Csulb Citt The Decade Ahead - Jobs, cargo, competition & you

[ MUSIC ] >> A DECADE AGO THE PORTS OF LOS ANGELES AND LONG BEACH PROJECTED THAT SUSTAINED CARGO GROWTH WOULD CONTINUE INDEFINITELY. MARKET TRENDS INDICATED THIS WAS A SAFE BET. AMERICAN OUTSOURCING PATTERNS OF MANUFACTURING AND THE RISING LEVELS OF PHENOMENAL FACTORY PRODUCTION IN CHINA AND THE FAR EAST SUPPORTED THESE ASSUMPTIONS. POPULATION GROWTH AND VORACIOUS CONSUMER DEMAND FOR FAR EASTERN GOODS THROUGHOUT THE UNITED STATES MADE IMPORTING THROUGH THE WEST COAST LOGICAL AND ESSENTIAL. NO OTHER PORT FACILITIES HAD THE COMBINATION OF CAPACITY, SPEED, AND LOCAL MARKET FOR GOODS AS WELL AS THE INFRASTRUCTURE TO HANDLE THE VOLUMES THAT ENTERED THE PORTS OF LA AND LONG BEACH. TODAY, MARKET FORCES ARE BUFFETING THE PORTS OF LOS ANGELES AND LONG BEACH. CARGO TRAFFIC HAS DECLINED OVER THE PAST TWO YEARS. THIS IS PARTICULARLY TRUE FOR IMPORTS. ECONOMIC TRENDS INCLUDING A GLOBAL CREDIT CRISIS, FLUCTUATION IN OIL PRICES, AND FEARS OF A WORLD-WIDE RECESSION HAVE CONTRIBUTED TO THIS DECLINE. AND NOW THERE IS MORE COMPETITION FOR DELIVERY ROUTES. THE NEXT DECADE PROMISES A FIGHT FOR DISCRETIONARY CARGO. THE REGIONAL POPULATION MAY GROW, BUT THE CONSUMERS EAST OF THE ROCKIES COULD FIND THEIR GOODS DELIVERED THROUGH A VARIETY OF ROUTES AND METHODS IN COMPETITION WITH WEST COAST PORTS IN GENERAL, AND LA LONG BEACH HARBOR IN PARTICULAR. >> WELL, IF WE'RE GOING TO BE COMPETITIVE, WE OBVIOUSLY NEED TO IMPROVE THE PRODUCTIVITY OF MOVING GOODS. BUT THE PRODUCTIVITY OF MOVING GOODS INVOLVES NOT JUST SIMPLY THE ILWU, EVEN THE TERMINAL OPERATORS, IT INVOLVES DEALING WITH THE INFRASTRUCTURE OF BEING ABLE TO MOVE THOSE GOODS THROUGHOUT A REGION, AND THROUGHOUT THE NATION. SO YOU'RE REALLY LOOKING AT A MUCH LARGER PROBLEM. WE WERE ABLE TO SUSTAIN THE OVERALL GROWTH IN TRADE PRETTY MUCH BECAUSE THERE WAS SOME CAPACITY. BUT NOW AS THE TERMINALS IMPROVED AND HAVE PRETTY MUCH BUILT OUT, THE REALITY IS, IS THAT WE NEED TO THINK ABOUT THE INFRASTRUCTURE ISSUES. NOT ONLY HOW ARE WE GOING TO GET THE GOODS TO SERVE THE CONSUMERS WITHIN THE REGION, BUT MORE IMPORTANTLY, HOW THOSE GOODS ARE GOING TO BE DISTRIBUTED ACROSS THE UNITED STATES, IF THEY'RE GOING REMAIN AT THE PORT OF ENTRY. >> IN PREVIOUS YEARS, STAKEHOLDERS IN THE PORTS OF LA AND LONG BEACH WERE CONCERNED LARGELY WITH TWO ISSUES. THE FIRST ONE WAS HOW TO SUSTAIN GROWTH WITH AN INFRASTRUCTURE BULGING AT THE SEAMS AND A DEMAND FOR GOODS RISING UNABATEDLY. THE SECOND ISSUE WAS THE NEGATIVE IMPACT ON THE ENVIRONMENT AND QUALITY OF LIFE FOR SOUTHERN CALIFORNIANS BESIEGED BY CONGESTED FREEWAYS AND CHOKED BY PORT-RELATED POLLUTION FROM FOSSIL FUEL EXHAUST. MOST OF THE OTHER ISSUES WERE RELATED TO THESE TWO. DEVELOPMENTS LIKE PIER PASS AND THE SAN PEDRO BAY CLEAN AIR ACTION PLAN CAME