Ports and Politics – Some of the Realities of Global Trade

Abstract

Global Trade remains a critical part of the world, and ports are the method with which significant amounts of traded is conducted. In this article, we take a close look at ports, port authorities, and port innovation.

Article

Travel schedules in March took me to New York City, a very different locale from my recent trip to the Caribbean. Somehow the train of thought that was launched while visiting remains of El Moro in Puerto Rico continued on its tracks. New York, like San Juan, began its life as a port and harbor, providing a gateway for the colonization of the New World of North America. Initially known as New Amsterdam, New York grew into a bustling commercial center. In addition to the goods of trade, the port had a more important role to play – this was the point in which many refugees from either economic or religious persecution entered into a new life, creating the melting pot culture that became the United States of America that we know today.

Reflections

On this particular visit to the City that never sleeps, I spent time I had on my hands to make a visit to ‘ground zero’ – something I have both desired and dreaded for many years. The cold and blustery day did not encourage loitering outside, but I could not resist the temptation to just stand and reflect on what had taken place here. It was hard to imagine that an act of malice and aggression by a small group of religious fanatics could have created this painful open wound. Handwritten notes, flowers and other tributes to those who had passed on from this place were reminders of those who remained, as was the graphical representation of the ‘new tower’ that would rise like a Phoenix from the ashes of the Twin Towers.

Crossing the street to the World Finance Center, the symbolism of these city blocks was brought home. These vast structures symbolize trade and transactions – the magic recipe that brings the nations of the world together in the pursuit of a better life for all! Trade has always been the driver for the discovery of new lands and nations, the integration of old ones into the status quo and the rise and fall of empires. My train of thought stopped at yet another station – this was all about the balance of power from an economic perspective, only this battlefield was monitored by bankers, not generals.

Changing of the Guards

My career in supply chain began on another continent, the tip of which boasted the only truly viable ports in Southern Africa. Natural harbors in Cape Town and Durban provide gateways to the arterials that channel the raw materials that are the fruit of the labor of the tribes of this vast land. Large oil tankers and container vessels made ports of call at these deep water harbors, in many cases using smaller feeder vessels to transfer cargo for movement to the secondary shipment locations of East London, Port Elizabeth and Richards Bay. The infrastructure that provided the ability for South Africa to play in a ‘league of their own’ was closely guarded by the Department of Railways and Harbors – a state owned monopoly. The changing of the guard politically and economically has resulted in the privatization of many of these facilities, in common with global trends. This in turn has created a focus on economic viability versus subsidized infrastructure.

Other ports that I have visited over the decades have impressed me with their commercialization, their adoption of technology and innovation. Singapore has transformed their city state into a commercial hub by providing state of the art storage and port facilities – opening the gates for global trade to neighbors in the region. The exploding turbo-capitalism of China is fueling the creation of ports in their country – supporting the movement of goods by air and ocean, in response to global demand. Logistics has come into its own as an area of strategic importance. Ports and harbors are no longer just sordid ‘nether-worlds’, providing a backdrop for nefarious activities, as so graphically depicted in Jackie Chan thrillers!

As global trade moves into the spotlight, the role of ports, port authorities and their impact on the ability of nations to play and win is emphasized. One of the premier global entities, the International Association of Ports and Harbors (IAPH) has summed this up in their motto –

“World peace through world trade. World trade through world ports”.

Global Competition

As highlighted during the debate on the potential management of port handling operations in New York, New Jersey, by a UAE company, there are many areas that need to be taken into account related to port facilities. Global competition is not limited to the manufacture of goods – the availability of world class logistics facilities is an important consideration when selecting partners for global trade. Competing ports need to be able to offer more than access to deep water. Other considerations include the provision of advanced information systems, enabling the seamless integration of data required to comply with rules and regulations. Added to which is the need to ensure the safety and security of goods and personnel that move through the harbors. The introduction of ever larger container vessels (particularly on the routes across the Pacific Ocean) requires the investment by Port Authorities in ever wider and deeper channels and longer berthing facilities.

Then there is the growing need for logistics companies to provide a fully integrated ‘door to door’ service, requiring a combination of multiple modes of transportation. This challenges the traditional roles of ocean carriers, who compete for their share of the traffic. Mergers, acquisitions and alliances with other service providers have created a new set of challenges – and opportunities. Value added services are now a component of the ‘menu of options’ – warehouse and storage facilities providing consolidation, de-consolidation, kitting and other options to those who trade globally.

The convergence of all these forces has created an environment in which it is imperative for public sector entities to encourage participation by the private sector in the development of port facilities and infrastructure. This is evidenced by the result of surveys conducted by the IAPH:
A global survey conducted in 1998 indicated that the majority of the 188 respondents were public agencies or corporations established by government. More recent surveys identified that more than 20 percent of these ports were experiencing changes in structure, with an increasing involvement of the private sector.

Global Integration

Although most port assets such as breakwater, access channel and land are still owned and managed by port authorities, a relatively larger percentage of handling equipment and terminals are operated by the private sector. The need to provide a combination of wired and wireless information technology has resulted in ongoing investments by these port operators. Another result of the increasing global integration of logistics systems is the trend for international terminal operators to have facilities in multiple ports, providing hubs and feeder networks. At the last count, the top 10 terminal operators were responsible for handling one third of the world TEU (twenty foot equivalent unit) traffic. One of the key enablers for this is advances in communications and information technology, allowing these operators to increase productivity.

The changing role of port authorities from provider of services to ‘custodians of the waterways’ demands an understanding of land based infrastructure, to include access roads and highways. This requires coordination with decision makers in city planning and development. And of equal importance, there is a growing concern related to sustainability of port and water operations. Issues related to ship waste treatment, ballast water problems and other areas of environmental concern need to be addressed. As such, there needs to be a true partnership between the public and private sector – focused on local, regional and global challenges – and opportunities.

Global Shift

The global shift of manufacturing operations from traditional shores – like those in Europe and the USA is of concern to many. However, change is a constant, and a combination of technology and innovation can be leveraged to create new opportunities for those engaged in global trade and transportation. This requires a new approach and a different mindset:

  • An understanding that the desired result should be the focus of all constituents – internal and external
  • Services in the logistics sector create a new revenue model but may require retraining of resources previously engaged in manufacturing
  • Thinking globally implies total impartiality – no prejudice, please!
  • Global trade needs to take into account physical borders and related regulations – think way beyond the border
  • Have respect for the environment – coastal waters are fragile, and what goes around comes around

In conclusion, although the roles we play in the global economy have changed over the years, there are opportunities for all – we just need to recognize them as such.


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