THE TTALK QUOTES 

On Global Trade & Investment

 

Published Three Times a Week By

The Global Business Dialogue, Inc.

Washington, DC   Tel: 202-463-5074

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No. 6 of 2015 

MONDAY, JANUARY 26, 2015      

 

   

Filed from Portland, Oregon  

     

Click here for last Wednesday's quote from President Obama.
UPS ON U.S. PORTS

"[W]e can't have the United States of America being the Achilles heel to the worldwide trade flows and global distribution network."

Thomas F. Jensen
January 22, 2014
CONTEXT
The people who load and unload cargo at America's 29 West Coast ports have been working without a contract since July 1.  The consequences of that are being felt throughout the country.  It isn't just that there is no contract.  It is also the crippling effects of the work slowdown by the members of the International Longshore and Warehouse Union (ILWU).  No doubt those actions are calculated to put pressure on the shipping companies, represented by the Pacific Maritime Association (PMA), and no doubt they have been aggravated by some of PMA's actions.   In any event, the result has been a series of supply-chain disruptions, which have led in turn to factory shutdowns by companies who depend upon the West Coast ports for their supplies.  The results have also been lost sales for farmers and others who rely on the West Coast ports to ship their products to customers, primarily customers in Asia.

In a GBD event at the National Press Club last Thursday, January 22, five experts talked about the problems at the ports and the urgent need to address them.   The title of that session was Trade Facilitation in America: The Shifting Dynamics of Supply Chains, Ports, and Labor Disputes.

Tom Jensen of the United Parcel Service, UPS, was one of the speakers. UPS is a $54 billion-plus company (2012 estimate).  That's big and the company's interests are wide-ranging, which was a point Mr. Jensen made at the start of his remarks.   "If I had to, in a nutshell, name the theme of this little UPS talk in the next five minutes, it would be UPS cares."  Pick a topic, he said in effect, and the theme would be "UPS cares," because a company that large cares about just about everything, from the highway bill, to the Federal Aviation Administration, to yes, the ports. 

Turing to the ports, Mr. Jensen said:

 "This is bread-and-butter, sweet-spot stuff to us doing our daily business. It's not about little brown trucks or brown-tailed aircraft, as we'll call them, flying around the world.  It is about who shipped that package and who is receiving that package, whether it's an overnight letter, a box of bolts, or whether it's palletized freight or something that is a big industrial piece.  We care about all modes."
 
He illustrated those thoughts with some numbers:
17 million packages (almost), delivered on a daily basis.

96,000 commercial vehicles,

3,000 containers or trailers a day on the railroads, making UPS the largest customer of the freight railroads, and

500,000 TEUs on the ocean during the course of a year. 
TEUs stand for 20-foot-equivalent units, which, with some variation in the height and width dimensions, are the standard containers for ocean shipping.
What UPS doesn't have, however, are ships.  "We don't want to have brown ships," Mr. Jensen said, but ships are a critical part of the whole transportation network, the management of which is UPS's great strength. "Ultimately, what we [at UPS] are really good at is managing networks," Mr. Jensen said.

But there are two big problems UPS cannot solve by itself.  It can't by itself resolve the dispute that is wreaking havoc at the West Coast ports.  "Government intervention is needed," Mr. Jensen said, because the disruption is impacting American competitiveness.

GBD's session last Thursday, however, was not just about the work slowdown on the West Coast.  It was about the broader challenges facing the U.S. ports generally and specifically the urgent need to improve both the waterside and the landside access to American ports-the depth and width of the channels for the ships and the maintenance and improvement of the roads and bridges that connect the ports to inland buyers and sellers. 

Referring to the longer-term, infrastructure challenge, Mr. Jensen said, "We are not afraid to pay our fair share....if it goes back into infrastructure.  We need that."

COMMENT
Last Thursday's event was primarily about U.S. ports, with a particular emphasis on the current crisis on the West Coast.  Yet we don't have any second thoughts about the title.   Moving product through ports of entry - whether by land, sea or by air - is the essence of trade facilitation (lower case).  As for the WTO's Trade Facilitation Agreement with capital letters, on Friday, January 23, USTR Michael Froman formally notified the WTO that the United States has ratified that agreement.  It is the third country to have done so.  The first two were Singapore and Hong Kong.  The agreement will go into effect once two-thirds of the WTO's 160 members have ratified it.  So, just 104 to go. 

***

As we have listened, over the years, to conversations about the WTO Trade Facilitation Agreement, our impression has been that it is an agreement about cutting red tape and improving the capacity for moving goods through the structural and bureaucratic systems of developing and least developed countries.  But that is just part of the story.  In a global economy with global supply chains, the ports and procedures everywhere matter.  We think Tom Jensen was making that point with his Achilles heel comment. 
SOURCES & LINKS

UPS Cares is a link to the audio file with Tom Jensen's remarks from January 22 GBD event on U.S. ports, particularly the current problems in the West Coast ports. 

  
U.S. Ratifies the TFA takes you to a USTR announcement on this development.


West Coast Tipping Point is a link to the January 6 TTALK Quote on this issue.   

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