In the 1954 movie "On the Waterfront," Lee J. Cobb, portraying a corrupt New York longshoremen's union chieftain, summed up the economics of a port in simple terms:
"We got the fattest piers and the fattest harbor in the world," he bellowed. "Everything moves in and out, we take our cut."
Times change, and things are no longer so simple.
Port operations, in fact, are now so complex that a knowledge of economics, computer technology and international relations is necessary to fully understand them.
There is a revolution in progress on the waterfront, drastically changing the economic environment for ports and ship operators. In recent years, the boom in imports from Asia has shifted the big growth in U.S. port trade to the West Coast, and the competition among West Coast ports and shipping lines is bloody.
The ports are being forced to look beyond their traditional role as regional points of entry for imports destined for markets no more than 500 to 1,000 miles away and are becoming gateways for imports bound for consumers east of the Rockies and conduits for Asia-bound exports from the Midwest and East.
To a large extent, this development does away with the ports' old restricted areas of influence and puts them into greatly heightened competition with each other.
"There is very little that absolutely has to go through certain ports these days," said Steven Resnick, director of marketing at the Port of Los Angeles.
As a result, ports are having to make huge investments--in specialized new equipment, and to ensure convenient truck and rail connections for intermodal handling of cargoes.
Deregulation of truck and railroad firms, with its attendant lowering of rates, and major innovations in the railroads' cargo-handling systems are the root causes of the increasing use of land transportation systems for cargo movement.
Previously, cargoes were carried as far as possible by water--through the Panama Canal and up the U.S. central river system--because it was cheaper. But now, intense competition among truck and rail companies has made it faster, easier and cheaper to transport cargo overland instead of by water to points east of the Rockies.
The new, sophisticated intermodal systems mark the first major breakthrough in shipping since containerization revolutionized the maritime business beginning in the 1950s.
Containers, which are owned or leased by shipping companies and come in a variety of sizes, are packed once and usually remain intact from point of origin to destination.
Containerization has helped to reduce dramatically labor requirements because the containers easily are handled by mechanized, often automated, systems both aboard ship and ashore.
Today, 75% to 90% of the general cargo that goes through U.S. ports is shipped in containers, according to the American Assn. of Port Authorities in Alexandria, Va. General cargo does not include commodities such as coal, iron ore or grain, which are shipped in bulk, or large items such as automobiles.
Until recently, containers were shipped domestically by truck or rail systems that operated independent of ocean carriers.
But American President Lines, which operates only in the Pacific, began pioneering a new rail transportation concept in 1979 when it leased conventional flat cars to carry containers from ports to the ultimate inland destination of the cargo.
In 1984, APL, which is based in Oakland, also developed a rail car that allows containers to be stacked two high. The cost of shipping containers on such double-stacked trains is said to be about 30% lower than that of moving cargo on conventional trains. APL's success has spawned a host of imitators among shipping and railroad lines.
Meanwhile, however, ship operators have been involved since 1982 in the most severe rate competition that anyone in the industry can recall. It has helped to keep consumer prices down but is hurting ship operators and accelerating changes in the Pacific maritime business.
The U.S. Shipping Act of 1984, which lifted previous restrictions and allowed ship operators to form "conferences" and make agreements on rate guidelines, gave them virtual immunity from antitrust action. The operators now are permitted to set rate guidelines even for shipments that might be transported partially by land.
However, a ship owner can undercut the agreed rates if he gives other conference members notice of his "independent action." Rate-cutting has hit unprecedented levels during the last year when ship owners, seeing the potential for the continued growth of the Pacific trade, put more containers into operation.
The result: too many containers chasing too few cargoes, forcing additional competitive moves.