U.S. Seaports: At the Crossroads of the Global Economy
Shallow, congested, and technologically lagging, U.S. seaports need a major overhaul to preserve U.S. strength in international trade.
U.S. seaports are showing signs of neglect, a disturbing prospect as the nation competes in an increasingly dynamic global economy. Many aspects of port infrastructure and management are relics from mid-century. And while ports throughout Europe and Asia are becoming more modern and productive, many U.S. ports will soon become obsolete in the absence of significant upgrading and investment. Since the movement of freight by sea is expected to triple by the year 2020, this is indeed a troubling scenario.
Many U.S. ports are cramped for space, with narrow navigation channels, shallow harbors, and congested truck and rail access routes. For example, the harbor at Newark, New Jersey, is so shallow outside the dredged channel and so prone to siltation that very large ships must unload part of their cargo in Nova Scotia or elsewhere, thereby raising shipping costs and putting the port at a competitive disadvantage. Maintenance and expansion of navigation channels often is impeded by delays in the granting of permits, a complex web of environmental regulations, and disagreements about how to dispose of dredged material. As a case in point, it took the Port of Oakland 20 years to begin the first phase of a channel-deepening project.
Meanwhile, the size of cargo ships has increased considerably. Large oil tankers long ago outstripped the capacity of all ports on the East Coast and along the Gulf of Mexico, and many shipping terminals are finding it increasingly difficult to handle large container ships in competitive time. Port development is slow, frustrated by high costs and budget cutbacks at all levels of government, and the waterways-management infrastructure generally lags available technology.
Contrast these conditions with those in Rotterdam, the Netherlands, one of the most sophisticated seaports in the world. The channel is 50 feet deep, large enough for megacarriers that have yet to be built. An elaborate waterways-management system tracks vessels and provides a running commentary on traffic, reducing disruptions significantly. Cargo handling is highly automated–state-of-the-art pierside cranes load or unload 30 containers per hour, robot stacking cranes dot the container yard, and truckers move containers in and out of the terminal quickly. Although the average U.S. port’s average of 28.5 containers per hour may seem roughly equivalent, fractional differences in productivity can have major economic consequences over time. Or consider the new container facility planned for Japan’s Port of Yokohama. To be built on 535 acres reclaimed from Tokyo Bay, the port will include vessel berths that are more than 49 feet deep, a modern container terminal allotted 138 acres, and ample storage and distribution areas and access roads.
Although specific projections of economic losses have not been made, failure to modernize U.S. ports is likely to result in substantial losses of American jobs and in increases in the price of goods transported. Some industry officials predict dire consequences, such as the development of huge ports in neighboring nations that draw shipping away from the United States and impose significant time and cost penalties on U.S. imports and exports. The impact of losing such critical transportation routes might be imagined by visualizing American life without the interstate highway system.
The importance of ports
Foreign trade helps drive economic growth. This is particularly true in the United States, which leads all nations in value of imports and exports. The value of U.S. imports and exports of commodities was almost $1.2 trillion in 1994, and exports constitute a growing proportion of the gross domestic product (GDP). Both foreign and domestic commerce rely on ports and waterways, which handle almost all U.S. trade by weight and about half by value. Waterborne transportation of all commodities totals over 2 billion metric tons, about half domestic trade and half international.
The U.S. waterways transportation system includes about 145 ports that each handle more than 1 million metric tons of cargo annually. The top ten ports handle a total of more than 900 million metric tons annually. The burden on ports is expected to mount in the near future as foreign trade soars. Beyond supporting commerce, major ports and their smaller counterparts provide many tangible benefits to their communities. The port industry and port users generate more than 15 million jobs and add some $780 billion to the GDP annually. Port-generated economic activities include shipping and related enterprises, trade services, inland transportation, and cargo and vessel services.
These benefits, although large, may be overlooked by those who usually pay for port improvements. Much of the economic value generated is national in scope, whereas ports traditionally have depended on state and local governments for financial and planning support. This mismatch has become a growing problem amid budget shortfalls confronting state and local officials, some of whom are cutting port subsidies and, at the extreme, even asking for a share of port revenues.
Other benefits provided by ports are intangible. Because of their waterfront locationsports sustain biological diversity, create economic vitality, and enhance the general quality of life. Newark Bay, for example, is home to wildlife, a fishery nursery, and numerous water-dependent industries. Other ports, such as Baltimore and Boston, have provided their cities with significant revenues from waterfront developments that attract tourists.
