Riling the Xenophobes to Tap the Federal Fisc

By Jock O’Connell

“The ocean carriers and marine terminals – which are mostly foreign-owned – are strangling exports by denying cargo and slowing shipments.”

That’s the incendiary claim lodged by the executive director of a national agricultural commodity group, who was responding to a CNBC report alleging that the shipping lines “rejected at least $1.3 billion in potential U.S. agricultural exports.”

Let’s set aside the fact that the CNBC report has been widely discredited by people who actually understand the rules of math and aren’t merely hungry for attention-grabbing headlines. The executive editor of the Journal of Commerce labeled the CNBC claim as “specious,” “hinged on a flawed premise,” and “unhelpful” to a serious discussion of the real issues at hand.

Given the political climate in this country and the marked upswing in racially-charged incidents in recent months, we should all be seeking to discourage such xenophobic rhetoric. But it’s probably only a matter of time before some hyperventilating politician stands before a television camera and tells the ocean carriers serving the nation’s seaports to “go home where they came from.”

Already, we have seen a flurry of letters to the Federal Maritime Commission demanding that the commission’s gumshoes be loosed on those pernicious foreigners who’ve been abusing our American exporters, most terribly all those farmers struggling to get their produce to overseas markets.

Regrettably but predictably, none of the petitions forwarded to the FMC quite get around to acknowledging that it’s the irrepressible demand of American consumers for imported merchandise that is dictating how the world’s shipping containers are being deployed. Blaming the foreigner, after all, is vastly preferable to chastising fellow Americans for wanting to buy stuff no longer made in the USA.

So do we really know, apart from the scattered crumbs of anecdotes that trade associations have been scattering before a largely credulous media? Before digging into the data, let me stipulate that I am not seeking to make light of those farmers (or, perhaps more precisely, their freight-forwarders) whose shipments – for one reason or another – have literally missed the boat. What I am interested in doing is bringing some perspective to a topic currently rife with histrionic hyperbole.

So, for starters, one thing we know is that the U.S. Department of Agriculture, which employs a small army of bean counters to keep tabs on the welfare of our farmers, tells us that the global sales of U.S. farm and food products last year was not only some seven percent higher than in 2019 but was also the second highest on record. Amazingly, all that food and fiber somehow made it to customers worldwide.

Another thing we know is that most of the nation’s farm export trade does not leave U.S. seaports in containers. Seaborne exports of soybeans, wheat, and corn last year amounted to 125.14 million metric tons, valued at just over $37.17 billion. How much of that trade traveled in containers? 6.71 million metric tons, a whopping 5.4% share. Exhibits A-C illustrate how little of the nation’s export trade in wheat, corn, and even soybeans relies on the availability of shipping containers.

So it would appear that a lot of the farmland fretting about metal boxes, especially in the states growing those amber waves of grain (and soybeans) we patriotically celebrate, has been for naught.

Some of the loudest laments lately cite the plight of apple growers in Washington State, who have been insisting they are being thwarted from getting their fruit onto outbound ships. U.S. trade statistics do show that apple exports through the Ports of Seattle and Tacoma between the usual start of harvest last September through January of this year (the latest available export numbers) were down from the same period a year earlier 18.0%.

But before anyone contends that that plunge constitutes prima facie evidence of ocean carriers discriminating against apple exporters, consider Exhibit D, which attests to the remarkable variability of the apple export trade through the NWSA ports over the past decade.

As the export manager at one major exporter of Washington State apples recently told Fresh Plaza, a magazine covering the fresh produce industry, “overall demand this season has been slower than usual.” Among other things, prices are said to be higher, which tends to suppress demand when large numbers of consumers are out of work due to pandemic lockdowns.

As for the matter of container availability, the executive pointed to a wrinkle in the eastbound transpacific trade that directly affects exporters of perishables. “In the past, dry goods would often be loaded into reefer containers to reposition them for export when they are here in the US, but reefer containers have less room than dry containers do. So, with imports being up, they are looking to ship as much product as they can and are using more dry containers so there just aren’t as many reefer containers being used right now.”

Let’s now look at how agricultural exports have been faring in the nation’s top farming state. That, of course, would be [drum roll, please] California, where total farm receipts are greater than runners-up Iowa and Nebraska combined. California is also the nation’s leading exporter of agricultural products.

According to the Agricultural Issues Center at the University of California at Davis, the state’s top five agricultural exports by value are almonds, pistachios, dairy products, wine, and walnuts. Together they account for just over half of the state’s agricultural export trade.

Unlike Midwestern wheat, corn, or even soybeans, California’s tree nuts, dairy products, and wine are all prime candidates for containerization. So if anyone’s exports are being afflicted by a conspiracy of foreign-owned shipping lines, these commodities should be prominent on the casualty list. So just how poorly have they been faring these past months of chaotic conditions at the docks?

The California Almond Board reports February exports were up 13,274 tons from a year ago, an increase of 19.3%. For the almond crop year which began last August, exports have been up 20.3%, an increase of 105,520 tons over the previous crop year.

The Administrative Committee for Pistachios reports February exports were up 788 tons from a year ago, an increase of 5.8%. For the pistachio crop year that began last September, exports have been up 32.9%, a gain of 17,437 tons from a year earlier.

The California Walnut Board reports February exports were up 6,923 tons from a year ago, an increase of 24.8%. For the Walnut Board’s marketing year which started last September, exports through February were up 19.2%, an increase of 54,207 tons from a year earlier.

Containerized dairy exports through California’s three major ports have been up 19.2% by tonnage since the start of the import surge last July, according to official U.S. trade statistics.

Containerized exports of California wines since last July have admittedly been down 2.3% from a year earlier, but then containerized wine has been an export trade of declining volume since 2013.

So where does this leave us?

There is every expectation that the congestion crisis at U.S. ports will significantly ease in the coming months. Making permanent policy decisions based on transitory circumstances is seldom a good idea. Worse still is leveraging those circumstances to tap the federal fisc for subsidies benefiting a narrow constituency.

It’s never a pretty sight to see pressure building for public policy decisions to be taken hastily on the strength of anecdotes rather than hard data. The potential for miscalculations with long-lasting consequences is all too real. Yet that seems to be where we may be heading here.

And what, we should ask, is the likelihood that aid directed to agricultural exporters won’t simply push up shipping rates for all outbound containers? And where would that eventually leave shippers of low-value merchandise such as scrap paper and metal, which dearly depend on cheap outbound rates to move their containers to overseas markets?

Standing on the dock, gazing dejectedly as someone else’s politically-preferred goods sail away is my guess.

Disclaimer: The views expressed in Jock’s commentaries are his own and may not reflect the positions of the Pacific Merchant Shipping Association.