Where Did the Export Containers Go?
By Jock O’Connell
GDP = Consumption + Investment + Government Spending + Net Exports
That’s the basic formula for calculating gross domestic product, the measure by which nations (and states like California) are often ranked economically. For the past 33 years, the number for America’s “Net Exports” has been negative because the value of the goods and services (but chiefly goods) we import has far exceeded the value of goods and services we export.
Keep that in mind while I digress.
A few years ago, while addressing a business luncheon in the town of Firebaugh about the virtues of exporting, I was accosted by a woman who was much aggrieved at not being able to water her front lawn every day. Firebaugh is one of those small (2020 population: 8,090) agricultural communities that dot the landscape in Fresno County, America’s leading county in terms of the value of its agricultural output.
Farming is on every Firebaugh resident’s mind. So, understandably for a region perennially flirting with drought, is water. The challenge hurled at me from the back row was not therefore entirely unexpected: Why should California be growing a crop, over 70% of which is exported, that uses lavish amounts of the local water supply?
The questioner was referring to almonds, long California’s most valuable agricultural export and yet a commodity that reportedly slurps up an extravagant share of the San Joaquin Valley’s precious supply of irrigation water.
My answer that day was the answer economists have been giving since, well, forever: Exports – namely goods sold abroad or even in the next county over -- result in a transfer of wealth from buyers to sellers, from importers to exporters. Those shiny coins a Babylonian merchant paid for a mina of Egyptian grain increased Egypt’s supply of money, which could then be used to build imposing tombs or, more practically, to import wine from Sicily.
That’s also why, when determining a nation’s gross domestic product, modern accountants add the value of exports but subtract the value of imports.
Now, back before the nation’s seaports were swamped by a pandemic-induced surge in consumer imports and before the average American paid attention to our maritime trade, some economists valued seaports not just as gateways for imported merchandise but as vital conduits for exported goods. In the past few years, though, we seem to have acquired a mindset that prompts us to celebrate what we consume over what we produce. Especially as the COVID-19 plague gave rise to a flood of inbound TEUs, America’s mainstream media all but abandoned reporting on the trade that made us rich in favor of the trade that increased our indebtedness to the rest of the world.
To be sure, the business of exporting does periodically attract the attention of public officials and editorial writers, usually in times of economic turmoil. Recall that toward the end of the Great Recession, President Obama used the 2010 State of the Union message to announce a National Export Initiative to double U.S. exports in five years. More recently, there was that scuffle a couple of years ago over whether U.S. farm exports were being unfairly thwarted because shipping lines were accommodating America’s burgeoning demand for imported products by quickly repatriating empty containers to factories overseas. That episode, spurred in part by some amazingly bad data coupled with dubious math, led to congressional action to restrict the latitude shipping lines might otherwise enjoy in running their businesses.
However, contrary to popular memory, the volume of containerized shipments from most major U.S. ports had peaked in advance of the plague. Indeed, at the nation’s busiest container port, the Port of Los Angeles, outbound loads reached their zenith in 2012 at 2,159,949 TEUs, while the Port of Long Beach hit its highwater mark for outbound loads in 2013 at 1,704,924 TEUs. That same year saw the Port of Oakland record its all-time high in outbound loads at 1,014,792 TEUs. The Northwest Seaport Alliance reached its peak in 2016 at 984,481 TEUs.
Back East, the situation was more mixed, reflecting the rapid rise of containerized trade through Atlantic Coast ports following the opening of the expanded Panama Canal. Outbound loads at the Port of New York/New Jersey had topped out at 1,621,264 in 2011. The Port of Virginia achieved its best year for outbound loads just last year at 1,101,620. But even that was just a smidge over its previous high of 1,034,526 back in 2014. Savannah saw its highest level of containerized exports at 1,470, 372 on the eve of the pandemic in 2019. That was the same year in which the volume of outbound laden TEUs reached its all-time high at 816,962 at the Port of Charleston.
Along the Gulf, Port Houston has been the rare major U.S. port to have seen a near steady increase in its outbound loads, with last year seeing its highest volume ever at 1,888,004 TEUs. (Through the first half of this year, outbound loads from the Texas port are up by 14.4%.) At the other Gulf Coast port that makes its container statistics publicly available, outbound loads at the Port of New Orleans peaked at 254,320 TEUs in 2016. Last year, the port handled 230,906 outbound loads. In the first half of this year, the volume has jumped by 12.3%.
As Exhibits A and Exhibit B attest, the fall-off in containerized export tonnage has not been equitably distributed across the nation’s ports but has been especially pronounced along the West Coast.
The Port of LA, while reporting a 30.2% year-over-year uptick in outbound loads during the first seven months of this year, remained 15.8% below the export volume recorded in the same period in 2019 and 27.0% below the first seven months of 2012. Even with a 15.5% year-over-year bump in outbound loads in the first six months of this year, 33.1% fewer laden TEUs sailed from the Northwest Seaport Alliance Ports of Tacoma and Seattle than in the same period in 2016.
The decline of outbound loads from West Coast ports is clearly reflected in Exhibit B, which displays the shift in shares of the U.S. containerized export trade over the past two decades.
Exhibit C depicts the fall-off of outbound laden TEUs at the principal U.S. West Coast ports.
The Port of Oakland perhaps offers the most curious case of declining exports. For many years, the San Francisco Bay Area’s chief maritime trade gateway boasted that it routinely exported more than it imported, largely because its status as a last port-of-call for freighters leaving the U.S. gave shippers of agricultural commodities and other time-sensitive goods a faster path to Asian markets. However, as Exhibit D reveals, the preeminence of outbound loads at Oakland ended almost a decade ago.
To be sure, there has been an uptick this year’s traffic in outbound loads from USWC ports. But those year-over-year gains nonetheless left the ports well short of the volumes they had achieved five years ago. The Ports of Los Angeles and Long Beach collectively show a 7.1% year-over-year increase in outbound laden TEUs during the first seven months of this year. Yet that leaves the two ports 17.4% shy of the volume of outbound loads they handled during the same months in 2019. Similarly, the Port of Oakland reported a 12.2% year-over-year bump in outbound loads during this year’s first half. But that was 13.0% below the volume five years earlier. Meanwhile, the Northwest Seaport Alliance recorded a 15.5% year-over-year gain in outbound loads during the first half of this year that still left the Ports of Tacoma and Seattle 22.1% shy of the number of laden outbound TEUs they had shipped in the same months of 2019.
Maintaining that positive momentum in rebuilding the export trade from USWC ports will not be made any easier by tariff increases being imposed by the Biden administration, not to mention the more draconian tariffs being promised by the Republican presidential candidate. Recapturing the previous volumes of export TEUs from USWC ports will necessitate a truly herculean effort that does not appear to be the cards the ports have been dealt.
Jock's comments do not necessarily reflect the policies of the Pacific Merchant Shipping Association.