Thus, stakeholders in the future of U.S. ports are diverse. A number of federal agencies have relevant responsibilities, including such activities as ensuring maritime safety and enforcing environmental regulations. Commercial stakeholders are legion, and include waterfront industries, manufacturers of all types, and commodities brokers. State and local governments traditionally have depended on ports to stimulate regional development. The public enjoys boating and various waterfront activities and is interested in protecting the coastal environment.
This diversity in port activities and stakeholders means that decisions about a port and its future must be made in the context of competing uses. If waterfront property is allotted to condominiums, then industrial sites will be lost. Allow industrial wastes to be discharged into the water, and the port’s capability to maintain dredged channels is limited by the difficulty of disposing of contaminated sediments. Site a marina in the industrial port, and the waterway may become overcrowded with recreational boats, precipitating congestion and safety problems. These considerations serve to complicate an increasingly urgent need for strategic port planning.
The need to modernize
Two primary factors demand attention to ports at this time. The first is the rapidly changing intermodal freight transportation market, which moves increasing amounts of cargo on ever-more-demanding schedules. This market has fueled a trend toward larger and faster ships that make precisely timed and efficient port connections in order to achieve maximum cost-effectiveness and competitiveness. The survival of a general cargo port therefore depends on its capability to receive and transfer goods as quickly as possible. The second factor demanding attention is the increasing number and complexity of environmental regulations that pertain to ports. Although enacted for important reasons, such regulations are nonetheless inhibiting maintenance and growth of ports at a time when modernization is needed. These factors are examined in more detail below:
Intermodal transportation. Freight often is transferred among sea, land, and air carriers. The expansion of this “intermodalism” in the 1980s can be traced to the emergence of railcars double-stacked with containers, which carry the greatest number of revenue loads for a given train length and therefore save fuel and labor costs. These containers are often moved between rail yards and the waterfront by truck. The challenge for marine terminals is to handle these heavy loads quickly, allowing both the seagoing and land-based modes of transportation to maintain their tight schedules. This means that if a ship, train, or truck is running even a few hours late, the connection at the marine terminal may be missed.
Achieving high throughput of freight is no simple matter. Unbelievable as it may seem, the queuing and unloading of container ships carrying goods from Asia through Puget Sound is influenced by rush-hour train schedules in Chicago. (Double-stack trains cannot pass through that city at rush hour, when commuter trains have priority.) Road and rail access to ports is a major problem nationally. A 1991 survey found that half of public ports, and nearly two-thirds of container ports, faced growing traffic congestion on local truck routes. For about one-third of container ports, bridges and tunnels lacked sufficient clearance for double-stack trains. And the problems can cut both ways: Almost half of ports reported that feeder rail lines crossed local streets, meaning that the long trains prized for efficiency can frequently tie up traffic.
Throughput can be enhanced by improving road and rail connections to ports and installing high-capacity container cranes and various types of automated cargo handling systems. Such improvements have been implemented or are planned at many U.S. ports, particularly on the West Coast where navigation channels generally are deeper than those in other areas. The Port of Tacoma, Washington, a leading container port, already has on-dock train depots, and similar facilities are under development in Los Angeles. Private investment is contributing significantly to modernization efforts. Major shipping companies, for example, can be counted on to install the latest automated cranes and electronic cargo-tracking systems at terminals they own or lease. One private terminal in New Orleans can move 37 containers an hour. Indeed, private investment in shoreside terminals is estimated to be twice the amount of public investment.
There is also a need to deepen and widen channels to accommodate the new generations of larger cargo ships. Ships that can carry 6,000 container units are already plying the seas, and 8,000-unit ships are planned. The draft of these ships is about 13 to 14 meters (about 43 to 46 feet), and their maximum beam is about 40 meters. Water depths in most Eastern and Southern ports currently prohibit passage by ships that draw about 40 feet. Although this limitation can be overcome by unloading part of the cargo offshore, operating vessels at reduced speeds or only at high tide, these are only partial and short-term solutions at best.
Similarly, ultrafast moderate-size cargo ships are being designed, creating a need for new docking facilities. Ships that can maintain 40 knots even in heavy seas will cut transit times across the Atlantic Ocean from eight days to four, and by connecting through special terminals, they will cut door-to-door cargo transit times from several weeks to one week. Such high-value transportation options aid business inventory control and customer service and will create market advantages in the automotive, chemical, and other industries.
