Navigating Politics in the Era of Brinksmanship
By John McLaurin, President, Pacific Merchant Shipping Association
I was asked to address how ports can avoid being caught up in escalating policy disputes and high stakes disagreements.
Short answer – they can’t.
Unfortunately, conflict is now the nature of the beast. But before we conclude that the situation is hopeless, let’s understand what is wrong right now and what has to change to ensure ports are economic engines rather than political pawns, or worse yet, political causalities.
First, what’s wrong. Port commissioners in California and Washington are either appointed by a local mayor or elected to office. In addition, ports are hybrid creatures on multiple levels – they are local public entities essentially operating as businesses in a global competitive environment overseen by a governance structure that is inherently political.
And at least in California, port authorities and their commissioners can also have conflicting responsibilities and priorities given that they are local public agencies with local interests while also serving as trustees on behalf of the state of California.
In past years, the state trust responsibilities provided port commissioners with a shield to take positions that might have been counter to the wishes of City Hall. Today, however, those trust responsibilities have become a thin veneer that does little to repel local policy directives and funding schemes. Instead of being viewed as trade gateways whose benefits go way beyond the confines of the port, the role of some ports is being reduced to the immediate gratification of cash transfers to the local city partner. Often ignored or forgotten by local political or state entities is the fact that ports are part of an international goods movement system. Local or state actions and policy decisions affecting the ports can have ramifications on a worldwide basis.
And layered over these conflicting responsibilities, port politics have become vicious and personal. In recent years, some port commissioners were either removed or voluntarily left office because they refused to bend to the political will of those that placed them in office. In other situations, the trade community has witnessed very public disputes and feuds between commissioners.
The political gamesmanship now part of daily port life and governance has also resulted in altering the social compact that ports have had with their paying customers. The priorities of the ports have shifted away from those that pay the bills to those that shout the loudest or have the greatest political influence. And it comes at a time when ports, and their customers, face a number of very serious issues and challenges. These include:
Environmental stewardship and regulation
Gateway performance and service levels
Port finances
Automation
Data control
Land use and threats to maritime industrial properties
City and state political agendas
Responding to climate change
And overlaying all of these issues is the consolidation and evolution of the maritime industry – one in which private equity interests are beginning to displace traditional players – bringing new relationships, new priorities and objectives and less tolerance for impediments to financial success.
All of this chaos impacts a port authority’s relationship with its paying customers and causes friction between port commissioners and port staff. I attended a meeting held at a port recently in which port tenants, customers, labor and other waterfront interests loudly, and quite frankly, unfairly attacked port staff for the actions of the port commission. The collective feeling of the waterfront interest groups was that port staff had not done enough to protect the core business of the port – and were sacrificing it for the sake of a development project unrelated to the port’s primary mission - international trade. The feelings expressed at the meeting were that the port commission was acting at the whim of the local mayor as opposed for the good of the port. This level of animosity, if it continues to fester at this port, may result in a couple of things: loss of confidence in the port as a gateway – and possible loss of cargo volume and the associated revenue; the potential loss of good and qualified port staff; and an inability to attract talented people to work for a port authority or serve on a port commission.
On the West Coast we have experienced loss of market share to other North American ports. Whether you use the metric of TEU’s or cargo value, the loss of West Coast market share is well documented.
There are several factors involved in loss of market share. It ranges from a change in where goods are manufactured overseas; expansion, ease and availability of alternative gateways; West Coast labor strife; increased costs due to West Coast only environmental regulatory requirements; the absence or inadequate support of port gateways by state and local officials; and an overlay of an arrogance that cargo has to come through West Coast ports.
Just a few years ago, one of my Board members sent me the following message: “The value of commerce has to be overtly transparent and embraced by port authorities and their governing bodies, in the case of California, city councils. California has lost its balance, and frankly market share only remains because of deep water, not because the governing bodies welcome commerce.”
That comment is still valid today. Tenants and customers are now viewing their relationship with their port authorities and local governing bodies with concern – and with a view that ports no longer appreciate or value them. Port commissions also have a habit of creating their own adverse weather.
Whether elected or appointed by a local mayor, port commissions have been influenced, and on occasion, dominated by the desires of those seeking political advancement – creating internal conflict and strife amongst the commission and staff – along with alienating their customer base.
Port commissions have also been known to by-pass senior management and gone directly to port staff – creating conflict within the organization, including much publicized conflict among their fellow commissioners - creating a fair amount of concern for port customers.
Going even further than attempting to direct lower level staff, some port commissions have also discussed or actually hired their own staff, feeling that they either cannot trust staff or feel the need for independent analysis separate from core port staff. All of which leads to confusion for port customers as to who is in charge.
So switching from the negative and the challenges that ports face, a few words of advice on how to try to avoid conflict and disagreements and how to ensure balance in port decision-making:
Don’t forget that marine terminals and ocean carriers are your customers. A terminal lease will last longer than the tenure of any port director or port commissioner. Your terminal partner is investing in your port for the long term. Acknowledge that loyalty and the risk they are taking.
If you want to offer operational advice in order to improve cargo flow, look at the entire supply chain, not just the politically expedient partners or rely on anecdotal feedback from one segment of the supply chain. Effective logistical solutions are the collective responsibility of all.
Ports need to ensure their independence. To make it happen, ports need to better define the policies that will support the economic growth of their operations and invest the public in the benefits of those policies.
Port commissioners and directors have a pulpit. Use it. Present a vision. But do so exercising responsibility that is factually based and non-biased.
Ports need to make an effort to change the perception people have of ports and port related operations. Ports and their tenants on the West Coast have collectively spent billions of dollars to make environmental improvements and advance innovative technologies, resulting in impressive environmental benefits, but have received little in the way of credit or acknowledgment from regulators, elected officials or the public.
Finally,
Ports need broad-based third-party advocates to support their proposals. Existing organizations – or new ones – should take up arms in support of the ports.
In light of all of the regulatory, environmental and competitive challenges, coupled with the politics and ongoing threats to maritime industrial properties, I sarcastically asked a colleague a year or so ago if whether we would have ports in the future. His response was immediate, “Yes,” he replied. “We shall call them marinas.”
Hopefully the situation is not that dire. Ports generate good paying jobs, provide opportunities for millions, and are innovators both from a logistics and environmental standpoint, benefiting not only local communities but the world. The days of ports being hidden from view are over, but the acknowledgement and important role that our ports play remains to be fully recognized and appreciated.