California is fortunate to be the home to the most productive regions in the world for manufacturing and goods movement. According to 2018 statistics, California manufacturers lead the nation in manufacturing with more than 1.3 million workers, over 30,000 companies and exports totaling more than $154.44 billion traveling through our ports.
But that leadership role is being eroded by other states. A new report shows that since 2006, West Coast ports’ “market share” – measured by the percentage of containers with consumer goods coming in and out of American ports — declined 19.4 percent. During the same period, market share at both East Coast and Gulf Coast ports increased.
Ostensibly, a loss of market share at West Coast ports does not appear to harm California-based businesses, but in reality the loss of cargo headed to other parts of the country creates a ripple effect on the state’s manufacturers and other exporters, employment at ports, transportation companies, warehouses, and ultimately consumers.
California lawmakers must take a hard look at the causes of market share loss at the ports, the impact of that decline on the state’s jobs and manufacturing base, and the policy changes that need to be enacted to reverse the current trend.
Manufacturers, in particular, are at risk when imports bound for other states is sent to ports outside of California. When ports lose that cargo, they lose funds that pay for port operations, the supporting transportation infrastructure, and port environmental programs. When market share declines, the state’s exporters must shoulder a larger share of the costs that support the goods movement infrastructure and forgo the opportunity to reinvest in their operations and workforce, creating incentives to grow production facilities outside of California.
What can be done at our ports to work in unison, improving our competitiveness?
Lawmakers must acknowledge the challenge from competing states and support California ports, and industries that rely on cost competitive ports to export or import their goods.
In the report on market share, international trade economist Jock O’Connell, notes “…there has been relatively little in the way of concrete investment or policy measures aimed at facilitating international goods movement. By contrast, other states have not been neglecting the material needs of their ports.”
In Pennsylvania, for example, the state funds an Intermodal Cargo Growth Incentive Program, which incentivizes moving cargo through Pennsylvania’s ports. Virginia offers incentives to companies who locate to Virginia including: Barge and Rail Usage Tax Credit, International Trade Facility Tax Credit, Port Volume Increase Tax Credit and a Port Economic and Infrastructure Development Zone grant program. Unlike California’s approach of new mandates and costs, other states are pursuing more container traffic to create jobs, increase state revenue and lower costs for in-state manufacturing.
The Legislature must prioritize the retention of quality manufacturing and logistics jobs. It has been estimated that had San Pedro complex ports kept up with U.S. market growth, 200,000 new jobs would have been created. If state policies drive container traffic to other ports and California manufacturers are required to pay higher export costs, even more jobs in both sectors will be lost.
While other states are providing incentives for growth and balancing regulatory policies with economic realities, California is falling behind.
There is still time to support California’s global primacy in the manufacturing and goods movement industries. But the state needs to acknowledge the challenge and produce policies that reverse the current trends.