HIGHLIGHTS
- American seaports operate inefficiently.
- Automation can ease congestion, boost economic growth and lower consumer prices.
FULL ARTICLE
Last week, about 200,000 containers were stranded on ships moored outside the Port of Los Angeles. Seaports on the East Coast of the United States are facing a similar situation. Delays at ports have had dire consequences such as retailers face shortages, manufacturers have slowed production, goods have spoiled, and exporters have lost customers.
Obviously, port congestion is not the whole cause. As the pandemic ebbed, consumer demand for goods soared. Imports surged and warehouses filled up. Labor shortages put trucking and rail networks under stress. As bottlenecks proliferated throughout the economy, ports bore the brunt.
Seaports in the United States have exposed serious shortcomings. Not a single port made the top 50 of the Container Port Performance Index last year, which was published by the World Bank and IHS Markit. It is estimated that shipping a container off the ship in Los Angeles takes twice as long as it does in Shanghai. While Asian ports typically operate 24/7 (or 168 hours/week), many ports in the United States operate only 112 hours/week.
What is the reason for this situation?
The key factor is the workforce. Trade unions represent seafarers who have been active in promoting the interests of their members. The median salary is $182,000 a year for shipbuilders in West Coast ports, much higher for foremen, prompting harbor operators to limit working hours to avoid overtime. Fearing that jobs could disappear or that instead of working in ports, they would work in offices for many times lower wages, unions have joined together against automation in ports.
Automation has enormous potential. According to a study by McKinsey & Co. shows that, if taken seriously and carefully, the automation of seaports can reduce operating costs by up to 55% and increase productivity by up to 35%. In the short term, many human jobs will be replaced by machines and jobs will be lost. However, in the long term, technology and automation will create more jobs.
President Joe Biden’s plan is to have US West Coast ports open 24/7, which is actually a short-term pilot program and has nothing to do with technology; the port simply agreed to pay overtime. One provision in the infrastructure bill that Congress is debating is a $3.5 billion investment proposal to invest in zero-emission technology at ports, specifically prohibiting investment in automation. This is a pity when the benefits of technological innovation are so obvious, from vaccines and batteries to reusable rockets and more.
Even after the current crisis subsides, the shipping trade is expected to continue growing for decades. By 2040, according to a forecast commissioned by the ports of Los Angeles and Long Beach, regional container traffic could reach 41.1 million 20-foot equivalent units, up from 17.3 TEU at the complex last year.
State and federal policymakers should take this year’s terrifying bottlenecks as a warning sign. Investing in automation should be one of the top priorities. Ports can also help standardize the data they collect and share that data with other actors in the supply chain.
Hong Dao
FURTHER READING
When Container Ship Crisis in the US indicated problems of global supply chain
