Any Port in a Storm?

Over the past few weeks, there’s been a fair amount of media furor over the slowdown in container traffic handling on the West Coast as dockworkers and shipping companies negotiated the new terms of a labor deal.

You no doubt heard a fair amount of hyper-ventilation about the economic consequences of disruptions to this international supply line. Unsurprisingly, the longshoremen’s union took maximum advantage of its leverage over workflow to drive a hard bargain with the shippers. This is a kind of kabuki show that is repeated whenever these multi-year contracts are up for renewal. And, as almost always happens, the two parties have come to an agreement, and ports, especially the Ports of Los Angeles and Long Beach are working quickly to move the backlogged traffic.

With the prospect of a new wider Panama Canal re-arranging the competitive environment for global shipping, many seacoast cities are giving new thought to how port traffic might influence their future growth prospects.  There’s little question that big “load-center” ports are hubs of commerce, where the economies of scale in shipping seem to be creating a winner-take-all situation.

But how big a deal is container traffic to the typical metropolitan economy? What if your city isn’t the big winner in the container traffic game?  That question is a very live one in Portland. Overshadowed by the furor generated by the coast-wide slowdown was an announcement earlier this month by Korean shipper Hanjin that it was terminating container service to the Port of Portland. Hanjin accounts for three-quarters of Portland’s container traffic.

In a new column in Oregon Business magazine, I examine the economic ramifications of the Portland’s loss of dock-side container service.

For a city whose first name is “port,” the loss of container service seems like an economic body blow. We are constantly being told that Oregon has a “trade-dependent” economy. How will we survive without this iconic connection to the global marketplace?

The answer will surprise you: Just fine.

You can read the rest at OregonBusiness.Com

There’s little doubt that container service is a highly visible icon of any city’s connections to the global economy. It’s the sort of thing that television reporters can stand up in front of a camera and tell visually compelling stories.

But for most city economies, dockside container service has little to do with whether they succeed or fail in the global economy. The ability of cities to compete hinges not on whether they can cheaply move bulk goods, but on whether they can create world-class products. Particularly in high-cost countries like the United States, firms compete on product differentiation and performance, not transportation cost. This is true of the high-value products of advanced industries: everything from commercial jets to computer chips. This is even more true for services–software, motion pictures, financial services–for which physical movement of product is essentially irrelevant.

As we move toward an increasingly intangible, innovation-driven economy, the old metaphors we use to visualize the economy are becoming a less useful guide to thinking about how the world works.