The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger
Page 24
Two traditional maritime centers stood aside from the frenzy. Portland, which handled nearly as much cargo as Seattle during the 1950s, could not muster the money or resources to build a containerport. The consequences were severe. Seattle’s foreign trade more than doubled between 1963 and 1972, but Portland’s barely grew. Once Japanese containerships began to call at Seattle, in 1970, Portland found itself receiving Japanese goods by truck from Seattle rather than by ship from Yokohama. San Francisco faced more fundamental problems, because the city’s location, on a congested peninsula with direct rail access only to the south, was ill-suited to handling freight to and from points east. City officials managed to get dredging under way in 1968 after wresting control of their port away from the state, but actual construction of container piers was delayed so long that even American President Lines, whose predecessor companies had made their home in the city for more than a century, finally decamped for Oakland. The city’s plans kept changing, even as Seattle, Oakland, Los Angeles, and Long Beach opened one huge purpose-built container terminal after another. In 1969, a Swedish ship line’s massive neon sign, a fixture of the San Francisco water-front for decades, was moved across to the Oakland side of the bay, the glowing words “JOHNSON LINE” offering San Franciscans a nightly reminder that their city’s time as a major port was over.16
The explosion of port construction on the Pacific coast, starting in the 1950s, had no counterpart on the other side of the country. After Grace Line abandoned its ill-fated container service to Venezuela, Sea-Land was left as the only company using dedicated ships to move containers in the East. The many other lines that advertised container service handled boxes along with mixed freight and did not need special cranes or storage yards. More important, the extraordinary enthusiasm for containerization shown by Pacific Coast ports was little in evidence on the Atlantic, except at Sea-Land’s home port in New Jersey. The West Coast ports that embraced containerization, save for Los Angeles, were withering in the late 1950s, and they saw salvation in the new technology. The ports on the Atlantic and the Gulf of Mexico had a steadier flow of cargo: as late as 1966, nine of the ten largest maritime routes for U.S. international trade passed through ports on the East Coast or the Gulf, and only one touched the West Coast. The eastern ports had less to gain from containerization, and, outside of New York, their eagerness to invest millions of dollars of public money was correspondingly less acute.17
The Port of New York Authority docks in Newark and Elizabeth were expanding without cease as container shipping became an international business. By 1965, half a dozen ship lines announced plans to launch container services from New Jersey docks to Europe in 1966, and dozens of new ships were on order. The embrace of containerization was not repeated up and down the coast. The obstacles were the same almost everywhere: labor and money.
On the labor front, the New York Shipping Association and the ILA had negotiated smaller gang sizes and a guaranteed annual income for displaced longshoremen in 1964, but union locals at other ports, save Philadelphia, had not. Unlike New York, where the efforts of the Waterfront Commission had eliminated casual dock-workers in the 1950s, most other East and Gulf Coast ports had large numbers of part-time longshoremen well into the 1970s. Boston longshoremen worked an average of one and a half days per week, New Orleans longshoremen two days. If containers were allowed, these part-time jobs were likely to vanish as the industry shifted to a permanent, full-time workforce. The ILA had seen how container shipping had decimated its membership rolls in New York, and it was loath to tolerate it in other ports until income guarantees were in place.18
Interunion disputes were a problem as well. In Boston, the Massachusetts Port Authority spent $1.1 million to build a container crane in 1966 so that Sea-Land ships could call on their way between New York and Europe, but the terminal was kept closed first by a dispute between the ILA and port employers and then by a dispute between the ILA and the Teamsters union. Sea-Land and its competitors soon learned that they could operate more profitably by trucking Europe-bound containers to New York and having their ships bypass Boston, and port traffic never recovered. In New York and other ports, the Teamsters objected to contracts that guaranteed ILA members the right to consolidate partial loads into containers at inland warehouses. The ILA viewed these contracts as essential to preserving its members’ jobs as traditional maritime functions moved away from the waterfront, but the Teamsters viewed them as infringements on their own jurisdiction over the warehouse industry. Contests over which union’s members would do the work persisted until 1970.19
Aside from Baltimore, most ports found the cost of building dedicated container facilities so daunting that they postponed decisions. The city of Philadelphia, short of funds, did nothing toward containerization until worried business leaders pushed for the creation of a port corporation with authority to issue bonds, in 1965. Only after a study predicted that Philadelphia would soon be losing a million tons of freight per year did the new corporation reluctantly invest in a container terminal, which opened in 1970. Miami built ramps for roll on-roll off ships but no specialized wharves for containerships. Gulf Coast ports such as Mobile decided not to invest in containerization because many of the Caribbean islands to which they exported were too small to require large containers. New Orleans, long the largest Gulf port, handled containers over the same wharves used for other types of cargo; its first purpose-built container terminal, located on a canal that subsequently proved too shallow, did not open for business until 1971. Houston, Sea-Land’s original western terminus, invested sooner, and it firmly established itself as the premier containerport on the Gulf.20
