Financing Crossborder Port Competition in the Pacific Northwest

By Jock O’Connell

November brought heavy rains to the Pacific Northwest, causing extensive flooding that tormented Vancouver and surrounding areas and temporarily severed road and rail links to the rest of Canada. Headlines worldwide strove to dramatize the plight of the imperiled city by running variations on the headline that ran in The New York Times: “Vancouver Is Marooned by Flooding.”

That was certainly one way of framing the situation. But lest we forget, the Port of Vancouver is Canada’s largest seaport and its chief gateway for trade with the Far East. Were the Canadians of British Columbia as self-obsessed as their British cousins, they might have preferred seeing headlines similar to one that appeared in a London tabloid when I lived there years ago: “Dense Fog Descends on Channel; Continent Cut Off.”

In this column, I don’t propose to talk about natural disasters. Still, especially for students of the relentless push for novelty in nomenclature, it does seem worth taking a moment to observe that the once-popular term “Pineapple Express” has evidently now been retired in favor of “Atmospheric River” as the preferred term for describing a deluge of epic proportions.

Moving back on point, it is a shame we generally don’t pay more heed to the ports of British Columbia and their cross-border rivals, the Ports of Tacoma and Seattle. Down here below the 49th parallel, the national media has lately been lavishing attention on port congestion in Southern California. Evidently, few news editors see much reason to dispatch reporters to the Pacific Northwest to check on maritime trade up that way, on either side of the border. To be sure, the wildfires and record high temperatures of this spring and summer did manage to shove aside the civic tribulations of the City of Portland to gain the region a measure of sympathetic national attention. But what role the ports on both sides of the border play in North America’s global trade is a topic seldom broached, at least outside of the Pacific Northwest.

It’s not as though the Ports of Prince Rupert and Vancouver in British Columbia (BC) and the Ports of Tacoma and Seattle in Washington State have been remote sideshows in the surging transpacific container trade. To be sure, taken individually, their container numbers are dwarfed by the millions of TEUs flowing through the Ports of Los Angeles and Long Beach in Southern California’s San Pedro Bay. Still, through the first ten months of this year, these four major ports in British Columbia and Washington State combined to handle 3,067,145 loaded import TEUs, the equivalent of 80.4% of all the inbound loads that arrived at the Port of New York/New Jersey (PNYNJ) during the same months. The four Northwestern ports also handled 1,500,534 export loads, a volume greater than the number of exported TEUs that left PNYNJ or Savannah or Los Angeles or Long Beach in the same period.

Since 2014, the Ports of Tacoma and Seattle have been operating as the Northwest Seaport Alliance (NWSA). Together, their container volumes have nearly matched Vancouver’s. Through October, Vancouver handled 3,185,381 total TEUs (empties as well as loaded), while the two NWSA ports handled 3,156,500 total TEUs. Located approximately 1500 kilometers north of Vancouver, the Port of Prince Rupert has been struggling to fulfill its original promise. Nonetheless, it has handled some 884,729 total TEUs through October.

So what accounts for the relative success of the Canadian ports?

Various factors obviously come into play, but one key reason is the quality of the relationship the ports have had with their respective local and national governments. On the U.S. side of the border, we are accustomed to local governments thinking that spectacle should take priority over commerce. Sports arenas and tourist attractions that infringe on seaport operations are commonly touted as somehow spiritually uplifting even if the economic benefits are almost invariably illusionary. Meanwhile, the dirty work of transporting billions of dollars in imports and exports is often decried in the same manner in which the lords and ladies of Downton Abbey disdain mere tradesmen. As for support from the federales in Washington, I have nothing to add to what LA Port Executive Director Gene Seroka has long bemoaned: that federal port money overwhelmingly goes to ports somewhere else.

Now, interestingly but disingenuously, the Port of Vancouver likes to tout its financial independence from the Canadian public trough. As its website claims: “The Vancouver Fraser Port Authority, like all Canada Port Authorities, is financially independent, receiving revenues from terminal and tenant leases as well as harbour dues and other fees charged to shipping companies that call at the port. We are not financed with tax dollars and all profits are reinvested into port infrastructure and other improvements.”

