Market Shares and Pendulum Swings
Import data confirm a market share shift between West and East Coasts that is more than just month-by-month variability. The pendulum swung toward the West Coast over 20 years ago. New post-Panamax vessels and double-stack rail service in the late 1980s led to West Coast dominance in trans-Pacific trade. That trade boomed due to multiple free trade agreements and a surge in outsourcing. Between 1986 and 2006 U.S. trade as a whole grew at 1.3 to 2.5 times GDP, and U.S. imports from China grew at an annual average of 22 percent. Inbound vessels from Asia called at Long Beach or Los Angeles first to serve the huge local market, and those ports became import gateways for the whole nation. In 1999, West Coast and East Coast shares were about equal at 47 percent each. Import transloading in Southern California helped drive the West Coast share to about 53 percent by 2006.
On the brink of the Great Recession, however, momentum was fading. The 2001 Doha round of WTO trade talks collapsed in 2008. New major trade agreements stopped in 2010. Most of what could be readily outsourced had probably already moved to Asia, and that tide ebbed. Major importers gained the scale needed to support three-corner and four-corner import strategies instead of transloading imports in Southern California. Starting in 2012, trade growth declined to about the same as GDP. Annual growth in U.S. imports from China averaged just 4 percent between 2006 and 2019.
The new Panama Canal locks opened in 2016. Ocean carriers consolidated into alliances that rationalize sailings in NeoPanamax ships to use the new locks. U.S. and Chinese manufacturers are shifting sourcing to Southeast Asia in response to rising costs in China and the Administration’s trade wars, favoring Suez routes to eastern U.S. markets. East Coast ports have added capacity. Their parent state governments have mounted aggressive economic development initiatives, attracting manufacturing and distribution growth while California has become a more costly and difficult place to do business. British Columbia ports have captured a growing share of the trans-Pacific intermodal market.
Southern California ports still dominate the trans-Pacific trades, and Oakland’s market share has been stable. But the pendulum that brought such rapid growth to the West Coast has indeed swung East.
Dan Smith is a Principal with The Tioga Group: www.tiogagroup.com