The net result of these decisions was that a single port, the Port of New York Authority’s complex at Newark and Elizabeth, dominated container shipping in the East. In 1970, only one other harbor between Maine and Texas, the Hampton Roads of Virginia, could boast even one-ninth the container capacity of the wharves on New York harbor. The emerging economics of container shipping meant that the laggards faced potentially serious consequences. The newly built containerships coming on the scene in the late 1960s carried far more cargo than the vessels they supplanted; even if the total amount of cargo grew, fewer voyages would be required. Shipowners wanted to keep their ships under way to recover the high construction cost, so they preferred that each voyage involve only one or two stops on either side of the ocean rather than four or five. Secondary ports would not see transatlantic ships but would get only feeder services to bigger ports. Once a port had slipped from the first rank, it would have a hard time climbing back: a less active port would have to spread the cost of building a capital-intensive container terminal across fewer ships, and its higher costs per ship would in turn drive away business. Ports that came late to the container game either would have to take huge risks in hopes of attracting tenants or would need to find a large ship line willing to help bear the costs of establishing a major new port of call.21
Some late starters did succeed in turning themselves into major containerports with relentless investment. The first containers passed through Charleston, South Carolina, in 1965, but the port had only one berth and no specialized crane to handle containers. Then, in the late 1960s, Sea-Land decided to expand its very modest Charleston operation. The state-owned port began an ambitious development program, growing from an initial fifteen-acre container terminal into three terminals covering nearly three hundred acres by the early 1980s. Charleston, with almost no container traffic in 1970, ranked eighth among continental U.S. ports by 1973 and climbed to fourth by 2000. The nearby port of Savannah, Georgia, another late starter, followed a similar trajectory after belatedly installing its first container crane in 1970. But as container shipping made the transition from the emerging technology of the early 1960s to the booming business of the early 1970s, the opportunity for ports to establish themselves as major maritime centers was diminishing rapidly. “The maintenance of a major port in every major coastal city is no longer justifie
d,” a government report declared in the early 1970s. Such long-standing ports as Boston and San Francisco, Gulfport, Mississippi, and Richmond, California, would have to find other roles in the container age.22
The first decade of container shipping was an American affair. Ports, railroads, governments, and trade unions around the world spent those years studying the ways that containerization had shaken freight transportation in the United States. They knew that the container had killed off thousands of jobs on the docks, rendered entire ports obsolete, and fundamentally altered decisions about business location. Even so, the speed with which the container conquered global trade routes took almost everyone by surprise. Some of the world’s great port cities soon saw their ports all but disappear, while insignificant towns on little-known harbors found themselves among the great centers of maritime commerce.23
Nowhere was the transformation more tumultuous than in Britain. London and Liverpool were by far Britain’s biggest ports in the early 1960s, but their business was remarkably close to home. Exporters and importers tended to use the nearest port in order to minimize trucking costs. About 40 percent of Britain’s exports in 1964 originated within twenty-five miles of their port of export, and two-thirds of all imports traveled fewer than twenty-five miles from the port of discharge. London, a huge industrial center in its own right, and Liverpool, serving the industrial heartland in the English Midlands, each handled one-fourth of British trade, with dozens of other ports claiming small shares.24
Both the London and the Liverpool docks were run by local government agencies, which since the 1940s had walked a tightrope between improving operations and antagonizing the powerful Transport and General Workers Union; as one careful student aptly described the situation, the docks had been modernized in “a leisurely manner.” Dozens of small stevedoring companies competed to load or unload each vessel, and the stevedores in turn hired long-shoremen by the day. These transitory arrangements involving lightly capitalized companies provided no incentive to make long-term investments in automation. Although productivity gains had been sluggish since the mid-1950s, pay gains had been robust. The average full-time docker earned about 30 percent more than the average male worker in Britain in the mid-1960s, compared with a gap of about 18 percent a decade earlier.25
Numerous government commissions had studied ways to make the ports more efficient. An inquiry in 1966 had called for a reduction in the number of stevedore companies, in the expectation that the survivors would be larger, more professional, and better able to finance equipment for efficient cargo handling. In return, the government promised that automation would not lead to redundancies among dockers. Given time, perhaps a deal could have been struck: on both coasts of the United States, the union agreements that opened the way for containerization had taken half a decade to arrange. No time was available in Britain, because technological change was forcing its way onto the docks. In March 1966, United States Lines carried the first large containers, along with other freight, on a voyage from New York to London. The following month, Sea-Land’s Fairland steamed across the North Atlantic to Rotterdam, Bremen, and the Scottish port of Grangemouth, carrying only containers. With barely a year’s notice, Rotterdam and Bremen had lengthened docks, deepened channels, and begun installing container cranes. London had not—and Fairland did not bother to call.26
