Since the end of World War 2, West Coast ports and docks have been controlled, literally, by the Communist Party—Harry Bridges (a proud card carrying Communist Party member) head of the dock workers union, or the unions. The workers, clients, consumers, government play second fiddle. It has harmed our imports and made our exports more expensive.
“Because of higher shipping and distributions expenses, toy makers Mattel and Hasbro are asking consumers to make up increased shipping expenses of up to $15,000 per container. For these companies, it is feared that not enough product will be available for the Christmas season to meet demand.
These increases especially affect California for which international commerce makes up a large portion of their economy. While the Walmart’s and Target’s of the world will be able to pass additional costs on to their customers, smaller companies may not have that option.
As an example, we have a small business, ABC located in Northern California. They bring in several containers of parts from China that are assembled and fabricated at their facility. This August, a shipment that normally cost $4500.00 per box, now runs $18,000. As a result it will cost an additional $27,000 to absorb the offset.
You have seen massive inflation—the ports and the import/export business—owned by unions, is a major factor.
California Ports: a neglected time bomb by Richard Eber
Richard Eber, Exclusive to the California Political News and Views 8/18/21
A time bomb is ticking away that threatens the economies of China, the United States, and literally the rest of the world. It’s called international shipping. Right now there is slow flow of cargo moving between the Far East and West Coast ports. What freight that is being lifted costs up to four and five times more than just a few months ago.
Signs of this are everywhere especially for businesses which import finished products and parts for the American market. Appliances such as refrigerators, TV’s, and washing machines have already climbed approximately 12% in the last half year. This price increase is expected to at least double by the end of the year.
Because of higher shipping and distributions expenses, toy makers Mattel and Hasbro are asking consumers to make up increased shipping expenses of up to $15,000 per container. For these companies, it is feared that not enough product will be available for the Christmas season to meet demand.
These increases especially affect California for which international commerce makes up a large portion of their economy. While the Walmart’s and Target’s of the world will be able to pass additional costs on to their customers, smaller companies may not have that option.
As an example, we have a small business, ABC located in Northern California. They bring in several containers of parts from China that are assembled and fabricated at their facility. This August, a shipment that normally cost $4500.00 per box, now runs $18,000. As a result it will cost an additional $27,000 to absorb the offset.
Rather than run up this bill, ABC intends not to offer the scooters to clients while lying off 3 workers. This figure is even higher when the multiplier effect of job loss is realized.
In addition to American companies and consumers suffering more inflation from higher freight costs, manufacturers in China are also taking a big hit. If one considers the effects of lower volume of production on exports they produce, this freight slowdown and rate hike might very well help collapse their entire economy.
The reasons for the slowdown in trade as the world tries to recover from Covid-19 epidemic are many. There is no one size fits all explanation of what has transpired and how things can be turned around. Factors to be considered include:
- An oligopoly of carriers involved with international commerce exist among the largest companies Maersk Line, Mediterranean Shipping (MSC), Hapag-Lloyd, CMA-CGM, and Cosco. Nowhere on this list can be found American Flag carriers. Except for domestic trades governed by the Jones Act, (Hawaii-Alaska-American territories) labor unions rendered American operated cargo ships virtually nonexistent years ago.
- A shortage of new containers exists because production has not ramped up very much after the Covid-19 slowdown in 2020. With almost all production of this commodity built in China, it is difficult for needed equipment to be produced in other locales. In addition a shortage of steel and higher price of materials being experienced in China, container supply in the near term is expected to be much less than demand.
- A slowdown in West Coast ports handling cargo. Ships lying in anchorage are indicative of this problem. The International Longshoreman’s & Warehouseman’s Union (ILWU) say that it is not their fault even though work rules make unloading large container vessels difficult. The Pacific Maritime Association (PMA) prefers to blame lack of truckers, warehousing facilities, and capacity on the rails, for the difficulties.
- The PMA is partially right as a lack of trucking capacity exists because many owner operators cannot afford new equipment that conforms to California’s pollution standards. Luckily Prop 5 was overturned in 2020 that devastated owner operator trucking rigs. Let’s see what happens if Gavin Newsom tries to legislate electric big rigs to pull loaded cargo containers?
- Railroad capacity at the ports has not increased to meet demand. A classic oligopoly exists there with rail mergers leaving only the Union Pacific and Burlington North Northern with direct access to the piers. No incentive exists on their part to increase capacity as this business is already profitable.
- Demand for storage facilities near ports continues to climb with little possibility for future growth existing. Unfortunately, constructing warehousing near ports is discouraged because of environmental concerns about causing more traffic and lower revenue from property taxes at the port.
Indicative of where things are going is a decision to be made by the City of Oakland to determine if the A’s Baseball team will have permission to build a new stadium on the water at Howard Terminal. The site would include shops, restaurants, businesses and residences similar to what surrounds the S. F. Giants facility across the Bay at Oracle Park.
What is decided by the City to develop the port or subsidize a professional sports team will play an important part in the cities future.
Help from Washington?
Even if President Biden or Congress determined that there must be upgrades made in improving the state of international shipping, it would be a difficult task to accomplish. There is so much to do.
On a Federal level a good place for them to start is incorporating improvements in ports, railroads, and on the highways, at and near congested shipping terminals. Making such upgrades might prove to be more important than providing free education, meals, and subsidized day care for the private sector; not to mention Sanctuary Cities assistance.
In California there is even more at stake because the import/export trade is so important, After Mexico and Canada, China is California’s 3rd largest trade partner. Taiwan and Hong Kong are also significant. Much of the Golden State’s prosperity depends on foreign trade. Thousands of jobs from fork lift drivers to Almond farmers depend on a steady flow of commerce to and from California ports.
By continuing construction of the Bullet Train, ignoring needed freeway expansion, tearing down dams, subsidizing little used mass transit systems, and frivolous social programs, the State Government in California has ignored performing needed infrastructure to guarantee future prosperity.
Just looking at the sad state of repairs on the highways, the economic time bomb for infrastructure improvements is ticking away faster than we might imagine.