Yet another factor that influences port productivity is its information infrastructure. The private sector is implementing many of its own cargo-tracking and other information technologies, and companies are working together to develop communal systems to automate customs, process commercial transactions, and improve document collection. The federal government, however, is finding it more difficult to carry out its traditional responsibility for managing traffic on waterways. Shipping efficiency can be enhanced through the use of technologies that track vessels and manage traffic flow and by improving systems for collecting and disseminating real-time data on tides, currents, and other environmental conditions. Indeed, ample technology is available that can help avert accidents and optimize traffic flow, but capital and operating funds have proved scarce. European ports have invested heavily in these shore-based surveillance and communications systems, but U.S. investments have lagged. For example, there is a pressing need to resurvey an estimated 43,000 square nautical miles of harbor areas outside navigation channels in order to provide accurate hydrographic data for updated charts. However, the National Oceanic and Atmospheric Administration (NOAA) lacks the funds to tackle this job, and funds are limited for port-specific installation and operation of a NOAA system to provide environmental data in a timely manner.
In summary, efficient intermodal transfer capabilities are seen as vital to the continuing success–perhaps even the existence–of U.S. ports. And competition for this business is intense, with shippers often choosing their routes based on a port’s intermodal transfer capabilities. As some ports modernize, they attract more business. One result has been concentration of cargo at the most competitive facilities, known as “load center” ports, and an uncertain future for lesser rivals. Of course, the decline of weaker ports is inevitable and not necessarily bad for the nation as a whole (even though there may be severe repercussions on regional economies), because a reduced number of highly competitive ports is preferable to retaining many inefficient ones. However, strategic planning is needed to ensure that the right capabilities are developed and maintained at appropriate locations. This can enable some ports to thrive in spite of inherent limitations.
The Port of Baltimore, for example, has taken a realistic and workable approach to strategic planning. Port officials noted that the port’s relatively shallow approaches may put it at a competitive disadvantage in the container market, given current trends in the industry and the dominance of its nearest competitors, New York and Norfolk, Va. Therefore, in addition to making efforts to sustain container trade, port officials plan to focus on building existing niche markets in noncontainerized goods, including “roll on/roll off” commodities, such as cars. The port’s goals for the next three to five years include becoming the largest roll on/roll off and automobile port on the Eastern seaboard.
Environmental regulation. The recent increase in environmental regulations, from all levels of government, stems from the recognized and growing need for coastal protection. At least ten major federal environmental laws as well as myriad amendments and other requirements affect the port industry. To comply, ports must expend considerable staff time and resources.
One major issue is dredging. Most U.S. ports require periodic and sometimes constant dredging to maintain shipping channels at the authorized depths. All the materials dredged, about 280 million cubic yards annually, must be disposed of or reused in some way. Clean material may be deposited in the ocean or put to beneficial uses, such as for the creation of offshore islands. But roughly 5 to 10 percent of dredged material is considered contaminated and requires special handling, such as permanent containment or costly treatment. It can take years to resolve all dredging and disposal issues and obtain the requisite permits, with the result that channel maintenance and deepening are seldom timely or cost-effective. Dredging permits for the Port of Newark, for example, were delayed for three years amid controversy over disposal of sediments that contained traces of dioxin, a chemical that has been linked to cancer and other health problems. Improving processes for making decisions, undertaking consensus building among stakeholders, and implementing technological advances will help resolve some of these issues. But in the meantime, steps must be taken to upgrade ports to a level that will sustain U.S. economic growth in the coming years.
The need for ports to deal with cargo spills and other shipping-related pollution creates additional environmental concerns. These challenges can be considerable. As but one example, the petrochemical industry relies heavily on waterborne trade, and the industry has expanded greatly in recent decades. The United States now imports more than half of the oil it consumes, and U.S. ports receive by water about 1.4 million metric tons of crude oil and petroleum products each day (some from Alaska, but most from foreign sources). Accompanying this growth in the petroleum trade has been continuous waterfront development; for example, the largest petrochemical complex in the world is now located along the Gulf of Mexico. With this expansion has come increases in pollution, sometimes in dramatic fashion, as with massive oil spills, but more often in more subtle but no less threatening ways.
Faced with these and numerous other environmental concerns, many ports are finding it increasingly expensive and difficult to dredge channels, manage wastes, respond to spills of oil and hazardous substances, control air emissions, and comply with wetlands and endangered-species legislation. Unfortunately, these growing demands come at a time when port resources are dwindling due to cutbacks in subsidies from state and local governments. Many smaller ports lack the resources and technical expertise to address environmental issues adequately, further evidence of the need for port-specific strategic planning as well as expanded attention to these problems on the national scale.
