Expanding North-South Trade Corridors
In his keynote speech at October’s TOC Americas 2016 conference in Cancun, Mexico, Mario Cordero, Chairman of the Federal Maritime Commission (FMC) discussed the benefits of increasing trade between the United States and Latin America.
Back in 2009, President Obama within his first 100 days in office attended the Summit of the Americas to further both political and economic relations between North and Latin America. Last year at the 7th Summit of the Americas in Panama the President reaffirmed the commitment of the United States to furthering the economic partnerships with the Americas.
2016 has been a monumental year to be at the intersection of shipping, trade, and the Americas. Two events stand out as being particularly historic and consequential: steps toward normalisation of relations between the US and Cuba; and the opening of the expanded Panama Canal. I have no doubt that 2016 will be remembered as a pivotal year for US Latin America commerce.
The expanded Panama Canal represents a way to change trade patterns by giving shippers more options for where and when their cargo will enter the US. The proximity of west coast ports to Asia may no longer be the only consideration that drives decisions about where discretionary cargoes land. If port productivity is low, or ancillary fees are too high for the services rendered, shippers definitely have more options open to them than they did only a few years ago.
Shortly after the Canal dedication ceremony, I was fortunate to be able to join my friends at the Port of Miami to welcome the first Neo-Panamax vessel to call southern Florida. The arrival of the MOL Majesty means that Miami has the potential to be not just a strong regional port, but it can compete as a national gateway for international commerce.
Similarly, there is talk about how ports on the Gulf of Mexico are now potential competitors to more traditional container facilities on the Atlantic and Pacific coasts. While these ports may soon be competing for ever larger container ships calling the Southeastern United States after sailing from Asia through the Canal, it strikes me that the real opportunity for new port business is finding ways to harness the potential of the north-south trade routes between the US and the nations that lay south.
Bountiful Trade Opportunities
The opportunities for trade between the US and Latin America are bountiful and transportation companies are taking note. CMA-CGM recently announced it has established service between New Orleans and ports in Chile, Peru, and Ecuador. This is in addition to existing service to Latin America provided by carriers such as Crowley, Hapag-Lloyd, Seaboard, Maersk and others. Latin America is a region of consumers, markets, and resources that has been largely untapped. Even more significant, it is a part of the world where many of its nations have recently enjoyed years of prosperity, driven in large part by demand from China.
While the countries of Latin America should pursue trade relationships with as many nations as they can – including China – it has long been my hope that the Americas would find ways to embrace each other as the natural trading partners they should be.
The US has free trade agreements with ten of the 20 nations in Latin America; the foundation exists to bring the hemispheric trading relationship to new, mutually beneficial heights. The evolution of the US-Mexico trade partnership demonstrates the potential gains to be had from establishing and expanding north-south trade corridors.
Supply Chain Productivity and 24-7 Gate Operations
Beyond trade deals and boosterism, it is port and supply chain productivity that will underpin the ability to move cargo and will be critical to tying our regions together more closely.
Freight mobility is becoming a matter of interest to a broader group of policymakers and legislators than it has ever been in the past. There is a growing understanding at all levels of government that supply chain problems create economic problems and maintaining high levels of port productivity is vital. The Federal Maritime Commission recognised early on the importance of moving freight efficiently and has engaged on the issue for years now. Most recently, we established the Supply Chain Innovation Teams as a way to find commercially viable innovations to congestion issues.
Another area of potentially significant consequence is that of ‘off-peak’ and ‘night gates’. There is no reason why at the busiest ports of the US we should not be working to achieve 24-7 gate operations and in the interim: dependable, predictable extended gates. In recent months, both Oakland and Seattle/Tacoma have debuted extended gate hour programs that provide an interesting contrast to PierPass in Los Angeles, both in terms of the model and the fees charged.
Extended gate hours is only one of the steps that marine terminals in the US can take to improve efficiencies and we should not be afraid to look elsewhere to see what we can do better. Several years ago I had the opportunity to visit the port facilities at Valparaiso, Chile. One key to their productivity was a staging area for port truckers established away from the terminals, but linked via dedicated truck lanes. Truckers were able to rest, eat, shower and wait in comfort at the staging area before they drove to pick-up a container at an appointed time. Very honestly, that is a model we should replicate.
I am unapologetically optimistic about the potential that exists for trade growth and economic development between the US and its neighbours to the south. I have every confidence that we are on a cusp of an era where Latin America finally begins to realise the potential so many of us have believed it has had for so long.