While we all watch with sadness the effects of the recession lingering on California – high unemployment and home foreclosures, state budget deficits far from balanced, and deep social services cuts being made left and right – we in the port and international trade community keep looking for ways to help get our economy growing again.
In fact, that’s our job. California’s marine terminal operators provide the working capital that pays for the workforce, infrastructure, and environmental investments necessary to make our public ports run. Resources invested in California by marine terminal operators include a longshore payroll that exceeded $1 billion in 2010 and our lease payments to public ports which exceed $900 million annually. And, our companies and our customers are going to spend an additional $5 billion through 2014 to reduce the air quality impacts of our international trade supply chain.
As the major investors in the infrastructure necessary to facilitate trade, we know that the key to growing California’s economy and creating more jobs is to attract more cargo.
One sure-fire way not to encourage job growth or attract more cargo to our marine terminals is for the state to further increase supply chain costs.
But this is exactly what the California Legislature is poised to do if it passes AB 907, a bill which will only further enrich a small monopoly of San Francisco Bay pilots and ultimately increase the annual salary of a pilot from $400,000 to over $500,000 per year.
Ship pilots are specialized mariners with knowledge of navigational hazards and conditions in local waters. They board arriving vessels off-shore and give advice and direction to ship captains as they navigate to our terminals. We understand and value the contributions of pilots, but AB 907 is not a fair and balanced review of compensation – instead it is the validation of a system that allows a small, but politically powerful, monopoly to game the system so they gain while others lose.
In support of this ill-timed rate increase, the San Francisco Bar Pilots argue that the costs of this income augmentation simply don’t matter because the ships paying the freight are owned by “foreign shipping companies.”
This is a political argument – not an economic argument – and it just doesn’t hold water since every part of the supply chain is financed by the importers and exporters who are shipping their goods around the world.
The economics of trade dictates a large volume, low margin model. Each penny – even fractions of a penny – on the price of transportation matters. This is particularly true of the agricultural exports coming out of the Central Valley through the Port of Oakland. In fact, the Farmer’s Rice Cooperative has warned the pilots that “while the many different costs that go into growing, processing, packaging and ultimately exporting milled rice might seem insignificant on a per ton basis, they all add up. We are very sensitive to all price increases in the supply chain and do not consider any cost increase to be trivial.”
Attempting to divert attention away from the economics of trade, the pilots have also taken to attacking our trade association, the Pacific Merchant Shipping Association (PMSA), calling us “wealthy foreign shipping companies.”
This is unfortunate and, more importantly, simply not the case.
The fact is that the two largest members of PMSA are American-owned, American-operated and American-based marine terminal operators: Ports America and SSA Marine. Our companies employ thousands of Californians, finance public port infrastructure, pay billions in wages, state and local taxes, and are investing in 21st century environmental improvements.
It may seem like good politics to try and arouse some sort of xenophobic or anti-foreign business sentiment, but, for so many reasons, that’s a regrettable turn of events. We need to address the facts, otherwise the politics will only mask the true impacts of what rising costs in the supply chain will mean to California’s economy, its workers and exporters.
AB 907 presents our state legislators with a clear choice between helping out a small monopoly or standing up for thousands of jobs throughout our supply chain. If California wants to maintain its trade competitiveness then this choice should not be a difficult one to make.