London’s formidable docks, it was obvious, were not well suited for container shipping. The docks were grouped in sheltered enclosures off the Thames that were difficult even for conventional ships to navigate; large vessels had to unload into lighters nearer the mouth of the river. Labor issues aside, transferring huge cargo containers from oceangoing ships to lighters made no economic sense, and the prospect of hundreds of lorries hauling 40-foot loads through the narrow streets of East London was a nightmare. Liverpool’s aging docks had similarly few attractions for container operators. The British Transport Docks Board, the government’s oversight agency, turned to consultants McKinsey & Company for advice. McKinsey predicted that container shipping would quickly consolidate around a few companies using gigantic ships carrying standardized containers. Ports, it said, would need to be very large to gain economies of scale in transferring containers between ships, trains, and trucks at high speed. Containerization could cut Britain’s ocean freight bill in half, McKinsey found—but only if a single huge port were to handle all cargo to and from North America and then use unit trains to link the port to other parts of the United Kingdom. A simultaneous study by consultant Arthur D. Little predicted that in 1970, ships would carry the equivalent of 1,800 20-foot containers each week from America to Britain, and 1,580 from Britain to America. Every aspect of these findings represented a threat to the power of the Transport and General Workers Union: there would be fewer ships, fewer ports, and fewer workers at each port. An important part of traditional dock work, the loading and unloading of cargo, would move to warehouses miles inland, where dockers surely would not be employed.27
The British Transport Docks Board and local port agencies agreed on major investments that would total £200 million ($550 million at the 1967 exchange rate) between 1965 and 1969. The largest was the Port of London Authority’s £30 million ($83 million) container complex at Tilbury, a longtime port twenty miles down the Thames. Away from the traffic congestion of central London, and with populous southeast England at its doorstep, Tilbury had the potential to become Europe’s premier containerport, or so the government hoped. There were to be five deepwater berths for containerships, each with twenty acres of land to store containers. Another containerport was built at Southampton, southwest of London, and the Mersey Docks and Harbour Board began a container terminal at Seaforth, north of Liverpool close to the deep water of the Irish Sea.28
Tilbury’s opening in 1967 was accompanied by a “voluntary” severance scheme for dockworkers, funded by charges on cargo at major ports. The union soon accused employers of abusing the rules to get rid of workers, and it objected to the new government policy encouraging permanent employment rather than daily hiring on the docks. Reaching back to a tactic tried by the International Longshoremen’s Association in New York a decade earlier, the union imposed a ban on containers at Tilbury from January 1968.29
The Transport and General Workers Union was powerful, but not omnipotent. It had never bothered to sign up members at the tiny port of Felixstowe, located on a North Sea estuary ninety miles northeast of London. Felixstowe, one of the hundreds of towns on Britain’s coasts, had two docks owned by the Felixstowe Railway and Dock Company, a private company controlled by an importer of grain and palm oil. The docks had been destroyed in the storms of 1953, and by 1959 the only activity involved ninety permanent workers who unloaded tropical commodities into a few storage tanks and warehouses. Felixstowe had no general-cargo business to protect, no militant unions, and, because it had never employed casual dock labor, no requirement for ship lines to contribute to the national dockworker severance scheme.
In 1966, while the British government was trying to convince container ship lines to call at Tilbury, Felixstowe’s owners had had the foresight to strike a private deal with Sea-Land Service. They spent £3.5 million pounds ($10 million), a fraction of the government’s outlay at Tilbury, to reinforce a wharf and install a container crane. Sea-Land opened service in July 1967 with a small ship shuttling containers back and forth to Rotterdam, and soon added ships directly from the United States. In 1968, with Tilbury closed by the strike, the hitherto obscure Port of Felixstowe became Britain’s largest container terminal. U.S. Lines finally was able to use Tilbury after reaching a union agreement, but the port remained closed to most other container carriers, including British lines. By 1969, Felixstowe, with two or three North Atlantic sailings each week and several feeder services running across the North Sea to Rotterdam, handled 1.9 million tons of general cargo, every bit of it in containers.30
Tilbury’s prolonged closure hit hard at the two consortia of British carriers that had plann
ed to launch container services there, one across the North Atlantic and the other to Australia. They struck back in the traditional way: by trying to stifle their competitors. Sea-Land’s request to join the conferences that set rates between the United States and Britain was rejected until the company filed an antitrust suit in British courts. When a small U.S. company, Container Marine Lines, offered Scottish distillers a through rate covering shipments between their plants and U.S. ports, including land transportation from Scotland to Felixstowe, the conference objected that a through rate would lead to “regulatory disintegration.” Only the threat that the U.S. Federal Maritime Commission would curb the conference’s right to set rates forced it to accept more competition.31
Felixstowe’s fortune came directly at London’s expense. London’s port had been busy through the mid-1960s. The shift to container shipping boosted average tonnage per man-hour 66 percent in just four years. The abrupt fall in costs at other ports drove the London docks to collapse. As Tilbury opened, the famous East India Dock closed without warning in 1967. As Felixstowe burgeoned, the St. Katherine Docks, adjoining the Tower of London, were shut in 1968. The nearby London Docks followed immediately, and the Surrey Docks, across the river, closed in 1970. Of the 144 wharves that had operated in London at the start of 1967, 70 closed by the end of 1971, and almost all of the rest followed soon after. The number of dockworkers fell from 24,000 to 16,000 in less than five years. Factories and warehouses, with no further need to be near the Thames, began to flee, taking their import-and-export business elsewhere, and the waterfront communities tied to the port began to disintegrate.32