Sunday, March 23, 2008

When Ports Compete: Will the Loser Please Step Back

This immediately past Washington Legislative season saw a renewed effort by advocates for port consolidation that was reflected by various legislative efforts to do so.

The recent announcement by NYK line to relocate from the Port of Seattle to the Port of Tacoma , gave some new legs to the issue. The contention of consolidation advocates is that competitive ports waste taxpayer dollars and just results in a shuffle of the center of economic activity 30 miles.

For a state dependent upon international trade, that is a rather parochial view of international logistics based on the assumption that the only two ports serving the Pacific Northwest or points east are Seattle and Tacoma. Not so. Obvious competitors are the Port of Portland and the Port of Vancouver.

The hot commodity and the center of competitive activities demanding public finance (if not taxpayer dollars, dollars of public enterprises - ports “owned” by citizens) have been containers. And, the measure of what the taxpaying public’s success is is not investment but rather returns on the public investment. Given the database’s ability to support an extensive comparison between all the major ports in the Pacific Northwest, the easiest comparison for return would be size and growth of container volume measured in 20-foot equivalent units (TEUs).

Yes, that’s right. Port of Portland is only in the low hundred-thousands for TEUs, with essentially no-growth over the last decade. The Port of Portland was long the contender with the Port of Seattle for the dominance of the U.S. Pacific Northwest. Perhaps their stagnation might be attributed to container lines reaction to the 1982 Mt. St. Helens eruption and the resulting problems on the Columbia River.

However, without a doubt, the Port that as suffered through competition is Portland’s. Its “rightful” growth has arguably gone to upstart Tacoma. But, overall container growth has gone to the other Pacific Northwest ports rather than the established Port of Portland.

True enough the Port of Seattle has been forced to compete, but not with Tacoma alone. Container lines that have moved south were taking advantage of infrastructure. If the Port of Seattle had not invested, neither it nor the Port of Tacoma would have grown. Long time maritime watchers can remember when the Port of Seattle’s vision for the Port of Tacoma was as a coal and log export center. (There’s a whole thesis worth on image and vision there.) Our premise is that any complacency by the Port of Seattle would have resulted in the Port of Portland’s growth just as competition has resulted in its stagnation.

Readers are encouraged to delve further back in the history of container growth and to look for other benchmark activities like investment or the timing of new line calls and submit their arguments pro or con. And don't forget to note the tremendous growth at the Port of Vancouver during this time.

And now comes Prince Rupert - competition changes faces.

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