TO FRUITION PRO ACTIVELY IN RESPONSE TO THESE CONCERNS. SECURITY AND SAFETY WAS A SEPARATE ISSUE BROUGHT INTO SHARP FOCUS BY THE EVENTS OF 9/11. POTENTIAL COMPETITION FROM OTHER PORTS AND OTHER ROUTES SEEMED INCONSEQUENTIAL COMPARED TO THE CHALLENGES THAT APPEARED ON THE HORIZON. FACTORS THAT RENDERED LA LONG BEACH LESS COMPETITIVE INCLUDED FEES, CONGESTION, ENVIRONMENTAL RESTRICTIONS, AND INFRASTRUCTURE INADEQUACIES. CALIFORNIA'S GREENHOUSE GAS EMISSIONS MANDATES ARE THE MOST PROGRESSIVE IN THE NATION, AND WOULD HAVE PROMISED A VERY COMPLICATED AND DAUNTING FUTURE FOR THE HARBOR IN ANY CASE. REGARDLESS , COMPETITION FOR CARGO WAS A LESSER CONCERN IN THE PAST BECAUSE MAJOR OCEAN CARRIERS AND LARGE PORTS CONTROLLED LOGISTICAL ARRANGEMENTS THROUGH THEIR ADVANTAGES OF SIZE AND CAPACITY. TODAY, THE EVOLUTION AND CONSOLIDATION OF BIG BOX STORES AND MAJOR DISCOUNT RETAILERS HAS PUT THOSE SHIPPERS IN CONTROL OF VAST AMOUNTS OF GOODS. THIS VOLUME LEVERAGE HAS GIVEN THEM THE POWER TO ENCOURAGE DISTRIBUTION AND WAREHOUSE DEVELOPMENT IN GEOGRAPHICALLY DISPERSED COMMUNITIES WILLING TO COMPETE ACROSS THE COUNTRY. CONTRACTS FOR LESS VOLUME AND SHORTER DELIVERY CYCLES ALLOW SHIPPERS TO SPREAD OUT COST AND DIVERSIFY DELIVERY RISKS BY USING MULTIPLE PORTS. >> WE DO MONITOR WHAT'S GOING ON IN OTHER TRADE ROUTES, ESPECIALLY THE ONES THAT COMPETE WITH US. AND SO -- AND WE LOOK AT THE TIMING OF THOSE PROJECTS. AND YOU KNOW, NOW THAT WE'RE SORT OF IN A DOWN TURN IN VOLUME, YOU KNOW, THINGS IN MEXICO APPEAR TO HAVE SLOWED DOWN. FROM OUR PERSPECTIVE, WE SEE THE INVESTMENT IN INFRASTRUCTURE THAT WE HAVE TO DO AS PARAMOUNT IN KEEPING, YOU KNOW, KEEPING OUR COMPETITIVE ADVANTAGE. >> EXPANSION OF THE PANAMA CANAL AND INCREASED USE OF THE SUEZ CANAL WILL GIVE SHIPPERS TWO MORE OPTIONS FOR SUPPLYING GOODS TO THE EASTERN HALF OF THE UNITED STATES. AN EXPANDED PANAMA CANAL, IF ABLE TO HANDLE THE LARGEST CONTAINER SHIPS, WILL HAVE A MAJOR IMPACT ON HOW MERCHANDISE IS DELIVERED EAST OF THE ROCKIES. SHIPPERS WILL HAVE THE OPTION OF BYPASSING THE WEST COAST OF NORTH AMERICA. SOME REPORTS INDICATE A LARGER PANAMA CANAL COULD EFFECTIVELY ELIMINATE THE MID-WESTERN MARKET FROM WEST COAST PORTS. OTHER THREATS EMANATE FROM PORTS IN MEXICO. LINKED BY A LOGISTICAL NETWORK WHICH COULD DELIVER GOODS FROM ASIA BY RAIL ACROSS THE BORDER ALL THE WAY NORTH TO KANSAS CITY. TACOMA AND SEATTLE, WASHINGTON, WILL IMPROVE THEIR RAIL ACCESS AND PORT FACILITIES TO HANDLE MORE INBOUND CARGO TRAFFIC. YET ANOTHER COMPETING ROUTE HAS BEEN DEVELOPED IN PRINCE RUPERT, BRITISH COLUMBIA. THE SO-CALLED NORTHWEST GATEWAY MANAGES TO CUT AT LEAST 30 HOURS OF OCEAN SHIPPING TIME FROM ASIA. IT THEN CONNECTS THE CANADIAN RAIL NETWORK TO THE U.S. HEARTLAND FROM WINNIPEG TO CHICAGO AND MEMPHIS, AND CONTINUES ALL THE WAY DOWN TO THE GULF