Dredging Jaxport? 9 Points You Should Consider

February 24, 2015 27 comments Open printer friendly version of this article Print Article

As the debate over port deepening continues Professor David Jaffee, Ph.D, offers 9 points for Jacksonville taxpayers to consider before supporting this billion dollar initiative for Jaxport.

1. Globalization and Port Logistics.

The process of globalization over the past thirty years has entailed the offshoring of US manufacturing and the increasing separation of the point of production (e.g. Asia) from the point of consumption (the U.S.) for most of the mass consumer merchandise purchased in the United States. In order to maintain the profitability of goods produced/manufactured in low wage and less regulated nations far from consumer markets, the cost of moving the goods back to these consumer markets must be kept as low as possible.

These two factors – the separation of production and consumption and the need to avoid losing that low-cost advantage in the transportation of the goods – have fueled the expansion of the logistics industry and the prominence of maritime ports (and container terminals).

Therefore, one should understand that the primary objective of the intermodal logistics supply chain -- in which Jaxport is simply one of many nodes/gateways into the US market -- is to move the goods as quickly and cheaply as possible from the point of production to the point of consumption.

Two corollary points to keep in mind: a. As long as transportation and logistics costs can be kept low, the advantage of shifting production offshore will be retained and there will be no economic incentive to produce these goods domestically. b. If consumer goods were actually produced in the United States, the ports would be far less important.

2. Discretionary Cargo.

The majority of cargo entering US ports is what is termed “discretionary cargo”. This means that shippers have the discretion to bring the cargo through almost any port in the United States because the cargo is not bound to any particular location. It can be moved to final destinations across the country using the intermodal transportation system (rail, truck). So, for example, most of the containerized cargo that enters through Jaxport is bound for destinations far beyond Jacksonville and north Florida. The port is not selected because goods will be consumed in Jacksonville nor because there are goods produced in Jacksonville that need the port for export purposes.

Rather, ports are selected on the basis of the costs and the speed at which the goods can be moved to their final destination. There are two important implications from the fact that most port cargo is discretionary. First, ports must compete with each other for the containerized cargo. There is no guaranteed cargo that must enter the through any particular port. US market shippers and carriers are in a stronger bargaining position vis-à-vis the ports as all the ports compete with each other for the cargo business of these shippers and carriers. Second, many of the economic benefits associated with the cargo that moves through any port are felt far away from the port city/community because the cargo has no necessary relationship to the local economy.

This contributes to the widely cited port phenomenon -- costs of the port economy tend to be geographically concentrated (infrastructure, pollution, maintenance, congestion) while the economic benefits are geographically dispersed.

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