It is too bad Joe Biden and Pete Buttigieg can’t bring Robert McNamara back from the grave to sort out import container confusion that impedes manufacturing and angers consumers. McNamara helped develop mathematical techniques for optimizing airlifts and bombing for U.S. air forces in World War II. These contributed to what is known as “operations research” today. He loved to tackle logistics bottlenecks.
Is that the problem today? Yes, though one must recognize that in addition to this supply-side factor, there also is unprecedented demand.
COVID halted much spending over which consumers had any discretion. Last year’s consumer sales were abysmal. The dam has broken and many households, though certainly not all, have money to spend and want to spend it. This is showing up even in used-car prices. Slack demand slowed much manufacturing. That is coming back, but many factories, including auto plants, need components, many of which are imported.
So high demand is in play. Unfortunately, the only way to curtail this would be the Federal Reserve sharply crimping the money supply, starting a recession. This won’t happen until circumstances force it. Dealing with supply problems is the only immediate option, and that isn’t easy.
The adjoining ports of Los Angeles and Long Beach stand out as the chokepoint delaying unloading of dozens of huge container ships carrying industrial components and consumer goods wanted for a bountiful holiday season.
Is the hold-up physical, a lack of adequate port and transportation infrastructure? Or is it a human one, lack of labor or bad management?
The answer isn’t clear. Port managers claim they are working as fast as they can but are short of workers to operate cranes and drivers to shuttle and sort boxes from dockside to temporary storage or onto trains and over-the-road semis.
Drivers say that there is no shortage of able workers, but that management has been slow to train these for specific positions, especially highly skilled crane operators. Port workers unions say there are members waiting for callback.
Critics of regulation say that zoning limits on the height to which boxes can be stacked compounds the hyper-traffic-jam situation. And there are photos of mountains of boxes in some ports
Reaching a conclusion may be impossible, but consider some background.
First, the shipping container revolutionized seaborne trade and is a greater factor in globalization than the lowering of tariffs.
Ships’ capacities exploded with burgeoning Chinese output. A ship that could hold 6,000 20-foot containers was news in 2000. In 2013, ones holding 16,000 were hailed. Eight years later, we are up to 30,000. The ability to move boxes across oceans grew much faster than port capacity and faster than the rail and road links needed to get boxes from seacoasts to factories and stores.
Port authorities and the federal government have invested a lot of money in infrastructure. Most of the federal money, however, was for dredging deeper harbors to accommodate the larger vessels that can pass the updated Panama Canal. Nearly all is on the East Coast, and we have duplicated capacity because if you dredge one, representatives of states that have competing harbors demand equal treatment. So we have overcapacity on the Atlantic.
There really are only four ports on the West Coast through which containers can flow: Vancouver, Tacoma, San Francisco and Los Angeles. All have deep harbors and major rail connections and are 5,000 to 6,000 nautical miles from Shanghai.
In addition, Prince Rupert, British Colombia, has the same assets, but it has more capacity to handle bulk exports like grains or coal than incoming containers. Mexican ports have more capacity than people realize, but their rail links, while improving, remain problematic.
Florida Gov. Ron DeSantis has said that state’s ports are open 24/7, but he did not note that Jacksonville is over 10,000 miles from Shanghai vis Panama versus 5,000 for Tacoma and 5,700 for L.A. Like many, he does not understand great circles on a globe. New Orleans, Mobile, Charleston, Savannah and New York-New Jersey are all in the same ballpark
Unfortunately, while these have rail connections, neither of the major railroads servicing East Coast ports have the capacity to the Heartland of the country that the BNSF and Union Pacific have from the west.
In particular, the BNSF “Transcon” that follows the Los Angeles to Chicago route of the Superchief passenger trains that celebrities used to ride is optimized for container trains. The company had invested several billions over the last decade, double-tracking nearly all of it and constructing 10,000-foot-long sidings to facilitate meeting and passing. The UP has less favorable terrain but huge capacity nevertheless. The BNSF lines from Puget Sound to the Twin Cities and Chicago carry more grains but have less container capacity. The Canadian Pacific has good lines from British Colombia ports, especially Vancouver. Both the BNSF and UP have large new yards near Chicago. So once past the ports, boxes can flow reasonably well.
The imbalance between loaded and empty boxes is a longstanding problem. Ideally, ships would bring containers loaded with U.S. imports from Asia east across the Pacific and then return with boxes filled with our exports to that region. But the value and volume of flows are not balanced and more of our exports are in bulk, like grains. No one wants to pay to ship empty boxes back west and ship owners don’t want to tie up vessels hauling nothing but air at low rates.
The same is true for railroads. A two-mile-long train of laden containers rolling east across deserts and prairie means millions in revenue for the BNSF. Empties headed the other way do not. Eventually, empty boxes do go back, but any economic incentive to optimize the return is lacking.
The upshot of all this is that this is not a problem elected officials will be able to solve easily or quickly. Calling out the National Guard is nonsensical. No one in the Army who can operate a container gantry isn’t already doing it in civilian life. And all the trucks in the National Guard couldn’t load the containers that go on one train.
Nothing here stems directly from any discretionary policy of either the Biden or Trump administrations, but most Americans firmly believe that presidents are responsible for every economic outcome. So the current one will have to take the heat if kids don’t find what they want under the Christmas tree.
St. Paul economist and writer Edward Lotterman can be reached at stpaul@edlotterman.com.
Real World Economics: Shipping container problem won’t be hauled away - TwinCities.com-Pioneer Press
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