In a wide-ranging briefing to Northern California customs brokers and freight forwarders, Peter Friedmann, executive director of the Agriculture Transportation Coalition (AgTC) warned that a collaborative effort by ports exporters, forwarders, brokers and longshore labor is essential to stem the loss of West Coast container business to East and Gulf Coast ports.
Friedmann was speaking to a video conference hosted by the Customs Brokers and Forwarders Association of Northern California (CBFANC) and was introduced by its president, Evey Hwang.
In his remarks, Friedmann noted that cheaper land, reduced regulation and closer proximity to East Coast consumers has helped drive the expansion of new warehousing and upgraded terminal facilities at ports such as Norfolk, Charleston, Savannah and Houston.
He warned that increased regulation in California aimed at curtailing independent contractor truck drivers and higher fees for zero emission trucks and equipment is adding additional costs to West Coast ports at a time when their competitors at East and Gulf Coast ports impose much less.
Friedmann cited the example of a protein exporter, who had shifted transporting some containers away from West Coast ports because of the 2014/2015 labor slowdown at West Coast ports:
“Cargo has a long memory” and these disputes have long term negative impacts on the viability of West Coast ports, he warned.
A key element in the management/labor problem on the Pacific West Coast is that the Pacific Maritime Association is represented by mostly ocean carriers, “who would move their ships to the East Coast at a drop of the hat and so they have no loyalty to the West Coast … This means that the ILWU (International Longshore and Warehouse Union) needs to act as the adult in the room … Right now, there is no real negotiation during contract talks, the ILWU demands and the PMA eventually gives in. They (PMA) don’t care about the costs because they can always move.”
Unless, the move to East and Gulf Coast ports changes, the ILWU will face the loss of many members, Friedmann said, if it does not stop the loss of container business to East and Gulf Coast ports.
Friedmann said it is incumbent on those who truly rely on the West Coast ports, including agricultural exporters, customs brokers, freight forwarders, ILWU and the ports and port communities to work together to preserve and increase the West Coast market share.
That market share has been in dramatic decline for the last ten years.
As an example, shippers, forwarders, brokers and the ILWU need to make themselves heard in California’s state capital at Sacramento to prevent increased and higher cost mandates being imposed on imports and exports transiting California ports.
Business/Labor Coalition Opposing Howard Terminal Baseball Park
Friedmann cited the positive example of business/labor cooperation that has surfaced fighting the proposed Oakland Athletics Howard Terminal Ballpark at the Port of Oakland, “It is this type of cooperation that we need to see to prevent scarce waterfront land falling into the hands of real estate developers, who seek to transform our working waterfronts into luxury condominiums at Oakland, Seattle, Tacoma and other West Coast ports.”
Higher U.S. Railroad Costs and Slower Service
Another loss of market share is coming from the diversion of West Coast business going through the Canadian Ports of Prince Rupert and Vancouver: “What we are seeing here is that the rail service provided by the CN (Canadian National) railroad is delivering containers in half the time and at half the price to Chicago, compared to the U.S. railroads delivering containers to Chicago from the West Coast ports … The U.S. railroads are charging $600 more per container than the Canadians.”
In past discussions, Friedmann has cited the problem of higher cost and slower delivery service by the two railroads servicing U.S. West Coast ports: the Burlington Northern Santa Fe (BNSF) and the Union Pacific (UP) railroads.
The continued problem of higher cost and slower delivery creates an important competitive disadvantage, Friedmann said.
Challenges for U.S. Exporters
U.S. agricultural exporters have held their own during the recent economic and trade downturn and dislocations related to the coronavirus. However, trade disputes with China and the United States plus higher costs accessing U.S. West Coast ports are adding to costs and in some cases resulting in losses in markets, such as in soybeans, hay and other products.
A critical need for these exporters is to be able to access import containers that need to be returned to Asia. These import containers cost-efficiently support containerized exports. When these import containers become less available due to loss of service to West Coast parts, they increase the cost and time delivery of U.S. exports to Asia.
Although there has been a great deal of “noise” between the Trump Administration and China, neither side truly wishes for any additional disruptions in their import and export relationship.
Political Threat to U.S. – China Relationship
Unfortunately, there are new political threats to the U.S. China relationship, that could have serious consequences:
U.S. retaliation against China for its treatment of minorities in Western China.
The threat of a Chinese crackdown on the people of Hong Kong “which could be the match that lights up the U.S. China trade relationship.”
Hopefully, both sides recognize the importance of future trade and how that can be harmed by increased tensions and flareups, Friedmann said.
The Pelosi-Trump Partnership
Finally, Friedmann noted that contrary to public perceptions there has been a productive, legislative cooperation of historic proportions that has generated nearly $2.2 trillion in federal aid and support of the U.S. economy in response to the pandemic crisis.
That partnership has developed between Democratic House Speaker Nancy Pelosi and Republican President Donald Trump.
Together, they have collaborated in authorizing historic levels of U.S. spending to cushion the blow to the U.S. economy caused by the pandemic: “Don’t listen to the noise from the media. Look at how Trump and Pelosi have worked together.”
In addition, under Pelosi’s leadership, the House of Representatives has passed a new $1.5 trillion infrastructure bill, that will impact “ports, the environment, bridges and roads.”
Senate Republicans are resisting the spending levels in the House bill, but President Trump supports many of its provisions, Friedmann said, and wants to see the investment in infrastructure, and so “he will be working with Senate Republicans to get most of it passed.”
