Learn the Lesson Of Charleston's Port

By Steven Pearlstein
Wednesday, March 29, 2006

CHARLESTON, S.C. Back in 1989, state officials who run the bustling port here foresaw the need to expand its capacity and set their sights on Daniel Island, a largely uninhabited triangle of land created out of dredge fill at the junction of the Cooper and Wando rivers.

Before they could get all the permits, however, the city was rocked by the Pentagon's decision to close the Charleston Navy base in the early 1990s. To help cushion the economic blow, port officials agreed to shift their expansion plans to the old Navy base. That turned out to be just fine with everyone but the immediate neighbors in North Charleston, a largely black, low-income community, who were convinced they would wind up with all the truck traffic but few of the jobs.

Years of political wrangling ensued before the port authority decided to turn back to Daniel Island. But wherever it proposed to locate its terminal, it again ran into fierce opposition -- in one case, from residents of Mount Pleasant, the wealthy suburb across the Wando stubbornly protective of its water views; in another, by the new residents of Daniel Island, then just beginning to sprout a ritzy new development of golf courses and million-dollar homes.

Now, on from the state legislature, the South Carolina State Ports Authority officials have come up with a billion-dollar plan for a new terminal on -- you guessed it -- the old Charleston Navy base. If all goes well, the first container could be lifted onto the dock as soon as 2011, 22 years after the site search began.

Unfortunately, Charleston's saga is hardly unique. Because of opposition from neighbors and environmental groups, port expansion in the United States has lagged far behind the explosive growth in trade. It is that, not the prospect of terminal operations owned by Dubai investors, that Americans ought to be worrying about.

We got a glimpse of the problem in the fall of 2004, when tankers were lined up halfway to Hawaii waiting to unload Christmas inventory at the ports of Los Angeles and Long Beach. Since then, port operators and shippers have made changes to their operations to relieve many of the bottlenecks -- things like the innovative time-of-day pricing scheme introduced at Los Angeles and Long Beach that has shifted 30 percent of the volume to off-peak hours.

But according to industry and government officials, with container traffic growing 10 percent a year and hundreds of new tankers being turned out each year by shipyards around the world, it is only a matter of time before bottlenecks reemerge, either at the ports themselves or on the railroads and highways that connect them to the rest of the country.

In fact, if you wanted to slow the growth of low-cost imports from Asia, you couldn't come up with a better strategy. No need for tariffs or other trade barriers. Just let the market do the dirty work through higher shipping rates, longer delivery times and unreliable supply lines.

It's not just a matter of higher prices for all those computers and sweatshirts coming in from China. According to an analysis by George Stalk of the Boston Consulting Group, the impact of transportation bottlenecks can be so large, they can wipe out the advantage some retailers or manufacturers now enjoy by sourcing from China through West Coast ports.

In anticipation, some shippers have already begun to bring more of their goods from Asia through the Panama Canal to East Coast ports such as Jacksonville, Savannah and the one here in Charleston. China has already surpassed Germany as Charleston's largest trading partner. And big retailers, such as Wal-Mart and Home Depot, have put new distribution centers in the region, with the express aim of bypassing West Coast ports.

Even without a new terminal, the port in Charleston has been able to accommodate the recent surge in business by increasing storage capacity, extending hours for truckers to make pickups and deliveries, and using computers to better organize the containers sitting on the dock. But now that it has turned itself into one of the country's most efficient facilities, port chief Bernard Groseclose Jr. says further productivity gains won't come as easily or cheaply.

The tricky part of all this is that while the problem of freight bottlenecks is a national one, the steps needed to relieve them must be taken by communities that don't want the increased traffic, railroads and truckers that benefit from high freight rates that come with tight capacity, and labor unions that see job losses in new productivity-enhancing technology.

At the prodding of big importers, the Bush administration last month finally proposed its "framework" for a national freight policy, one that looks to be long on "coordination" and "public-private partnerships" but rather short on funding or expanding federal powers. And Congress recently demonstrated its abiding concern for the issue by eliminating from the recent highway bill special funding for "intermodal" projects linking ports, rails and highways. Seems they needed the money for bridges to nowhere and other pet projects.

The math on this dilemma is rather simple. China is building close to 100 new container-loading berths over the next few years, each capable of shipping about 250,000 containers a year, most of them to the United States. Meanwhile, five berths are planned for the West Coast of the United States to receive them. Something's got to give.

Steven Pearlstein will host a Web discussion today at 11 a.m. at washingtonpost.com. His e-mail address ispearlsteins@washpost.com.

© 2006 The Washington Post Company