COAST. >> I THINK THERE'S ALWAYS CONCERN. I THINK YOU HAVE TO CONTINUE TO LOOK IN YOUR REAR VIEW MIRROR TO MAKE SURE THAT SOUTHERN CALIFORNIA PORTS CONTINUE TO BE THE GATEWAY FOR GOODS COMING FROM THE TRANS PACIFIC. THAT BEING SAID, CARGO [INAUDIBLE] SOUTHER CALIFORNIA. THERE'S A LARGE CAPTIVE CONSUMER BASE. THERE'S GREAT INTERMODAL CONNECTIONS, WE HAVE DEEP WATER, GOOD WEATHER, VERY DEVELOPED DISTRIBUTION, WAREHOUSE SYSTEM. AND SO ON TO THE EXTENT THAT WE CAN CONTINUE TO MAKE IT THE PORT OF CHOICE, THAT'S WHAT WE WANT TO DO, AND I THINK WE'RE WELL POSITIONS TO DO THAT. >> MANUFACTURING GROWTH PATTERNS IN SOUTH AMERICA COULD TILT A LARGE PORTION OF TRADE TOWARD THE ATLANTA. AS COULD AGGRESSIVE FACTORY DEVELOPMENT IN SOUTH ASIA. IN PARTICULAR, SOUTH ASIAN FACTORIES COULD MAKE THE SUEZ CANAL ROUTE MORE ATTRACTIVE FOR DELIVERY TO THE EAST COAST. RAILROAD INFRASTRUCTURE AND CAPACITY IN THE LA LONG BEACH HARBOR HAS COME UNDER SCRUTINY FROM MANY WHO BELIEVE IT IS NOT UP TO THE TASK OF MAINTAINING AN EFFICIENT, COST EFFECTIVE FLOW FROM THE PORTS TO THE MIDWEST. RAIL DEVELOPMENT TO THE INTERIOR OF THE COUNTRY IS BEYOND LOCAL CONTROL. HOWEVER, WITHIN THE SCOPE OF LOCAL OPERATIONS IS THE DEVELOPMENT OF MORE ON-DOCK RAIL CAPACITY. WHICH WILL BE ESSENTIAL FOR ANY FUTURE GROWTH. ADDITIONALLY, WAREHOUSING MAY NEED TO BE PUSHED FURTHER EAST. OTHER STATES AND LOCAL GOVERNMENTS HAVE DEMONSTRATED A WILLINGNESS TO INVEST IN PORT INFRASTRUCTURE, DEVELOPMENT, AND DISTRIBUTION FACILITIES WHICH WILL BE NEEDED TO ACCOMMODATE THE GULF AND EAST COASTS. GOVERNMENTAL LEADERS IN SEATTLE AND CANADA IN THE NORTHWEST, VIRGINIA ON THE ATLANTA COAST, AND HOUSTON ON THE GULF COAST ARE WILLING TO INVEST GENEROUS AMOUNTS OF GOVERNMENT FUNDING IN JOB-CREATING GOODS MOVEMENT INFRASTRUCTURE PROJECTS. SIMULTANEOUSLY, THOSE OFFICIALS ARE WILLING TO STREAMLINE ENVIRONMENTAL REVIEW SO THAT THESE PROJECTS CAN BE DEVELOPED IN TIME TO TAKE ADVANTAGE OF NEW OPPORTUNITIES. THE PERCEPTION IS THAT IN SPITE OF INITIATIVES LIKE PROPOSITION 1 B, A SIMILAR COMMITMENT TO PRIORITIZING INFRASTRUCTURE FUNDING DOES NOT EXISTENCE IN THE GOLDEN STATE. >> I THINK ONE OF THE MOTIVATION THAT SHIPPERS HAVE IS THEY WANT TO DIVERSIFY THEIR PORTFOLIO. THEY DON'T HAVE THE CONFIDENCE THAT WE IN SOUTHERN CALIFORNIA OR THE STATE OF CALIFORNIA ARE GOING TO SERIOUSLY DO THE KINDS OF THINGS THAT WE NEED TO SUPPORT THE GROWTH OF THOSE PORTS. AND IF WE'RE NOT GOING TO DO THOSE THINGS THEN THEY NEED TO LOOK AT ALTERNATIVE PORTS OF ENTRY. WHETHER WE'RE DEALING WITH SHREVEPORT, OR WE'RE DEALING WITH POTENTIAL PORT IN MEXICO, THEY DON'T REALLY CARE. WHAT THEY CARE ABOUT IS THAT THEY GET THEIR GOODS TO A MARKETPLACE. >> FEES FOR CONTAINER HANDLING THAT ARE UTILIZED FOR ENVIRONMENTAL MITIGATION IN THE LONG BEACH HARBOR ARE VIEWED AS A DISINCENTIVE