Competitive issues remain despite ports’ aligned interests

Bill Virgin, June 14, 2015, The News Tribune

The Northwest Seaport Alliance isn’t a completely done deal, but scuttling it with all the official momentum behind it would be akin to attempting to turn a fully loaded container ship with a canoe.

 

The two port commissions have approved a draft agreement to be submitted to the Federal Maritime Commission. To date there’s no indication of organized opposition or that federal regulators would be inclined to reject the plan.

 

That would be followed, according to the official timeline, by separate commission votes this summer to officially set up the alliance. It seems unlikely that the ports, having traveled so far, would at that point stop and ask themselves, “Wait a minute. What did we just talk ourselves into? And why?”

 

Which is too bad, because the alliance as presented promises to do nothing in addressing the ports’ competitive pressures or in delivering benefits to two critical constituencies.

 

There’s nothing in this for shipping lines or shippers, for example. The ports have said this is not an exercise in cost or rate-cutting; They have said they want out of the game of cutting rates to win business from one another. As for reliability and efficiency of operations, the ports have been remarkably mum as to what the alliance might do to improve those. That may be because the recent West Coast labor dispute (about which many shippers who lost customers, markets and products are still seething) revealed the ports have little sway over how those facilities actually run.

 

Nor does the alliance promise much to the taxpayers subsidizing the ports, beyond some vague references to not duplicating one another’s investments in new facilities needed to handle ever-larger container ships. It is certainly not a good deal for the taxpayers of Pierce County, who are giving up the competitive advantages of their port (including developable land, better transportation access and cargo diversity) and tying its future to a seaport in a city whose officialdom is decidedly ambivalent about having it there.

 

The conspiratorial theory has been that the alliance provides political cover for Seattle to concentrate on the airport while devolving its seaport operations. That theory will be tested once the alliance is formed and decisions have to be made about Seattle’s Terminal 5 (currently serving as a temporary support base for Shell’s Alaskan drilling operations) and Terminal 46 (the one closest to downtown).

 

Here’s how that could play out: The alliance could decide to go ahead with rebuilding both, figuring it needs the capacity for all the trade it expects, and that it needs both Terminal 5 and whatever Tacoma builds to accommodate jumbo container ships.

 

Or as long as were tossing around crazy scenarios, how about this: The alliance goes ahead with Terminal 5, but once that’s completed the Port of Seattle, lured by the astronomical rents and property values to be created along the waterfront once the viaduct comes down, decides to convert Terminal 46 to development property, announcing, “What were we thinking? We love the arena idea. Chris Hansen, let’s talk.”

 

The alliance might want to put some or all of these items on its agenda, because the rest of the maritime world is moving ahead. For example: The Agricultural Trade Coalition, which was one of the most vocal critics of the West Coast trade dispute, recently issued a release about the introduction of two pieces of legislation in the U.S. Senate, one to collect metrics of port marine terminal productivity so that we can have an early warning system to know when terminals are ceasing to operate normally and when it may be time for the federal government to step in, the other giving governors the authority to invoke Taft-Hartley provisions in the event of a strike or lockout.

 

The latter may not be of much value if the governors aren’t inclined to intervene or if there is no declared strike or lockout, just a slowdown that each side can blame the other for (as was the case this time). The larger point, though, is that shippers don’t plan to passively wait for a repeat. The coalition says it is also meeting with the ports of Los Angeles and Long Beach to discuss ways to prevent more disruptions.

 

Here’s who else noticed what happened out here and would like to capitalize on it: The East and Gulf coast ports and the union representing workers there. The Wall Street Journal reported last week that preliminary talks have begun on a new contract, even though the current agreement doesn’t expire until September 2018. A prime motivation: Retaining the cargo and customers who diverted shipments from the West Coast during the dispute.

 

Those are just the latest additions to a growing list of issues and competitive threats the local ports face. The alliance may have a name and official authorization, but what it could really use, and at present doesn’t have, is a plan.

 

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