Is Southern California Losing Its Competitive Edge in World Trade?

Congestion, lack of infrastructure funding and stringent emissions rules are threatening Southern California's leadership position in world trade and logistics, according to panelists at the Southern California Transportation & Logistics Summit. While currently 43 percent of all trade to the nation goes through Southern California ports, these volumes are at risk of being diverted to other ports that are easier to operate in.

California State San Bernardino's Leonard Transportation Center tackled these issues during the Summit, which was held June 4 in Ontario, Calif.

Port Volumes

According to Dr. John Husing, a research economist at Economics & Politics Inc., the Ports of Long Beach and Los Angeles lost 25.9 percent of its volumes between 2007 and 2009. In 2009, trade at these ports fell 17.6 percent, while trade at other western ports was down 11.2 percent. These numbers are already starting to show that the west is threatened by the possibility of trade diversion to other ports, including Seattle/Tacoma, the Panama Canal and even the Suez Canal, Husing said.

In addition, logistics jobs in the Southern California area were down 40,000 in 2009. "We need those jobs back," Husing said. In the inland empire of Southern California, the vacancy rate for industrial production has increased from about 2.7 percent in 2005 to 11.9 percent this year.

However, the good news is that we're now back in growth mode, with analysts predicting 28 percent growth in volumes at the Southern California ports this year, Husing pointed out. The majority of that growth will be in furniture, apparel, auto parts and footwear, he said. Meanwhile, exports will see growth in such bulky items as paper, scrap metal, fabrics and animal feed.

"The bottom is behind us. How fast it will grow is a different issue," Husing said.

Infrastructure Issues

Despite the anticipated growth, panelists were concerned that the area's infrastructure would not be enough to accommodate the growth. Husing said there's a lack of agreement on expansion routes and a lack of funding for separated truckways, which are needed to get cargo out of the Los Angeles basin.

Jerry Critchfield of Weber Distribution said his company is concerned with infrastructure, and he doesn't see funding coming to the ports any time soon.

Hasan Ikhrata, executive director of the Southern California Association of Governments, said the Southern California area can expect population to grow from 19 million people to 23 million by 2035. On Interstate 710 alone, which connects to the ports, truck volumes are expected to increase from 38,300 today to 90,000. There are not enough freeways and truck-only lanes to support that growth, Ikhrata said.

"This region has every reason to expect growth," he added. "Why isn't the national government giving us more money?"

Keeping Shippers at the Ports

Unlike other ports around the country, the Ports of Los Angeles and Long Beach can serve ships that require 50 feet, allowing for deep water access. This is one reason the ports have a competitive edge.

However, the Southern California area now has many different kinds of regulations related to emissions, including the Ports' Clean Truck Program, which bans polluting diesel trucks; and several rules from the California Air Resources Board. These rules often mean increased fees for those who don't comply, or increased expenses for those who have to buy less polluting trucks or retrofit devices. According to Don Snyder, director of trade relations at the Port of Long Beach, this means California is not on a level playing field with other ports.

To address this problem, Snyder said his team is working on an outreach program for cargo owners. The Port of Long Beach is focusing on the needs of the customers, in hopes that this will keep them at the ports, Snyder said.