Toward a coordinated plan
Modernizing U.S. ports will require a coordinated effort on many fronts. The first step is to ensure that all parties recognize the scope of the problems. This can be accomplished by instituting a national dialogue on the future of the nation’s ports. While the decentralized nature of U.S. port management virtually precludes conducting a comprehensive upgrade program on a nationwide scale, this national dialogue can help all parties learn together and perhaps identify some common goals and approaches. The timing for such a dialogue may be appropriate, given the spirited political attention being focused on the nation’s economy and international competitiveness, issues that are intertwined with the status of U.S. ports.
Once the dialogue is under way, the real challenge will be to begin implementing solutions. Two possible approaches, conceived as a package, are identified here. These proposals are described in concept only, recognizing that more detailed plans will need to be developed on a port-specific basis.
New ports. The need for new, deeper ports was recognized more than 10 years ago in a National Research Council (NRC) study, which concluded that the United States should develop the capability on all three of its coasts to handle large ships efficiently. The authors determined that given the length of the nation’s coastlines, there was a need to have deep-water “superports” at two locations on the East Coast, two on the West Coast, and one on the Gulf of Mexico. The study also concluded that the nation’s lack of flexibility to respond to new developments in maritime trade was placing a critical limitation on future competitiveness. This problem remains; indeed, it is becoming even more pressing. Strategically planned port construction and upgrades would provide the needed flexibility. Such projects will have to be implemented soon, because expanding port capacity is a long-term job, and numerous other nations are far ahead in this quest.
Although the cost of building a new port will be steep–in some cases, the price tag may run into the billions of dollars–there are now ways to make such projects more affordable. For example, it is no longer necessary to locate ports in densely populated areas, where land is the most expensive and there are many competing demands for space, access, or even the view. All that is needed is adequate water depth, easy sea access, ample shoreside space for marshaling cargo, and efficient access to land transportation. Perhaps deep-water berms could be built a short distance from shore, and these berms could be served by innovative rapid transit systems to move containers from ships to shoreside marshaling areas. (Japan, which has developed varied uses for reclaimed coastal land and for artificial islands, has been constructing port facilities offshore for decades.) A strategy especially suited to petroleum and other bulk liquid cargoes would be to construct deep-water ports many miles off the coast. This approach is exemplified by the Louisiana Offshore Oil Port, which was built some 18 miles away from land; huge tankers can easily dock at the port and unload their petroleum, which is then transported by pipeline to onshore facilities.
Construction of offshore artificial islands may be the only solution for the Ports of Los Angeles and Long Beach, which are running out of land but are faced with a projected doubling in cargo shipping (by weight) by the year 2020. The ports plan to use landfill to construct 2,500 acres of artificial islands in Sad Pedro Bay. The new islands will be large enough to accommodate 38 state-of-the-art shipping terminals. The ports also plan to build 50 new berths and miles of new navigation channels up to 85 feet deep. Project 2020, as this effort is called, is expected to cost $4.8 billion. But this cost will be less than one year’s projected revenues from the two ports in 2020, according to trade forecasts. This project may serve as a model of sorts for other ports, in that it reflects innovative planning tailored to local port conditions and needs.
Just as costs will vary according to each project, the funding sources for building and improving ports and terminals will likely vary. Some deep-water ports, such as offshore terminals for oil tankers, might be profit-making ventures privately owned by shipping companies. Other facilities, such as new industrial islands built at the entrances to port complexes, might be publicly financed under the auspices of existing port authorities.
Regional planning for port needs. Although building new ports would improve shipping access to the United States, different tactics are needed to improve road and rail access to ports in order to enhance the efficiency of vessel movements. Making the necessary improvements will require regional planning that takes port needs into account. One barrier that has typically stood in the way of such regional planning, however, is that state and local government officials have tended to be more interested in highway and mass transit improvements than in port access.
In addition to addressing road and rail access problems, regional planners will need to look for ways to improve waterways management capabilities. There is a barrier here, too. Although waterways management has traditionally been a federal responsibility, federal funds for this task are tight and becoming tighter. This budget shortfall is likely to frustrate the Coast Guard and NOAA in their efforts to undertake the necessary improvement projects. Furthermore, political pressure to transfer federal responsibilities to state and local levels suggests that new approaches to technology selection, purchasing, and operation are needed. Because few ports can afford to install and operate waterways-management systems on their own, regional planning groups might be better positioned to undertake the scale of solutions required for modernization. Of course, these groups should work in cooperation with the appropriate federal agencies, particularly the Coast Guard, which is responsible for port safety and maritime law enforcement, among its other missions.
