As part of an effort to unblock our logistics, the president is urging the Port of Los Angeles, one of the largest in the country, to operate 24 hours a day, 7 days a week. That’s good news, even if that might get most people to stop and think, “Wait a minute, aren’t our ports already operating 24 hours a day?” ”
No, which is a testament to the thick layer of irrationality that engulfs our supply chain. It’s beyond one person’s power to change this anytime soon, but trying to remove as much of this clutter as possible should be a national priority.
We are experiencing the worst supply chain disruption since the advent of the shipping container era in the late 1950s, driven, deep down, by the pandemic. A boom in e-commerce, coupled with a labor shortage, has helped create the conditions for a series of spiraling bottlenecks.
Ships wait at idle to unload their cargo in ports, while containers wait in ports to be shipped further inland, while cargo waits outside full warehouses on chassis that are no longer inland. not available to pick up other containers, and so on. In theory, there are a lot of ships, trucks, and other capacity to handle the volume, but not if much of that capacity is tied up and frozen in place.
So the challenge here should not be underestimated. Everyone at every step of the American supply chain is pointing the finger at each other, and everyone deserves a blame, whether it is the ports, the truckers, the warehouses, the railroads or others.
Yet the situation also shows how, as Scott Lincicome of the Cato Institute convincingly argues, our logistics system is beset by silly policies and practices that make it extremely inefficient. There is a tendency in the political debate on infrastructure to assume that more – and more spending, in particular – is better, but how you use what you already have matters.
Consider our ports. The American installations are far from the most efficient installations in the world. They are generally less automated and less efficient than those in other advanced economies. For example, it takes on average twice as long to move a container from a large ship at the Port of Los Angeles than at major ports in China. Ports in Asia operate 24 hours a day, at the factory round-the-clock rate, while until now the ports of Los Angeles and Long Beach have only operated 16 hours a day.
The White House made a pointed, albeit underrated, reference to this in its recent fact sheet on its new logistics push: “Unlike the world’s major ports, US ports have failed to realize all possibilities. offered by night and weekend operations. “
The main culprit for this massive inefficiency is the incredibly powerful International Union of Longshoremen and Warehouses, which has a lockdown on ports up and down the West Coast. He hates automation and has earned extraordinary wages for his workers (dockworkers earn an average of $ 171,000 a year, foremen earn nearly $ 300,000) and strict work rules. When negotiating contract renewals, the union can effortlessly scold freight all over the West – work slowdowns are its specialty.
As Peter Tirschwell writes in the Journal of Commerce, “Huge cost increases, limited ability to automate terminals, avoidable chronic interruptions during contract negotiations, and much lower productivity and working hours compared to ports Asia and elsewhere in the world are at the heart of the problem. “
Notably, the highly automated Port of Virginia has withstood the current crisis better than its counterparts.
Nothing is easy in our current regime. Truckers complained that various restrictions prevented them from using the overtime hours that were already available at the ports of Los Angeles and Long Beach. In its backgrounder, the White House said 3,500 more containers would move overnight, a gradual change in the right direction, but a drop in the ocean in the scheme of things. Tirschwell points out that it is about 3% of what goes through U.S. ports each week.
Long-haul truckers across the country need around 20,000 additional drivers and have also been hit by a chassis shortage. In the midst of a major logistics nightmare, the United States’ International Trade Commission imposed tariffs of around 200% (in addition to the 25% Trump-era tariff) on the world’s largest chassis manufacturers, China Intermodal Marine Containers. The company indeed benefits from unfair subsidies, but the timing of the action of the trade commission was hardly favorable. The head of the Harbor Trucking Association, representing west coast harbor truckers, complained, “Now we’ve created shortages and increased costs. “
US trade policy should not be indifferent to the real consequences for the US economy.
Then, as Lincicome points out, there are long-standing rules like the Jones Act, which make it much more expensive to ship goods from port to port in the United States, which puts a premium on the systems. land surcharges.
Ultimately, American logistics will emerge from the current impasse and reach a new equilibrium. Yet this crisis should prompt us to rethink the unnecessary inefficiencies that we impose on ourselves. It will be too late to keep this coming Christmas harmless, but will serve us well for the future, whatever the season.