President Biden announced on October 13, 2021, that to clear the cargo ship backlog at the Port of Los Angeles the port will move to all 24/7 operations like the Port of Long Beach. Port representatives say, however, that despite this move the cargo ship backlog will not end before Summer 2022. Other experts are more pessimistic about the impact of Biden’s announcement, saying it will require a lot more than just the ports to solve the backlog. Read on to find out what can be done to eliminate this serious and damaging economic problem.
Cargo ship backlog at Los Angeles and Long Beach ports to continue into 2022 despite operating 24/7
Longer port working hours will not relieve cargo ship backlog
Los Angeles and Long Beach ports account for around 40 percent of all goods coming into the US. This year Noel Hacegaba, Deputy Executive Director of the Port of Long Beach, advised these two ports are likely to receive over 20 million shipping containers. This is substantially more than the 17.5 million received in 2020. He implied the increase in volume is part of the reason for the current significant delays at the port.
Hacegaba added, however, that with the ongoing scarcity of truck drivers, chassis equipment, warehouse operators and storage space, longer hours won’t solve the logistical obstructions. He said the backlog is likely to be cleared by Summer 2022, but if the entire logistics network moved to longer hours this timeline could be shorter.
He was hopeful that Long Beach port’s move to longer hours would motivate the entire logistics network to do the same. He said that expansion of storage space and adding more drivers, equipment and trucks would allow the cargo to be unloaded and shipped inland rather than being held up in port storage facilities.
Not all industry authorities agree with Biden’s statement. Some feel the ports alone are not what will resolve this cargo ship backlog.
Is the cargo ship backlog solution more drivers, trucks and storage for ports with the entire logistics network moving to longer hours?
Port of Los Angeles still in talks about going to 24/7 operation
Gene Seroka, Port of Los Angeles Executive Director, said on 14 October 2021 that he was pleased to be liaising with the Biden Administration on efforts to resolve the cargo ship backlog. He was, however, not able to provide details around when the longer hours would come into effect. He was also unsure whether all the port’s seven terminals would take the same approach.
Seroka said it was hoped that 24/7 operations would be standardized, but this was still under discussion. With the layover times being so extreme, it is essential to move the cargo on, utilizing the quiet time at the gates and correlating this with transport options and goods in and out. When asked when the first terminal will move to 24×7 hours of operation, he said talks will be undertaken.
Resolution of cargo ship backlog must be holistic and concurrent
Looking at just one part of the supply chain will not fix the problems overall. The entire gamut needs to be considered. From the lack of labor and equipment to improving business conditions, all needs to be resolved comprehensively and at the same time. Even if Gene Seroka manages to increase port operating hours, holistic and concurrent measures can be taken to help the entire supply chain recover from this calamity.
How were clogged ports and goods shortages in USA previously fixed
The previous US period of rapidly increasing prices, job losses, scarcity of goods and lack of supply was in 1979, during the ‘Energy Crisis’. There were long queues for gas at service stations because oil deliveries from the Middle East were severely impacted.
The economic turmoil experienced in those times is comparable to the current situation.
What differs is how the impacts of these situations were resolved. President Biden made an executive decision ordering, on 13 October 2021, that Los Angeles and Long Beach ports were to go to 24/7 operations. Will government authority really work?
A study of the supply chain issues that stemmed from the ‘Energy Crisis’ shows the solution might come from encouraging a free market, rather than pushing governmental authority.
Reducing industry regulations
Governmental rules mean prices stay high and buyers are negatively affected. A first step was slashing energy industry regulations, and by 1981 the federal government cut out production capping and pricing restrictions. Detractors forecast that oil and gas prices would skyrocket at the bowser, but they were proven wrong; production rose and pricing fell.
This, today, would be comparable to decreasing the huge governmental control that exists over the maritime industry in California. In August 2020 the California Air Resources Board set heavy new controls for the industry. Vessels and vehicles must now reduce air pollution by thousands of tons in localities around harbors, roadways and storage facilities. A number of petroleum companies, motor manufacturers and harbor facilities are against these new controls. They say the country’s buffeted financial system cannot take the strain of further changes that could reach almost $7 billion. Reducing such regulation when the industry is under such stress would free up resources that can be used to deal with the cargo ship backlog.
Lowering of taxes
Cutting taxes proved an effective way to revive the economy from ‘stagflation’—stagnation plus inflation. The top income tax rate dropped from 70 percent to 50 percent by 1983, then to 28 percent in 1986. Equivalent rates for the middle class were cut. Everybody paid less and the economy soared by 7 percent in 1983, and an average of 4 percent after that until 1990 when taxes were raised. The move encouraged investment in the creation of new businesses and jobs.
Biden today is doing the opposite. There is negotiating raging to massively raise taxes as part of the Build Back Better program. Even though the cost of $3.5 trillion is more likely to be reduced to $2 trillion, it is an enormous amount.
How were clogged ports and goods shortages in USA previously fixed
We believe the cargo ship backlog will continue for a further year
The port authorities at both Los Angeles and Long Beach suggest that simply expanding operating hours will not clear the cargo ship backlog. They also suggest that fixing the problems at particular points along the supply network will probably not fix those within the system overall.
The Biden Administration has an opportunity to deal with the situation by making judicious and clever moves – reducing controls and lowering taxes – that have historically proven effective. Such strategies may not bring immediate change, but they have worked in the past and their effects are long-lasting. Unfortunately, given the direction the current administration is currently heading, meaningful assistance from the government is unlikely to be forthcoming for at least the next year.
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