real” money as we say in California. Not the hundreds of millions of dollars as called out in the ports’ report, but billions of dollars – and the need to meet ever-higher environmental standards.

California has individual ports that have invested more than all Florida ports combined in recent years.

California ports offer superior and direct access to U.S. markets via approximately 100 trains a day on two Class 1 railroads (Union Pacific and BNSF), container cranes and dredged channels that can accommodate the largest vessels in operation, and 1.8 billion square feet of warehouse-distribution centers within a short drive of the ports of Los Angeles and Long Beach. 

In addition, shipping lines and terminal operators in California are light years ahead of other U.S. ports in initiating strategies to improve their efficiencies and environmental performance, both on land and water.

So while we think Scott’s visit to California will be eye-opening, but probably not in a good way for him, it’s not to suggest we be complacent. Far from it.

California’s economy depends on trade. And it’s not just imports. California ports give our manufacturers and agricultural producers direct access to the world.

The international trade and logistics industry is extremely competitive and getting more competitive all the time. California needs to take competition seriously. Most recently, the trade community endured contentious waterfront contract negotiations and, hopefully, that is behind us now. Some cargo might be lost, our market share might erode. But our challenge, as an industry, working with our public officials, is what we learn from these events and how we improve. 

Over the past 10 years, marine terminal operators have paid billions in lease payments to California’s public port authorities. Those funds have allowed the ports to modernize marine terminals, improve or replace bridges, and improve rail facilities. Industry has provided funding for environmental projects ranging from equipping vessels to connect to the electrical grid while at berth; the purchase of the newest, cleanest fleets of port drayage trucks; and electrification/automation of terminals, just to name a few.

Those efforts, coupled with other environmental regulatory measures, has resulted in significantly reducing port-related emissions by more than 80 percent in several categories in less than a decade – with more improvements already on the books and scheduled for implementation.

California’s public officials need to continue to work with the trade community to ensure that such large private investments and environmental progress continue to be successful. We need to build on the success already achieved as we plot a path forward while avoiding short-term gains at the cost of long-term goals.

Scott won’t be the first fortune seeker to leave California disappointed. To keep trade jobs growing in the state – and to keep disappointing would-be suitors – California needs to continue making investments, improving the business climate and keeping a sharp eye over its shoulder.

John McLaurin is president of the Pacific Merchant Shipping Association, which represents owners and operators of port terminals and ship lines.

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