Knatz: U.S. at fault for Canada diversion
Wednesday, October 26, 2011
The head of the nation’s largest container port suggested Monday that Canada’s investment in its western ports to capture more Asian trade is smart policy and that a U.S. government inquiry into cargo diversion up north should focus on domestic impediments to U.S. port competitiveness.
In a wide-ranging interview with American Shipper’s editorial team, Port of Los Angeles Executive Director Geraldine Knatz sounded envious of Canada’s ability to coordinate local, provincial, federal and private sector investment in marine and intermodal facilities to move cargo to Chicago and other destinations in the American heartland.
“I think what the Canadians have done is a best practice that we can learn from. The way they came together and really unified the national and provincial governments to support port development is a best practice.
“So more power to them. They’re doing a great job,” she said.
Canada’s effort stands in stark contrast to the United States, which does not have a comprehensive national strategy for transportation infrastructure development let alone a strategy to develop key freight corridors. Federal aid tends to be distributed to states and other entities for individual projects and general maintenance based on formulas or other factors with little regard to concentrating money were it will have the greatest impact.
“They have a system plan. And we lack that here in the United States,” Knatz said.
Earlier this month, the U.S. Federal Maritime Commission opened an investigation into why some shippers have chosen to route their cargo through ports in Canada and Mexico.
Canada has invested about $4 billion to build a container terminal at the Port of Prince Rupert, more capacity at the Port of Vancouver, feeder roads to port facilities, additional lanes for the Trans-Canada Highway and enhanced rail infrastructure to attract shippers interested in efficient delivery of imports to consumers in the eastern half of the United States. The rail corridor is also being used to move cargo to eastern Canada and for exports.
The federal share of the Asia-Pacific Gateway effort is $1.4 billion, with the rest of the cost being born by municipalities, provinces and the private sector.
Canada’s value proposition is that can trim at least two days off the transit time from North Asia to U.S. destinations, with competitive intermodal rail service. Prince Rupert was exclusively designed to transfer all containers at the dock to Canadian National trains, which can reach Chicago in 100 hours.
Canadian officials have reacted negatively to the FMC’s announcement of a study, noting that some proponents have called for a border tax to equalize the burden for those entering marine cargo through Canada with shippers who have to pay a .125 percent Harbor Maintenance Tax at U.S. ports based on the value of their goods.
The FMC initiated its inquiry at the request of several lawmakers from western states who have heard complaints from ports in their district, especially in the Pacific Northwest, about structural disadvantages they face.
The HMT averages about $80 per container, but can reach $200 per box or more for high-value goods.
Knatz did not suggest that Canada has engaged in any unfair trade practices.
Instead, she complained that high-volume container ports contribute the most to the HMT, but get little in return because only half the money collected is drawn by the Army Corps of Engineers for dredging navigation channels. The rest is used to mask the federal deficit, resulting in a $6 billion surplus.
In fiscal year 2010, the Harbor Maintenance Trust Fund grew by $1.3 billion, but only $828.5 million was spent because the balance was diverted to deficit spending. Advocates of maritime trade say that navigable channels at U.S. ports are not being maintained at proper levels, making it difficult for larger vessels to enter ports fully loaded and reducing their efficiency. The backlog of work makes it difficult for major ports to win funding for new projects to make them accessible to the next-generation of giant container vessels.
Last year, 7 percent of U.S.-bound imports that entered through the West Coast came through a Canadian port.
In a speech last week in Ottawa, U.S. Ambassador to Canada David Jacobson reassured Canadians that the U.S. administration is not considering a tax on imports transshipped by land through Canada, according to accounts in the Canadian press. However, nothing precludes the Congress from using the results of a study to justify imposing a levy on imports from Canada.
“Anything that brings on the issue of U.S. competitiveness, and focuses on that, is good,” Knatz said of the FMC study, adding, “We need a system approach” and greater federal investment in infrastructure. – Eric Kulisch