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WORLDWIDE SEAPORT CONGESTION

A Master Thesis

Submitted to the Faculty

of

American Public University

by

James Anthony Braveboy

In Partial Fulfillment of the

Requirements for the Degree

of

Masters of Arts

October 2015

American Public University

Charles Town, WV

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The author hereby grants the American Public University System the right to display these contents for educational purposes. The author assumes total responsibility for meeting the requirements set by United States copyright law for the inclusion of any materials that are not the author’s creation or in the public domain. ©Copyright 2015 by James A. Braveboy All Rights Reserved.

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Dedication I dedicate this thesis to my late mother Willie Mae Henry whose spirit is always with me.

I also would like to dedicate this thesis to my wife, my family, my friends, and the faculty of

American Military University for standing by me and supporting me in so many ways over the

course of my studies and as I completed my thesis. Your understanding of the time and energy

displaced from pleasurable to academic pursuits is appreciated and will always be remembered.

Thank you!

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Acknowledgements I would like to thank GOD who is the head of my life. I would like to also thank the men

and women who serve in the United States Armed Forces and those who serve the country in

numerous other incredible ways – be it law enforcement, fire fighters, paramedics, doctors and

nurses. These selfless individuals embody the American dream and what we all should strive to

be. I would also like to thank Professor Keith Wade for his guidance and support while I was

completing this thesis and my course of studies. I would also like to thank all of my professors

and instructors who have taught me during my Master’s degree experience. I have learned so

much about who I am not only as a person but as an academic, and as a citizen.

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ABSTRACT OF THE THESIS

WORLDWIDE SEAPORT CONGESTION

by

James Anthony Braveboy

American Public University System, October 25, 2015

Charles Town, West Virginia

Professor Keith Wade, Thesis Professor

Seaport congestion, or the back-up of cargo ships in ports worldwide, is a growing phenomenon

in light of the globalization of the container shipping industry. Cargo ships filled with

merchandise sit in ports for many weeks, unable to unload, destabilizing economies that depend

on maritime import/export in both the developed and developing world. Given the development

of post-Panamax, or super-sized, liners, along with alternate sea routes such as the Northern Sea

Route and the newly-widened Panama Canal, shipping should be faster and easier than ever; this

is however not the case, and this thesis explores several theories as to why. Using the U.S. West

Coast as a jumping off point, this thesis contends that that a major source of friction and

contribution to the problem of massive seaport congestion worldwide is the dissonance between

globalized worldwide shipping networks that operate on sea, and the locally-based, unionized,

and heterogeneous dock workers they encounter in port.

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TABLE OF CONTENT CHAPTER PAGE I. INTRODUCTION……………………………………..……………………………8 Problem Statement…………………………………………………………………….9 Purpose of the Study……………………………………………………………….. 13 Theoretical Framework…………………………………………………………..… 13 Definition of Key Terms…………………………………………………………… 17 Research Design and Data Analysis Method…………………………………………18 II. LITERATURE REVIEW……………………………………………………………19 III. METHODOLOGY…………………………………………………….……………38 U.S. West Coast Labor………………………………………………………………. 39 Analyzing Labor…………………………………………………………………… 40 Globalization Theories……………………………………………………………… 41 Ways Around………..………………………………………………………………42 IV. RESULTS………….……………………………………………………………….. 43 U.S. Labor in the Global Shipping Landscape…………………………………….. 43 Multi-port Options for Conglomerate Liner Companies……………………………47 Liner Companies as Multinational Corporations ……………………………………51 Alternate Sea Routes…………………………………………………………………55 V. DISCUSSION………..………………………………………………..…….……….58

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Synthesis of Results…………………………………………………………………58 Recommendations…………………………………………………………………..59

List of References……………………………………………………………………62

Appendices…………………………………………………………………………. 65 Appendix 1: Summary of Documents by Category………………………………………65

Appendix 2: Map of Case Studies Relatedness to Major Topics…………………………67

Appendix 3: Theories of Labor……………………………………………………..68

Appendix 4: Ducruet and Notteboom’s Visualization of the Global Liner Shipping Network in 1996 and 2006………………………………………………………….69

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Chapter I: Introduction

In October of 2002, operations shut down along U.S. West Coast commercial seaports

between Portland, OR and Long Beach, CA due to a labor dispute between the Pacific Maritime

Association (PMA) and the International Longshore and Warehouse Association Union (ILWU).

