US ports may choke China's success

Experts predict bottlenecks will slow shipments to the West Coast and in the process, shrink the US trade deficit with the Asian nation.

By David R. Francis | Columnist of The Christian Science Monitor

from the May 14, 2007 edition

Page 1 of 2

The United States faces a West Coast port crisis.

Imports from China and other Asian nations are rising so explosively that within a year or two, ports in Los Angeles, Long Beach, Oakland, Tacoma, Seattle, and San Francisco will be badly clogged with traffic, predicts George Stalk Jr., senior partner in Toronto of the Boston Consulting Group (BCG). Ships will be lined up in harbors waiting for space at a dock, he says. Railroads will be jammed; highways busier than ever.

As a result, retailers could face costly delays in the arrival of clothing, furniture, toys, electronic items, and other goods from the Far East. "This is a form of 'stealth protectionism,' " says Mr. Stalk. "I don't think the politicians have figured it out. It could be a powerful do-nothing way to limit trade with China."

Inadequate port capacity is already a "growing concern" for such major retailers as Wal-Mart, Lowe's, Target, The Home Depot, and so on, notes an official with the Retail Industry Leaders Association.

Greater attention to port security, perhaps involving more frequent inspections of ship-borne containers, could deepen the potential for port delays.

Stalk, in a report that BCG released last week, advises business clients to consider alternatives to having their products made in China because transportation bottlenecks will drive up costs and hurt profits. "Many companies are blindly walking into a strategic trap," warn Stalk and Kevin Waddell from BCG's Warsaw office. With no quick solution in sight, companies may be "better off" manufacturing in Mexico or at home.

A slowdown in the growth of Chinese imports would cause no tears in many labor circles and among some manufacturers.

The rise in the US trade deficit with China between 1997 and 2006 has displaced American production that could have supported 2.16 million jobs in the US, notes Robert Scott, an economist with the Economic Policy Institute, a think tank in Washington that is sympathetic to labor.

Though most Americans benefit from relatively inexpensive imported Chinese goods, the trade deficit with China has become a lively political issue. Last year, the US imported $232.7 billion more in goods from China than it exported to that country. The trade imbalance has allowed the Chinese government to pile up $1.2 trillion in foreign currency reserves, the bulk of that in US Treasury bonds. In effect, China has financed much of US budget deficits in recent years.

Page 1 | 2 | Next Page