When recession ends, will container ships come back to Seattle and Tacoma?

THE international container shipping business, which supports tens of thousands of Pacific Northwest jobs, nose-dived along with other sectors of the economy during this terrible recession. The question some observers are now asking is, when the world economy recovers, will the ports here be left behind.

The post-recession competitive challenges facing the international trade community, like those facing the aerospace industry here, relate primarily to cost and choice.

Hundreds of giant container ships are idled around the world. Carriers have already lost billions of dollars and many companies are teetering on bankruptcy. Container traffic across the docks in Seattle and Tacoma is dropping by double digits. Thousands of ship crews, dock workers, truckers, rail workers, and warehouse clerks have lost their jobs.

Carriers have shaved every expense from their already lean operations to bring costs down as far as possible.

Industry experts predict a major transformation in ocean shipping will have occurred by the time economic recovery comes. And the industry changes experts see coming have major implications for the Pacific Northwest.

The movement of international goods — imports and exports — through Seattle and Tacoma's ports is a regional economic cornerstone. More than 250,000 jobs relate to Puget Sound port activities.

Recovery will be slow. All companies in the supply chain will be tightly focused on operating at the lowest possible cost. In the future there will be fewer companies, fewer and larger ships, and less frequent port calls.

Separately, but compounding the challenge for the Pacific Northwest, carriers and shippers have new port and sea route choices.

Canada sees the goods-movement industry as a jobs creator for their citizens. The national government has invested billions of dollars in port and railroad development in Vancouver, B.C., and Prince Rupert. Shippers can now choose to route cargo bound for America's heartland via Canadian ports.

Another more ominous competitive challenge comes in five years when the expanded Panama Canal opens. Carriers will then be able to bypass the U.S. West Coast and route their vessels directly to ports in Texas, Alabama, Florida, Georgia, North and South Carolina, Virginia and New York/New Jersey.

Still another change that provides more choice to carriers and shippers is the shift of manufacturing centers from China to Southeast Asia and India. Carriers and shippers may choose routes from those areas directly to the U.S. East Coast via the Suez Canal.

Fortunately, port and industry leaders in Seattle and Tacoma recognize these challenges and are responding to them.

Much more needs to be done to position the Pacific Northwest ports to be competitive. The focus has to be on using financial resources wisely, making investments and on keeping costs — especially fees and taxes — down.

Here are my suggestions:

• Change the federal Harbor Maintenance Tax — Shippers that route cargo through Seattle and Tacoma pay tens of millions of dollars in taxes each year to a federal government fund that is used to pay for dredging harbors in the U.S. Seattle and Tacoma's natural deep water ports don't need dredging and, as a result, this region gets no benefit for the expense. Instead, the taxes are used to improve other ports so they can better compete with Seattle and Tacoma.

• Link green initiatives to real impacts and connect them to cost savings — Green initiatives are good, and are supported by industry and the ports. But the initiatives should be linked to minimizing legitimate port impacts and should be based on a cost-benefit analysis. The ports of Seattle and Tacoma — and the private companies that operate in them — are making huge strides with operational changes and financial investments that improve environmental performance.

• Consider that taxes and fees add up, creating a competitive disadvantage — The new Neah Bay tug, for example, is going to cost millions of dollars a year to keep on standby 24 hours a day. Its purpose is to prevent a catastrophic spill from an oil tanker grounding on the Olympic Peninsula. But the Legislature decided operators of commercial and large fishing vessels should help the big companies that ship crude oil pay for part of the tug's cost. Other examples abound: Puget Sound pilot compensation, which is set by a state government board, has been dramatically increased over the past several years to a rate of more than $400,000 for each pilot.

• Develop a northern tier rail-improvement strategy — Ports, and states across the northern tier, need to work with the federal government and the railroads to improve rail service and lower costs between the Pacific Northwest and the Midwest. Rail service is a huge variable in the cost of moving containers between the ports and markets.

Just as with aerospace, this region's past pre-eminence as a major international transshipment center is not assured. We have to be competitive. The jobs and prosperity can be maintained if the region adapts, makes investments and recognizes that all costs, especially fees and taxes, matter.