The result of the shutdown, as Day and Arnold (2002) noted, was that over one hundred and fifty

freighters were sitting stagnant off the U.S. West Coast (p. 35), unable to unload their cargo. The

seaport congestion caused by the 2002 shutdown posed major complications that could have

potentially altered both logistics and the economy worldwide. In 2002, concerns over effects on

the market were swirling. Economic theorists predicted a transnational marketplace meltdown

affecting the U.S., Asia and Oceania (Woodyard, 2002, p. 5), but President Bush’s use of Taft-

Hartley Act managed to rescue the economy and squash anxiety for the next twelve years.

Tension along the stretch from Portland to Long Beach skyrocketed once again in

February 2014, as congestion reached a critical due to labor disputes. Not surprisingly, this

second incident resulted in many companies deciding against shipping to U.S. West Coast ports

in favor of new alternatives. The recent labor-induced congestion along the West Coast seaports

is related to several issues unique to the contemporary globalized seaport and maritime economy.

As Burnson (2015) points out, the post-Panamax era ushered in new scenarios for both labor and

logistics (Logistics Management). Many of these new challenges continue today not only to

rework and reroute seaport congestion, but also how we think about global shipping and

logistics, congestion on the seas, and the maritime economy.

Proposed resolutions to the contemporary issues of seaport congestion include opening

the Northern Sea Route along the Arctic Circle in Russia (Blunden, 2012). McCalla et al. (2004)

describe the way that globalization has created a lag in the container shipping industry between

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ultra-modern at-sea operations, which are highly conglomerated, and land (dock) operations,

which still run heterogeneously. According to Jaffe (2010), the rapid divergence of new super-

sized (post-Panamax) freight liners away from congested West Coast ports via the Panama Canal

to Gulf and East Coast ports also destabilizes the monopoly on competitive wages that the West

Coast-based ILWU historically has had over the East Coast-based International Longshoremen’s

Association (ILA). Ducruet and Notteboom (2012) illustrate the shift in port hierarchies through

a series of network maps that reveal the decreasing importance of the U.S. West Coast ports and

overall congestion worldwide, indicating not solutions created by global reorganization, but

simply reorganization in the face of rapid global growth.

The general problem faced by commercial shipping industry today is unresolved

worldwide seaport congestion. An unanswered question remains: is globalization incompatible

with the shipping industry, or does the industry simply need to catch up in order to resolve issues

such as congestion? The discrepancies within the global shipping industry that are in contention

today are problems of old methods meeting new, but the question begs further examination. This

document will assess the contemporary causes and proposed solutions to worldwide seaport

congestion and identify the challenges that contribute to the ongoing problem. Also included in

this document will be the purpose of study, significance of the problem, research questions,

definition of key terms, research design and data analysis method.

Problem Statement

General Problem

Before the era of modern globalized business, seaport operations were run

heterogeneously both on the high seas and on the docks; multiple companies operated lines on

the oceans, and multiple companies and operated on the docks and in the ports. Shipping lines, of

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which there were many, chose where to dock and unload their cargo based on the best rates they

could negotiate with port authorities and longshoremen. While the latter is still true, the era of

multiple shipping companies is disappearing in favor of a conglomerate model at sea –a result

typical of globalization. The clash between large conglomerate companies at sea and multiple,

small-interest companies and workers on the docks have contributed directly to seaport

congestion in the contemporary era as labor disputes become more frequent.

Superficially, seaport congestion appears to be the result of human need in an era when

business increasingly neglects the human, but research proves it a complex and tangled web of

various interests, both human and economic. Workers fighting for fair wages, safe conditions,

and proper working hours prompt slowdowns or even shut downs of business along the docks,

which in turn causes congestion along whole stretches of seaports. Large cargo liner companies,

often in conjunction with the port cities competing for their business, have sought to revolve

congestion issues by widening important waterways such as the Panama Canal so that larger

ships may pass through to different ports and deal with different companies and laborers.