Hopes for improving road and rail access to ports nationwide were raised in 1991 when Congress passed the Intermodal Surface Transportation Efficiency Act (ISTEA). The ISTEA marked the first time that federal transportation policy explicitly recognized intermodal connections as an important topic for planning and infrastructure investments. This act did catalyze some progress. For example, some metropolitan planning organizations did begin to recognize the importance of intermodal access and freight transport. But by and large, funding and the development of strategic guidelines generally continued to be focused on traditional highway and transit projects, which has made it difficult for ports to compete for investments.
The ISTEA is up for reauthorization by Congress in 1997, which will provide an opportunity to draw attention to port needs. More regional planning and transportation officials need to be convinced of the importance of intermodal freight transport and of the corresponding need to improve road and rail access to ports. A recent NRC study recommended that incentives be provided to state and local governments to ensure that port access needs are considered fairly and thoroughly along with competing demands and to encourage long-range planning.
Such incentives might be provided through an initiative modeled on the federal Coastal Zone Management (CZM) Program, which was authorized by Congress in 1972. This is a voluntary, incentive-based program. It rests on the premise that there is a national interest in managing the nation’s coastal zones but that states have jurisdiction over their land and therefore should assume the lead as coastal zone managers. The program satisfies federal and state interests: The federal government provides matching funds to assist states in developing and implementing coastal zone management programs while at the same time promising that federal activities will be consistent with a state program once it has been federally approved.
This effort has been successful to the extent that most eligible states and territories have completed CZM programs that combine to cover 94 percent of the U.S. coastline. A 1994 NOAA report found that the federal-state partnership is producing measurable beneficial changes in the management of coastal resources. Some reviews, however, have been less enthusiastic, describing the results of state programs as uneven and identifying problems with implementation, enforcement, and conflict resolution.
But even if the CZM program has proved imperfect,a voluntary, incentive-based approach to strategic planning is considered by many observers to be an important means of fostering port development. Now, Congress should establish a formal national interest in maintaining safe and efficient ports and waterways, and then buttress this interest by offering funding incentives to state and local governments that develop and implement realistic port upgrade plans. This approach would be consistent with the decentralized management structure that characterizes U.S. ports while also encouraging attention to the national economic interest in port modernization.
As regional planning groups come to focus on ports, it is hoped that the groups will be granted increased access to established forms of federal and state funding as they develop coordinated efforts to modernize ports. Still, new funding sources will probably have to be established as well. As one possible model, in 1993 California created the Maritime Infrastructure Bank as a funding mechanism for the development of port facilities. The bank can make and issue bonds, guarantee loans and make and accept grants. Other states, such as Maryland and Louisiana, have set up special trust funds to increase the ability of state agencies to respond to intermodal transportation problems. And in some areas, such as the Los Angeles-Long Beach port complex, public-private partnerships have emerged to provide funding and operating solutions to problems facing private waterways-management systems (which operate in cooperation with the Coast Guard). This partnership concept is a promising way of fostering consensus and distributing costs. The development of such partnerships will require strong leadership at the local level, which might be provided by a port authority, harbor safety committee, or some other group that seizes the opportunity. Indeed, the emergence of local groups interested in port issues may be encouraged by the hoped-for increase in availability of federal planning grants.
Avoiding a stormy future
Following this general blueprint, filling in the necessary details and putting the plans into practice, will require efforts on many levels–public and private, spread across many agencies and organizations. Indeed, port modernization is too important to the national interest to be left to the whims of any single agency or group.
Of course, not every port can become a superport. But smaller ports in key locations will also benefit greatly from modernization, becoming efficient “feeder” ports by developing superior terminals and inland access routes. The challenge is to develop incentives for all types of port improvements nationwide without sacrificing the tradition of state and local control. The key–stated previously but deserving repetition–will be realistic strategic planning. Failing such planning, the nation’s ports face stormy weather ahead.
Ideally, port modernization will also help address a number of environmental concerns and protect the interests of other stakeholders. For example, the construction of offshore oil ports would keep large tankers, and potential oil spills, away from the coasts. The construction of ports on offshore artificial islands would help reduce concerns about how to manage dredged material, since huge quantities of sediment could be used in building the islands themselves and the islands’ offshore location would reduce the need for maintenance dredging. For municipalities, the development of dedicated truck and rail corridors to serve ports would help to relieve traffic congestion, and the increased business attracted by more efficient ports would create numerous permanent jobs locally. Balancing these various issues can be achieved as port stakeholders organize to resolve mutual concerns and ensure that maritime issues are considered in regional planning and economic development efforts. In this way, U.S. ports could be transformed into the transportation superhighways needed in the 21st century. The process needs to begin now.