Return to Mercury

San Jose Mercury News, February 12, 2005, Saturday

Oakland port grows with China’s trade

In telling sign of trade gap, 1 in 3 containers leaving port is empty

By KARL SCHOENBERGER, Mercury News 

Sitting nine stories high atop his gantry crane at the Port of Oakland, Milan Radich can’t stop to admire the view. Once every two minutes, the longshoreman hoists a container full of Chinese goods from a docked ship and places it on a waiting truck below.

More than one-third of the merchandise passing through Oakland, the Bay Area’s shipping gateway, now comes from China or is on its way back. And tellingly, one in three containers leaving Oakland for China or other Asian ports is empty, hard evidence of America’s $ 618 billion trade gap with the world and its $ 162 billion trade deficit with China last year.

The rise in imports from China is forcing the port to expand capacity and dig deeper channels to accommodate a new generation of giant ships. Locked in fierce competition with other West Coast ports for the China trade, Oakland has imported a dozen gargantuan cranes from China to unload the bigger ships and has set up a logistics center in Southern California to speed delivery of goods by rail and road.

Caravans of trucks thunder in and out of the dozen shipping terminals that line the Alameda Estuary and the Outer Harbor facing the bay. The trucks discharge their loads, then pick up 40-foot steel containers for a rumble down Interstate 880.

The pace makes the port the nation’s fourth busiest at moving shipping containers—more than 2 million containers loaded with goods worth about $ 30 billion in 2004. The trade generates an estimated 44,000 regional jobs—at trucking companies, trading firms, rail lines and other service companies—and is a measure of the nation’s dynamic economic relationship with China and the world.

Oakland has a history of adapting to change with new technology. It embraced containerization in the early 1960s, putting San Francisco’s port out of business. It grappled with its powerful longshoremen unions in 2002, winning an agreement to install new container tracking technology on the docks. Its state-of-the-art gantry cranes, built in Shanghai, made news when barges carrying them slipped under the Bay Bridge at low tide with inches to spare.

But while the port was having the cranes built, it fell behind in dredging its channels to the 50-foot depth needed to accommodate those giant ships—creating a mismatch between infrastructure and technology.

“We should have seen this coming, and now we’re five years behind schedule,” said Wilson Lacy, director of the port’s maritime operations.

A peek inside the containers streaming through the port reveals a graphic picture of America’s restructured economy and manufacturing decline.

Incoming containers from China and other parts of Asia bear computer parts, machinery and bales of low-cost clothing. Some outgoing containers are filled with California-grown produce and wine, but most contain the discards of post-industrial society. Recycled paper, metal scrap and other waste material are the port’s top exports.

“At any given time, there are 20 to 30 ships out at sea waiting to get into California’s ports and disgorge their goods, and most of them are Chinese,” said Joe Harrison, president of the California Council on International Trade in San Francisco. “The big question is what we should send back in those empty containers. California’s biggest export to China is supposed to be scrap paper, but over time you can’t sustain a growing trade imbalance like this.”

The U.S. trade imbalance with China and the rest of the world is a topic of hot debate in economic policy circles. One side argues it’s a sign of weakness in the U.S. economy; the other dismisses trade deficits as unimportant to the health of the nation’s service-oriented economy. To an unknown degree, imports from China are a boomerang effect of offshoring, with U.S. investment in China’s industrial base supplanting uncompetitive domestic manufacturing.

Imports of clothing and textiles from China are expected to increase dramatically with the phase-out this year of a trade accord that set import quotas to protect the distressed U.S. apparel industry.

United States’ exports to China actually have grown by double digits in recent years, but have not kept pace with the rising gusher of Chinese imports. The Oakland port’s shipments to China rose 23 percent to $ 786 million in 2003, the last year for which there is data. That was still only about of one-sixth of the port’s $ 4.9 billion in Chinese imports.

So the hollow shipping containers, stacked in neat rows like Lego blocks in the back lots of the port, are loaded with symbolism.

“I like loading the empties because they go the fastest,” said longshoreman Radich, 40, while moving containers on and off a big ship named APL China. “But I suppose it’d be better if we filled them with something.”

Oakland ships a lot of empty containers in part because it’s the last port of call for ships stopping first at Los Angeles or Long Beach before sailing here, then home, said Lacy, a former maritime industry executive. He added that the Chinese are losing interest in getting containers’ paper scrap.

“They’re saying they’d rather just get the empties because it’s faster that way to fill them up with exports and send them back,” Lacy said with a shrug of his shoulders.

Silicon Valley’s most precious export commodities—microchips and other costly electronic components—don’t go near the seaport. Their high value and the time pressures of the global supply chain mandate that they get sent out as air cargo, cutting up to a month off the lumbering sea route. San Francisco International Airport’s exports to China in 2003 were valued at $ 1.6 billion—more than double that of the seaport.

Accommodating the boom in the China trade means facing other infrastructure problems besides dredging, said Brad Nail, economic development director for the city of Pittsburg, who has been in talks with port officials about having excess cargo shipped up the bay on barges for storage and distribution.

“They’re running out of space” at the 770-acre port, Nail said. “The city of Oakland doesn’t want industrial expansion along the waterfront. And the traffic on the I-880 already has serious congestion and pollution problems with container trucks.”

THE PORT OF OAKLAND

•            $30 billion: Estimated value of total two-way trade in 2004.

•            2 million: Number of shipping containers handled in 2004.

•            44,000: Estimated regional jobs generated.

•            12: Number of terminals

•            43: Number of shipping lines.

•            Biggest trading partners: China (35%); Japan (14.6%); South Korea (6.6%); Taiwan (6.1%)

Source: Port of Oakland

Copyright 2005 San Jose Mercury News