Squaring the “Four Corners Strategy”
By Jock O’Connell
From a West Coast perspective, one of the salutary benefits of the labor-management discord that recently threatened a catastrophic shutdown of U.S. ports from Texas to Maine is that it has at least momentarily stifled those maritime industry pundits who had long held up the hitherto harmonious relations between the International Longshoremen’s Union (ILA) and the U.S. Maritime Alliance (USMX) as the ideal model for waterfront labor relations. (The last ILA strike occurred in 1977.)
As these pundits were usually quick to point out, that long period of concord contrasted with the more fractious history on the West Coast between the International Longshore and Warehouse Union (ILWU) and the Pacific Maritime Association (PMA). The price of waterfront discord, it was widely reported, was measured in the steady inroads U.S. East Coast (USEC) and U.S. Gulf Coast (USGC) ports made in siphoning off larger and larger shares of the nation’s inbound container trade with the economies of East Asia.
Exhibit A displays what they are talking about.
Ironically, of course, last year’s bump in the USWC ports’ share of the inbound transpacific trade has been almost uniformly attributed to shippers’ fears that the ILA and USMX would fail to achieve a soft-landing in their contract negotiations. The prospect that commerce through East and Gulf Coast ports could suddenly be stymied for an indefinite period of time (the last ILA strike lasted 44 days) led to wholesale diversions of container traffic to Pacific Coast ports.
Fortunately, the two sides reached an agreement, and what passes for peace on the docks will reign for the next six years. The issue over which some are now focused is how much of their recently elevated share of the transpacific container trade USWC ports will be able to retain.
On the margins, some shippers may have found (or rediscovered) congenial logistics providers serving West Coast ports. For the most part, however, we should anticipate that elasticity will largely restore the status quo ante distribution of market shares where ILA-USMX ports will continue to eat away at the USWC ports’ market shares.
Up until last year, the steady gains in market share by East and Gulf Coast ports were commonly attributed to shippers’ embrace of what was largely a journalistic contrivance known as the “Four Corners Strategy” (FCS).
The FCS promised to better ensure the resilience of shippers’ supply chains, largely by diverting import containers away from the arguably less reliable ports on the West Coast. The concept gained prominence some two decades ago around the time of the “billion dollar-a-day” closure of the nation’s Pacific Coast ports in the fall of 2002. The five-month work slowdowns at USWC ports between October 2014 and February 2015 effectively made sure the FCS would be routinely cited at maritime trade conferences and in the nation’s press.
Remarkably, though, there was never much to the FCS other than a metaphorical talking point.
No one much bothered to move beyond the fact that its essential appeal had to do with the distribution of ports along the nation’s Atlantic and Pacific coastlines. (Barely 5% of America’s containerized trade passed through Gulf Coast ports at the time the FCS first became a fashionable go-to meme twenty years ago).
Especially troubling was that there was never any consensus about which ports belonged in which corner. Of course, no one doubted that the Ports of Los Angeles and Long Beach, the nation’s busiest container gateway, were a corner unto themselves. And most people probably assumed that the Ports of Seattle and Tacoma constituted another corner because, well, symmetry seemed to demand that the East and West Coasts should each have two corners(?). But did the Canadian Port of Vancouver belong in the same Pacific Northwest corner as the NWSA? And what about the Port of Oakland, whose status in the Four Corners scheme sometimes resembled that of a base runner caught in a run-down?
Similarly on the East Coast, was the Port of New York/New Jersey a corner all by itself or did it also encompass the Ports of Philadelphia and Baltimore?
There might be good reason to believe that the Ports of Norfolk, Charleston, and Savannah might constitute a separate Mid-Atlantic corner, but where did that leave Florida’s East Coast ports?
And, if the West and East Coasts are both allotted two corners, what about the fast-emerging Port Houston and other Gulf Coast ports like Mobile and New Orleans? And how, for that matter, do we acknowledge the Great Lakes ports served by the St. Lawrence Seaway?
For professionals actually engaged in supply chain management or in logistical planning, the vague, if not vacuous outlines of the much-touted FCS seemed to offer little guidance. Yet, for public officials and reporters covering the waterfront, it became a handy synonym for diversification.
Confusion over which ports belonged to which corner was less of an issue than the fact that this artificial geographic construct was poorly aligned with the actual distribution of the nation’s consumer and industrial end-markets as well as the massive investments that were being made in upgrading the maritime infrastructure along the East and Gulf Coasts.
Back in 2003, 46.2% of all containerized tonnage that entered U.S. mainland ports originated in the Far East. With the emergence of China as an exporting power following its accession to the World Trade Organization in December 2001, The East Asia trade was clearly shaping up to be the maritime version of the Oklahoma Land Rush.
Yet U.S. ports were ill-prepared for the rapid pace of growth in Asian imports. West Coast ports held a dual advantage over their rivals elsewhere in the country. They were the closest American ports to Asia, and decades of supporting American military operations in the Pacific bequeathed to them much of the physical infrastructure needed to handle enormous volumes of cargo. The chief disadvantage of West Coast ports was that they were at least a half-continent away from the population and industrial centers of the United States.
By contrast, East coast ports enjoyed proximity to those markets but were largely geared to serving the nation’s more mature transatlantic trade, which then accounted for just 20.8% of all U.S. containerized imports. To grab bigger shares of the burgeoning transpacific trade, these ports would have to invest billions in dredging channels and anchorages while expanding wharfage and buying newer, taller cranes. Unlike their West Coast peers, they benefited from staunchly pro-business political leaders who found the federal, state, and local funds to finance the ambitions of their states’ ports. (That the Panamanians chipped in with a more capacious set of locks in 2016 certainly helped facilitate the aspirations of East and Gulf Coast ports.)
For much of the past year, the word “diversion” has more commonly been used – often in conjunction with the word “pendulum” -- to describe the shift of container traffic away from the contract uncertainties at ILA-USMX ports to maritime gateways on the Pacific Coast as shippers feared a closure of ports along the East and Gulf Coasts.
Exhibit B offers a month-by-month view of that shift from the fall of 2023, when shippers began to doubt a quick resolution of contract talks between the ILA and USMX, and the latest month for which statistics are available.
Observers unfamiliar with the concept of elasticity have been pondering whether West Coast ports will be able to retain some portion of their recently inflated shares of the inbound transpacific trade. Exhibit C does not provide much nourishment for that expectation.
Any discussion of the competitiveness of U.S. ports should address the question of how well USWC ports have been doing with the nation’s major maritime trades aside from its trade with East Asia, such as those with Europe, Latin America, and South Asia.
The following three exhibits depict the USWC and USEC/USGC ports’ respective shares of those trades. If nothing else, the trend lines in these charts do not sustain the expectation that USWC ports will enjoy a broad market share renaissance as a result of the past year’s worries about labor-management relations at the nation’s East and Gulf Coast ports.
The commentary, views, and opinions expressed by Jock O’Connell are his own and do not reflect the views or positions of the Pacific Merchant Shipping Association. PMSA does not endorse, support, or make any representations regarding the content provided by any third party commentator.