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One World, Linked by Containers

Trade: Changes in shipping in the last three decades have made the Western port shutdown an event of global scale.


When striking dockworkers paralyzed West Coast ports in 1971, President Nixon waited three months to force them back to work. But with cargo ships backed up from San Diego to Seattle, few expect President Bush to take anywhere near that long to step in this time.

What has changed in three decades is America's growing dependence on the swift movement of goods across international borders, and the starring role of West Coast ports in that transformation. Now the nation's gateway for surging trade with the Pacific Rim, the West Coast's ports handled 253 million revenue tons of cargo last year. That's more than four times as much as those ports handled in 1970. Container volume has jumped twentyfold.

Self-sufficient in just about everything but oil in the 1970s, the United States has since embraced global commerce with a vengeance. Stop the merchandise at the water's edge now, and repercussions ripple around the world. California broccoli bound for Japan withers on the docks. Honduran sewing machine operators sit idle waiting for material to arrive from a Los Angeles factory. Chinese manufacturers can't retrieve the ocean shipping containers they need to send shoes and televisions to the United States.

"Thirty years ago, when we had a dock closure, foreign trade didn't matter to our economy. It was trivial," said economist Stephen Cohen, co-director of the Berkeley Roundtable on the International Economy. "It's quite different now. It's an integrated system, and if you cut the supply line, you stop the system."

Cost cutting has driven U.S. firms to embrace "just-in-time" practices in a bid to eliminate every spare minute and wasted dollar moving products from assembly lines to store shelves. That means slashing inventories in favor of taking spot deliveries of goods only as they are needed.

Thanks to falling trade barriers, smart communications technology and cheap ocean shipping, suppliers today are much more likely to be overseas than they were in the early 1970s. Autos, for example, once a mainstay of U.S. industrial might, now arrive by the shipload from Japan.

"Whether it's consumer goods, toys or more valuable articles, nearly everything has moved overseas in the past 30 years," said Robert Kleist, a 55-year-veteran of the shipping industry and advisor to Taiwan-based Evergreen Shipping Lines. "It's to the point where every citizen of the United States has become much more dependent on international business, even though they don't think about it very much."

Inexpensive imported consumer goods have helped tame inflation, while American companies have boosted their profits by eliminating warehouses and outsourcing manufacturing to low-wage countries. No less a luminary than Federal Reserve Chairman Alan Greenspan has credited this supply chain revolution with boosting U.S. productivity and fueling the 1990s expansion.

But the current labor strife at the West Coast ports illustrates the inherent vulnerability of this system. A major bottleneck can cripple some operations within days, as evidenced by Wednesday night's shutdown of the Fremont, Calif., auto assembly plant owned by Toyota Motor Corp. and General Motors Corp., which ran out of imported parts less than a week after the management lockout began.

Pickups and sedans are just the beginning. A lengthy shutdown of the ports would wallop U.S. retailers, who depend on foreign suppliers to stock their shelves with everything from apparel to yo-yos. California, the nation's largest exporter, risks losing foreign customers for its wine, almonds and high-tech equipment. The West Coast lockout has made front-page news in Asia, whose economic fate rests largely on its exports to the United States.

What was an isolated spat between port management and the unions in 1971 now strikes a vast web of interconnected players. Thus the urgency to get the ports back up running--and fast.

"It's like dominoes," said Guy Fox, an executive vice president with the Redondo Beach office of Global Transportation Services Inc. "Once one thing happens, it all starts to fall apart."

In the chicken-and-egg history of globalization, it's hard to pinpoint a single factor that has spawned the far-flung trading networks we take for granted today. But logistics experts say you couldn't do better than the humble shipping container, those huge metal crates that allow cargo to be stacked as neatly as shoeboxes on a shelf.

In the early 1970s, "containerization" was still a novelty and seaborne cargo was still mostly handled in what was called "break bulk" style. That meant that individual pieces of cargo had to be carefully arranged in the hold of a ship, much like furniture inside a moving truck. The process was labor-intensive, slow and costly. A single ship could take as long as two weeks to load or unload.

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