In 2011, then Lt. Governor Gavin Newsom, in his Economic Growth and Competitiveness Agenda, recognized the important role of international trade to the state of California, stating:
“…the state must become a better partner in preserving and enhancing California’s position as a preeminent hub in the global economy. At the simplest level, it must make promoting both trade and its international presence an economic priority undergirded by a plan and performance metrics, bringing scale and efficiency to existing international efforts by regions.”
International trade accounts for one out of nine jobs in Southern California, plays a vital role in the Bay Area economy, and provides the infrastructure for California companies to export products to other states and countries. However, significant issues need to be addressed by Governor Newsom for California to preserve or enhance its competitive position in international trade.
California is losing market share to Eastern, Gulf and Canadian ports. California’s ports have lost 5% of all North American container market share – dropping from 35.5% to 30.2% and current volume numbers are nearly 50% below state projections – amounting to lost opportunities for the state in terms of jobs, personal income and state and local revenues.
Those that import cargo through California cite higher costs associated with regulations, and increased uncertainty with regard to constantly changing environmental regulations and associated costs as the motivations for re-routing goods.
The most disconcerting part of this diversionary trend is that once supply chains are re-routed, they are notoriously hard to reverse. As a result, California’s loss of port, warehouse, trucking and rail jobs, and the associated state and local tax revenues, go to our competitors. And, to add insult to injury, those cargo diversions also result in higher greenhouse gas emissions for the planet and leave those who have invested heavily in cleaner operations here in California without the additional revenues necessary to offset the higher costs.
It is well documented that California’s supply chain has already invested billions of dollars in environmental improvements and have reduced diesel and sulfur emissions pollutants by over 90% from many sources. But despite this progress and the existing high cost of incremental improvements, the state continues to add costly new regulations without a full analysis of the impact of those regulations on California’s port market share. All this while other states and North America trade gateways have imposed few environmental requirements to their operations.
To address the declining market share issue, the following is recommended:
- Thorough assessment and acknowledgement of the progress already made in the goods movement sector with respect to the environment and the economic consequences of lost market share.
- Full implementation of California’s Sustainable Freight Action Plan’s economic impact evaluation process and determination whether additional state regulations will enhance or detract from the state’s environmental and economic goals.
- Full access to funding sources available to other industry sectors to support the necessary billion-dollar infrastructure changes at the ports for goods movement.
In addition, there is a need for a program of state support for California trade, specifically to remedy the historic lack of executive level involvement and state financial support for California’s trade sector. Our competitors in other states work closely with state government leaders to convince major cargo owners to move their California business to their state (often traveling to California in highly publicized trips). California, on the other hand, has no formal or informal program for its own state Government to promote our own ports, warehouses, and environmentally progressive goods movement industry.
Trade provides quality jobs to California workers and provides the state revenue from operations that stretch from north to south. According to former Governor Jerry Brown, California’s freight industry accounts for over $700 billion in revenue and over five million jobs. To maintain those jobs and that revenue, there needs to be a strong signal sent to the trade community that California wants to maintain its role as the gateway for imported goods bound for the rest of North American and for California exports to be sent around the world. We need the state to help fight to keep the jobs and businesses associated with an industry estimated to comprise one-third of the State’s economy and jobs.