The Coming Economics of Port Cities


September 18, 1991|By M. SIGMUND SHAPIRO

In a recent speech to a French audience, Claude Abraham,president of CGM, a large French steamship and transport company, gave his audience a history lesson. Mr. Abraham, who spent a number of years as a professor, is an educator at heart. He maintains that maritime history is in the process of repeating itself. The port of Baltimore should take heed.

His premise is persuasive. During the 1990s we will witness the swelling of one of those waves of international trade that have risen periodically over the centuries. As has happened time and again, the development of trade will mean the emergence of port cities as power centers. If we were to compare transport costs between land and sea (notwithstanding that we have moved into the ''giant containership age''), ''we can see that today it costs almost the same to transport a container 3,600 miles from Le Havre to new York as 120 miles from Le Havre to Paris.''

Distance is no longer a handicap, as long as the distance is purely maritime. The car built in Japan can be delivered to Los Angeles more cheaply than one built in Detroit. Therefore, land-transport costs will be the critical factor in deciding the ports of exit and entry.

It's hardly possible to imagine any further cost reductions at sea; consequently, ''it is on land that the efficiency battle would have to be won, either by cutting up the markets and differentiating the products or by reducing logistical and commercial costs. Major economies of scale can be achieved on land.''

Mr. Abraham believes that the high development areas, at least those that base the majority of their activity on export, are those which are near the ports and are not handicapped by transport costs.

The port of Baltimore fits the description of a 21st-century port for just the reasons Mr. Abraham outlines. Its physical marine terminal facilities are unexcelled on the East Coast; its network of roads and rail access and its proximity to the nation's Midwest give it an exceptional advantage vis-a-vis other East Coast ports.

Notwithstanding deregulation, transportation costs to and from Baltimore to the Midwest are still substantially cheaper than any other East Coast port. While it is true that some competitive ports have subsidized this inland move in order to compete with us, the cost of these subsidies in these days of budget shortfalls is being recognized by the state legislatures. It is only a matter of time before the free market in transportation surfaces and Baltimore's advantages will be recognized -- provided that we change our market techniques and trumpet our traditional advantage.

Too much has been made of the additional steaming time required to reach Baltimore. If Mr. Abraham is to be believed, history has proved that vessels, be they triremes or containerships will seek out the cargo. Baltimore should concentrate its marketing efforts on the shippers and consignees of cargo instead of trying to subsidize the steamship lines' operations in order to convince them to call here.

The State of Maryland seems to be giving up on the port as a viable contributor to our economy. Rumors of its demise, however, are premature. It would be very short-sighted on the part of the legislature to cut core services. More than ever, we need a vital marketing and sales force, especially in the Midwestern United States and Europe where our opportunities are the greatest. We spent a lot of money developing physical facilities and easy access to them. Soliciting the right customers will give us the maximum return on our investment.

M. Sigmund Shapiro is president of Samuel Shapiro & Company.

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