Logistics theorists have also considered alternate sea routes; consequently, politicians have

argued over who can claim the Arctic Ocean paths above Russia, or whether or not it is safe to

dock ships near Yemen. A general problem of the modern globalization of the seaport shipping

industry, however, is the lack of resolution at the level of human labor relationships. This can be

seen, as McCalla, Slack, and Comtois (2004) and others have noted, in countless examples of

labor struggles in industrial ports, resulting in massive seaport congestion – where globalized

ocean liner companies have docked in an attempt to do business with unionized, heterogeneous

maritime land laborers.

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Specific Problem

The two major labor disputes within twelve years on the U.S. West Coast have proven

the potential of local labor relations to break down worldwide economies by clogging the

network at its most basic level. Between the 2002 shut down and the 2014 slowdown, a marked

change has taken place. As Fransoo and Lee (2013) point out, “containerized ocean transport has

become the lifeline of almost any global supply chain (p. 253). Since the early 1990s

containerized transport has been growing at almost three times the world GDP rate of growth,

and yet now an unbridled potential has come into play: The Panama Canal expansion project,

which has an intended completion date of April 2016, symbolizes the globalization-era shipping

industry (Allen, 2012). The term post-Panamax comes from this literal and figurative expansion.

Oversized cargo ships already dock in ports Southampton, and Liverpool UK (“CMA CGM

Marco Polo visits UK for first time,” (2012), and with the expansion nearing completion, they

will soon be moving freight around the world en masse (Ducruet and Notteboom, 2012).

According to Olney (2003), ILWU membership of longshoremen, clerks, and foremen on

West Coast docks had remained steady from 1980-2000, but the amount of cargo handled on the

docks increased by 128%, while employment of workers overall had increased by over 50%

from 190,000 to 290,000 (p. 39). Therefore, almost half of the employees working on West

Coast docks did not have collective bargaining rights, and according to Olney were working in

terrible conditions. Today, as Brunson (2015) notes, shippers are sick of back up and congestion

on the West Coast: “Total imports along the East Coast have increased by 16% while import

traffic along the West Coast is down by 4% (para. 4).” Not only does this shift represent a shift

in logistics made possible by the post-Panamax moment, but is also represents a vast shift in the

dynamics of human labor. Resolving seaport congestion at the level of business logistics in the

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era of the globalized economy indeed seems irreconcilable with the demands of human labor on

land, and so this paper asks whether the two can continue to cohabitate, as Hesse (2006)

suggests, or if another business model is needed to sustain the industry and economy.

Type of study

This study will be a mixture of qualitative and quantitative data that will examine the

causes and proposed resolutions to seaport congestion, with specific emphasis on globalization

of the container shipping industry, as well as organized labor. It will utilize present statistics on

labor and shipping from recent studies and compare them against studies that predate the post-

Panamax era for optimal efficacy (Blunden, 2012; Ducruet and Notteboom, 2012; Fransoo and

Lee, 2013; Muirhead et al. 2015). Maps and charts also help to explain the present redirection of

cargo ship congestion in seaports worldwide. Where present research is deemed inadequate or

inaccurate, suggestions will be proposed and alternatives examined. To provide a fair scope,

labor issues will be investigated from the perspective of both the unions (ILWU and the ILA)

and the Pacific Maritime Association, while issues related to the Panama Canal will also be

investigated from multiple perspectives (developed versus developing world, and multiple

political and economic views, for example) (Boyle 2015).

Additional qualitative review in the form of textual analysis of sources such as primary

sources from the two West Coast incidents place and give voice to the element of human labor

that is so deeply in contention with the global marketplace that the cargo liner system

increasingly operates within (Burnson, 2015; Cummings et al. 2002; Day and Arnold, 2002;

Mongelluzzo, 2015; The Economist 2002; Woodyard 2015). This methodology ensures both a

sound analytic approach to the problem of seaport congestion while also helping to identify and

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address the lack of discourse around human labor in the global marketplace within the container

shipping industry.