That’s a wonderful example of being parsimonious with the truth. Of course, there are myriad ways of tapping public funds to enhance the competitive position of a port without sending a treasury check to help cover the cost of port operations. Allocating funds to help finance the restoration of a port’s flood-damaged road and rail links to the outside world are examples that immediately come to mind.

Fortunately, we now have a new study*, commissioned by the Northwest Seaport Alliance and the Ports of Long Beach and Oakland, that begs to differ with the Port of Vancouver’s interpretation of what constitutes financial independence.

Prepared by Davies Transportation Consulting, Inc. in collaboration with Hatch Consultants Associates, Inc., the October 2021 study documents the very substantial financial assistance the British Columbia ports have received from Ottawa, substantially more than the competing Ports of Seattle and Tacoma have had from Washington, D.C. In the succinct words of the study: “Canada has treated its West Coast ports as a national priority.”

Here is what the study found: Investments in port terminals and rail networks have been critical in enabling B.C. ports to succeed in increasing their share of North American container traffic, enabling them to take advantage of the economies of scale of large container vessels and longer trains. For IPI [inland point intermodal] traffic to U.S. destinations, efficiency of the rail system is crucial. CN has made substantial investments in longer sidings and other network improvements to enable the use of 12,000 foot (and longer) intermodal trains. Based on estimates from U.S. Surface Transportation Board Public Waybill sample, international intermodal rates from B.C. ports to the Midwest have averaged around US$200 per container less than rates from Northwest Seaport Alliance, Port of Long Beach and Port of Los Angeles terminals over the last decade.

The U.S. Midwest is the largest destination for international intermodal traffic arriving at Pacific Coast ports, and the Ports of Vancouver and Prince Rupert have been escalating their bid for higher shares of that traffic. Based on Intermodal Association of North America data, the Davies study found that B.C. ports’ share of inland point intermodal traffic to the U.S. Midwest “increased from 2 percent in 2007 to 22 percent in 2020.”

To determine the actual loonie vs. greenback disparities in port investments, the Davies study counted funds expended on “Direct Port” projects, which were defined as projects for which a port is either the lead agency and/or the infrastructure funded is on or directly adjacent to port property. Major Canadian transportation funding programs which provided funds to port-related projects since 2005 included the Asia Pacific Gateway and Corridor Initiative from 2005 to 2016 and the National Trade Corridors Fund from 2017 to 2021.

The Davies study determined that Canadian federal contributions to B.C. “Direct Port” projects over the last five years (2016 – 2020) totaled US $372 million compared to US $45 million for Washington State ports. For “Direct Port” projects since 2005, Canadian contributions to B.C. ports totaled US $560 million compared to US $92 million for Washington State port projects.

There are hopes things may be changing now that America’s massive Infrastructure Investment and Jobs Act (aka the Bipartisan Infrastructure Law) has been enacted. Even so, it is unclear whether the grotesque geographic disparity in federal support for America’s ports – a disparity that has not favored West Coast ports – will be significantly redressed. Certainly, congested conditions at the Southern California ports have drawn an unprecedented measure of concern from the White House and Capitol Hill. But such concern can be fickle. A long-term commitment to bolstering the container-handling capacities of the supply chains passing through San Pedro Bay may be difficult to sustain once the current level of congestion subsides or as ports elsewhere in the country experience their own congestion issues. There are, after all, longstanding political reasons why federal funds earmarked for America’s ports have been doled out more with an eye to narrow electoral priorities rather than with any objective assessment of which projects would most benefit the national economy.

Still, as the Davies study concludes: “Success in accessing federal and other non-federal funds for port-related investment is a fundamental challenge in ensuring that the ports can build the infrastructure needed to compete in the North American containerized cargo trade.”

Disclaimer: The views expressed in Jock’s commentaries are his own and may not reflect the positions of the Pacific Merchant Shipping Association.