THAT MIGHT SCARE AWAY BUSINESS IN THE SHORT TERM. THE UNCERTAINTY THAT EXISTS REGARDING DEVELOPMENT AND IMPLEMENTATION OF THE CLEAN TRUCK PROGRAM ALSO LIMITS CONFIDENCE IN THE ABILITY OF LOCAL PORTS TO REMAIN COMPETITIVE. HOWEVER, THESE TYPES OF FEES ARE NOT ENTIRELY UNIQUE TO LA AND LONG BEACH, AND THE PROGRAMS THEY FUND COULD HELP TO SUPPORT BOTH INFRASTRUCTURE DEVELOPMENT AND LONG TERM CHANGES IN THE INDUSTRY THAT WILL MAKE THE PORTS MORE VIABLE IN THE LONG TERM. THESE EFFORTS COULD ALSO BECOME MODELS FOR OTHER PORTS AS WELL. INDUSTRY STAKE HOLDERS CAN AND WILL SUPPORT FEES IF THE TRANSPARENCY OF THE PROCESS LEADS TO SPECIFIC, MEASURABLE IMPROVEMENTS THAT WILL DIRECTLY GENERATE MORE EFFICIENT GOODS MOVEMENT. >> YOU KNOW, OUR CUSTOMERS HAVE MADE INVESTMENTS IN THIS PORT. AND SOME OF THEM WILL TELL ME, YOU KNOW, I'VE GOT A TERMINAL HERE, I WANT TO FILL UP THE TERMINAL IN LOS ANGELES, I DON'T WANT TO GO TO PRINCE RUPERT. I MEAN, THAT'S ACTUALLY WHAT THEY'LL TELL ME, BECAUSE THEY HAVE INVESTMENTS HERE AND THEY NEED TO PAY FOR THEIR INVESTMENT IN THE INFRASTRUCTURE JUST LIKE WE NEED TO PAY FOR THE INVESTMENT IN THE INFRASTRUCTURE. SO THERE'S A MOTIVATION TO COME HERE BECAUSE OF THAT REASON, AND THE MOTIVATION TO COME HERE FOR THE MARKET. SO I THINK WE'LL ALWAYS HAVE THAT IN YOUR FAVOR. >> MOST PORTS ACROSS THE COUNTRY AND THE REST OF THE WORLD WILL HAVE TO GET ON THE SAME BAND WAGON THAT WE ARE RIGHT NOW. I THINK WHAT WE'VE RECOGNIZED IS THAT YOU CAN GROW AND YOU CAN GROW GREEN, AND YOU CAN POSITION YOURSELF FOR MORE GROWTH IN THE FUTURE. SOME OF THE THINGS WE'RE DOING NOW, OTHER PORTS WILL BE DOING IN THE FUTURE. WE MAY HAVE LOST A LITTLE BIT OF DISCRETIONARY CARGO OVER THE LAST YEAR OR SO, BUT I THINK THAT'S CARGO THAT WE CAN CERTAINLY GET BACK WHEN OTHER PORTS START TO HAVE THE CHALLENGES WITH THE CONSEQUENCES OR PUBLIC HEALTH IMPACTS, I THINK THEY'RE GOING TO RECOGNIZE THAT WE WERE REALLY PIONEERS AND WERE, AS I SAID, WE'RE GROWING SO WE CAN POSITION OURSELVES FOR THAT GROWTH WHEN IT COMES BACK. >> DECISION MAKERS IN THE LA LONG BEACH HARBOR HAVE TO CONSIDER THE RISKS OF A STANDING PATH TO WEATHER THE STORM OF AN ECONOMIC DECLINE AND NEGATIVE MARKET TRENDS, OR THE OPPOSITE RISK OF ALIENATING CUSTOMERS BY RAISING CONTAINER HANDLING FEES FOR EVENTUAL IMPROVEMENTS. EFFICIENCY IN THE FUTURE AND WHAT THAT MIGHT ENTAIL FOR LABOR, THE LOCAL ECONOMY, AND THE LOGISTICS INDUSTRY WILL ALSO NEED TO BE ADDRESSED. THE PORTS OF LA AND LONG BEACH WILL CONTINUE TO HANDLE THE CARGO NEEDS OF A LARGE, REGIONAL POPULATION. THE QUESTION IS WHETHER DISCRETIONARY CARGO WILL CONTINUE TO PUMP VITAL NEW LIFE INTO THE ECONOMY AS THE GATEWAY FOR GOODS TO AMERICA OR IF THE LOCAL HARBOR WILL BECOME A FACILITY THAT ONLY SUSTAINS THE NEEDS OF THE CONSUMERS THAT RESIDE IN ITS SHADOW. [ MUSIC ]