the visible hand

it is the theory which decides what can be observed – einstein

Putting the port debate in context…

Posted by ecoshift on August 22, 2008

I’m posting this because I appreciate Lew Litzky’s effort to analyze the impact of changing global and regional economic conditions on local policy and development proposals. We need more analysis of local issues that takes accurate measure of the dynamic economic forces that will define which of our efforts will yield satisfactory results. Local policy debates are too often dominated by ideological assumptions free from any empirical or verifiable basis.

It’s true that the Washington consensus is breaking down and unmitigated support for open markets is no longer politically or economically justifiable. More nations are questioning the benefits of focusing on export markets as the only feasible development path. The recent failure of the WTO Doha round is evidence that Free Trade will face additional challenges in the future, both at home and abroad.

And it’s true rising energy costs change the calculus of global shipping.

And it’s true that the current US credit crisis and economic contraction spreading to the global economy as a whole will likely impact the volume of goods shipped in and out of US ports.

But, this crisis, including the spike in energy prices, is also part of a cyclical pattern. Will it be significant? Yes, it has the potential to be the most significant economic downcycle in our lifetimes. It could last several years or longer. Will the US find it difficult to compete with emerging economies for dwindling global (even domestic) market share? I think so. Will it result in an emphasis on alternative energy sources? With even T. Boone Pickens coming out with alternative energy plans I hope and expect that it will. Will it result in a permanent contraction in global trade over a period of decades? That’s a different question.

As recent weeks have shown economic contractions in other major global economies have reduced demand for and the price of crude oil. Concurrent with the emerging global recession and the falling price of oil the value of the dollar has surged. The surging dollar means US markets, even weaker US markets, will remain a target for exporting nations and US exports will continue to face challenging global (and domestic) market conditions… And, container barges will likely remain the pack mules of the global economy because they remain the cheapest method for moving products from place to place — relative to other alternatives.

While I doubt the redevelopment of the railroad through the Eel River canyon will ever be an economic alternative to expanding or increasing throughput at existing major ports in LA, SF, Portland and Seattle it may be worth looking at the relative cost of using container barges to move products in and out of Humboldt to major west coast ports. Not gearing up for full scale port development, but appropriate development scaled to meet local transportation needs and move product in and out of Humboldt at a reasonable price — relative to other alternatives.

PS: don’t skip the EIR.

Reject the marine terminal plan – Times-Standard Online
Lew Litzky/For the Times-Standard
Article Launched: 08/22/2008 01:27:19 AM PDT

This is in regard to the Redwood Marine Terminal Business Plan.

One of the choices for moving the project forward, Option B, calls for upgrading the terminal facilities and rebuilding the railroad to the Bay Area. If the Humboldt Bay Harbor, Recreation and Conservation District selects that option, publicly issued revenue bonds of $20 million to $30 million dollars will be issued to pay for upgrades to the existing terminal and port facilities. After those improvements are completed, investors will decide on the feasibility and profitability of rebuilding the railroad.

Before deciding to invest the hundreds of millions of dollars needed to rebuild the railroad, investors will want to be assured that globalization will continue to expand and that existing port facilities will be over their limit in cargo-handling abilities, necessitating port expansion into other areas like Humboldt Bay.

A recent front-page article in the Aug. 3 edition of the New York Times titled “Shipping Costs Start to Crimp Globalization” suggests a different emerging scenario. “Cheap oil, the lubricant of quick, inexpensive transportation links across the world, may not return anytime soon, upsetting the logic of diffuse global supply chains that treat geography as a footnote in the pursuit of lower wages. Rising concern about global warming, the reaction against lost jobs in rich countries, worries about food safety and security, and the collapse of world trade talks in Geneva last week also signal that political and environmental concerns may make the calculus of globalization far more complex.”

”The cost of shipping a 40-foot container from Shanghai to the United States has risen to $8,000, compared with $3,000 early in the decade according to a recent study of transportation costs. Big container ships, the pack mules of the 21st-century economy, have shaved their top speed by nearly 20 percent to save on fuel costs, substantially slowing shipping times.”

”Many economists argue that globalization will not shift into reverse even if oil prices continue their rising trend. But many see evidence that companies looking to keep prices low will have to move some production closer to consumers. Globe-spanning supply chains — Brazilian iron ore turned into Chinese steel used to make washing machines shipped to Long Beach, Calif., and then trucked to appliance stores in Chicago — make less sense today than they did a few years ago.”

What is all of this is saying? There is reasonable cause for doubt that globalization can continue expanding at a rate to justify building new port facilities such as the one in Humboldt Bay. Investors are savvy folks and will review changing world conditions before sinking the many hundreds of million dollars needed to rebuild the railroad. If they decide to walk away from the table, guess what? Taxpayers will be left holding the bag, paying off revenue bonds for an underutilized port facility. One more boondoggle!

Before it’s too late, tell the commissioners of the Humboldt Bay Harbor, Recreation and Conservation District to reject the Redwood Marine Terminal Business Plan.

Lew Litzky resides in Arcata.

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