Purpose of Study

The importance of this assessment is to provide an alternate perspective to shipping

companies, port authorities, maritime associations, and union leaders and laborers of the

relationship between large conglomerate ocean liner companies and small, heterogeneous land

workers in order to prevent (what are otherwise preventable) situations of seaport congestion due

to lack of understanding between the two groups. Breaking down the complex problem into a

dialogue which accounts for all sides of the issue can and should result in smoother seaport

operations and a stronger seaport community. By validating measures such as post-Panamax as

essential components of a globalized economy, yet not the solution to worldwide seaport

congestion, parties can remove some of the stigma from the building of these larger ships and

focus on building relationships with workers and employers instead. This assessment will assist

with exploring modern economic trends in seaports, promote healthy labor-employer

relationships in a global maritime context, and generate new ideas about ways in which

congestion at seaports worldwide can be alleviated vis à vis inter-organizational negotiation. The

scope of this assessment is multidisciplinary and as such extant research is far-reaching; this

assessment draws from recent works in economics, logistics, business, and political science with

the intention to add complexity and nuance to these fields.

Theoretical Framework

Hypothesis

Globalization has vastly altered the container shipping industry. As McCalla et al. (2004)

note, the differences in carrier lines have all but disappeared, and these “conformities are best

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seen in the extension of services to all world markets through the alliances or multinational

mergers among the world’s largest shipper container companies” (p. 474). This, however, is not

the case for maritime land operations which as the authors note remain, “differentiated and

distinctive.” In other words, conglomeration defines sea operations while specialization defines

those on the docks. This marked contrast at least in part accounts for some of the massive seaport

congestion experienced worldwide recently. With the implicit industrial emphasis on profit, and

the innovative drive, as demonstrated by the ongoing widening of the Panama Canal to

accommodate super-sized liners and provide access to more ports, and the promotion of alternate

sea routes to alleviate congestion, the at-sea globalization model is the privileged business

model, leaving heterogeneous land operations behind. When sea and land operations go toe to

toe in the ports under this new globalized atmosphere, the dissonance is clear and can be

confirmed in the resultant labor strikes and slowdowns that directly cause seaport congestion,

affecting the global cargo shipping industry and the economy worldwide.

Significance of the Problem

During the 2002 shut down of the U.S. West Coast ports, up to 150 freighters sat off the

coast of Long Beach, causing shipping companies to look for alternate accommodations, and

losing up to $1 billion in revenue per day as business stagnated. The shutdown prevented

Americans from getting goods such as produce and poultry from other countries, and was also

troubling to countries such as Pakistan, where the economy relies on clothing industry-related

exports and the need to fulfill multilateral trade quotas for these products (Day and Arnold,

2002). The potential for economic disaster is inherent in letting freighters sit along the coast. The

wide-reaching effects of seaport congestion demonstrate the fragility of the globalized economic

model in that multiple linked economies have the potential to collapse based on a simple shut

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down of two or three major ports in one country. While the U.S. has a developed economy,

smaller developing countries would have a much harder time recovering from such a collapse.

As Mongelluzzo (2015) points out, the effect seaport congestion caused by port shut downs

could devastate the economies of East Asia (“LA-Long Beach, Oakland, PNW reaches critical

level”).

Additionally, the focal cause of seaport congestion discussed in this paper – a friction

between multinational at-sea operators and specialized maritime land labor – has not fully been

explored from the perspective of land labor, taking into consideration the modern needs and

demands of dock workers. Studies such as Blunden (2012), Ducruet and Notteboom (2012),

Jaffee (2010), and Turnbull and Wass (2007) among others, all cite this dissonance but do not

explore the nuances of maritime land labor from land labor’s perspective. Clues as to why and

how seaport congestion emerges from this point of contention are found in labor journal articles

about specific incidents (such as Olney’s 2003 “On the Waterfront” analysis of the 2002

shutdown), but this thesis attempts to provide a more complete picture by combining existent

research on globalization with such case studies in order that the cause of these problems

becomes better understood, and hopefully, avoidable.

