FMC Inquiry Threatens BC Container Trade
The FMC inquiry threatens BC container trade and blows it onto the rocks. At first glance, the US Federal Maritime Commission (FMC) inquiry appears to be one more example of trade protectionism at work in the U.S. political system. Based on the last presidential election cycle there is ample room for shipper concern that protectionist sentiments will grow in 2012. This BC Shipping News article reveals that there is more than pure political protectionism sentiment at play. Two critical issues relevant to the future growth of North American container traffic and port development are emerging. The first issue is potential cargo diversion. The second is freight shipping transportation policy priorities of government.
FMC Inquiry Threatens BC Container Trade – What is the Evidence?
Vancouver, B.C. based economist Phil Davies of Davies Transportation Consulting Inc. was one of the first analysts on either side of the border to challenge the conventional wisdom on the port market share. His paper entitled Cost Elasticity and Port Choice for West Coast Container Traffic(“Cost Elasticity”) examined the impact of relative cost increases (particularly the appreciation of the Canadian dollar) on the market share of the Port of Vancouver’s share of West Coast container traffic. The elasticity of port traffic was found to be significantly lower than values found in previous studies for U.S. West Coast ports. Davies concluded that the impact of increased relative costs due to the exchange rate was outweighed by the increase in Canadian Pacific Rim imports due to lower prices for imported goods. Based on a sample of Canadian customs data, it appears that the Lower Mainland has lost market share in its core Canadian market and that the largest portion of traffic lost to competing ports enters Canada by truck through land border crossings in Eastern Canada. These results are at odds with the consensus among the U.S. port community that Canadian ports have been dramatically increasing their share of U.S import traffic. Readers to this blog are invited to share their opinion on the evidence available and the implications on port routing choices for global supply chain performance.