Research Questions

The primary research question of this assessment is: Would a reconciliation between

heterogeneous, multi-company, often unionized land (dock) labor and homogenous,

conglomerate shipping lines operating at sea alleviate seaport congestion? Are other

stakeholders, such as port authorities, regional and national governments, non-unionized labor,

and hinterland transport companies equally to blame for this problem? The disparity between

pre- and post-Panamax freight shipping, which can also be described as container shipping

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before and after hyper-globalization, causes friction in the supply chain, but this is only one

element that contributes to congestion worldwide. Theorists also postulate that congestion is due

to the increased demand for seasonal products, and emergent retail cycles, increased liner traffic,

new access to ports in the developing world due to the opening of the Panama Canal expansion,

among other reasons. However, in the age of post-Panamax, while many focus on economics

trends and the truly awesome logistics of the new super-sized container ships built especially for

the Panama Canal’s new third set of locks, it is worthy to examine the reasons that U.S. West

Coast ports is losing business due to repeated bouts of congestions offshore directly resultant

from disputes at the human/land versus corporation/sea level.

Secondary questions include: What are the benefits to a globalized maritime economy,

and is it possible or even preferable to maintain a heterogeneous economy on the docks? Post-

Panamax liners are beginning to dock in ports around the world and may potentially bring

growth to the economies of the communities they are landing upon. Globalization links networks

of economies together through supply chains that necessitate organization that the container

shipping industry is still working out, possibly at the expense of organized and working class

labor. It is still unclear what will happen in the future between large organizations that control

shipping such as the Pacific Maritime Association, and the unions that control labor on the

docks.

Additional questions: Do alternate “solutions” to the problem of seaport congestion, such

as the Northern Sea Route, operate like a band aid, and neglect to address the real problem at its

core and instead redirecting attention for the time being elsewhere in order to bide time and clear

the air, so to speak? Politically charged conversations over international waters and war-torn

territories stir up animosities between already fragile international political relationships. It

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would seem prudent to shift away from such temporary solutions in order to find a successful

and lasting option to meet this challenge.

Definition of Key Terms

Alternate Sea Routes: the next operationally-ready sea shipping routes, such as the Northern

Sea Route in the Arctic Ocean above Russia, which could potentially replace the more congested

sea shipping routes such as those running through the Panama and Suez Canals (Blunden 2012,

pp. 115-129).

Conglomerate Liner Companies: As a result of globalization, shipping liner companies have

become conglomerates, or merged together under one multinational corporation while still

appearing to remain as distinct smaller companies (McCalla, Slack, and Comtois 2004, pp. 473-

487).

Containerization: A system of intermodal freight transport using containers of a standard size

made of weathering steel. Containers can be loaded and unloaded onto ships, railways, and semi-

trailer trucks without being opened, and are tracked using computerized systems (Ducruet and

Notteboom 2012, pp. 395-423).

Globalization: The international integration of politics, economies, worldviews, and cultures

(Hesse 2006, pp. 570-596).

ILA: International Longshoremen’s Association (East and Gulf Coast labor union).

ILWU: International Longshore and Warehouse Union (West Coast Labor Union).

Maritime Land Labor: Dock workers and other land laborers who work in ports. Workers can

be unionized or not, but workers with union contracts often receive better wages and working

conditions due to their collective bargaining power (Olney 2003, pp. 31-40).

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Multinational Corporation (MNC): Organization that owns the means of production or

products in more than one country aside from their own (Abdulsomad 2014, pp. 415-426).

PMA: Pacific Maritime Association (association that controls land labor in West Coast ports).

Research Design and Data Analysis Method

This research design that will be used in this thesis will be a mixture of quantitative and

qualitative data that will examine the causes and proposed resolutions to seaport congestion, with

specific emphasis on globalization of the container shipping industry, as well as organized labor.

It will utilize present statistics on labor and shipping from recent studies and compare them

against studies that predate the post-Panamax era for optimal efficacy (Blunden, 2012; Ducruet

and No