Southern California made a big economic bet that logistics, becoming a point for receiving and handling the shipments of goods, would be an economic boon, but it now faces big tests of viability.
In retrospect, Southern California’s political and civic leaders may have erred a half-century ago in deciding that the region’s economic future would depend on developing a massive logistics industry centered on the twin ports of Los Angeles and Long Beach.
Countless billions of public and private dollars were committed to upgrading the ports to handle ever-larger container ships, erecting dozens of warehouses and other facilities in San Bernardino and Riverside counties, and improving rail and highway corridors linking them to the ports.
In macro terms, it paid off.
As shipment of goods from Asia — particularly China — blossomed, the twin ports eventually claimed as much as 40% of the nation’s import traffic and logistics became, by some measures, Southern California’s largest single generator of employment. It propped up the region’s economy when another mainstay, aerospace, plummeted three decades ago after the Cold War ended.
That said, the industry may have peaked. Factors such as the enlargement of the Panama Canal, the emergence of India and other nations as suppliers of goods, congestion in the twin ports and transportation corridors, labor conflicts, and growing local opposition to the environmental impacts of logistics pose potentially existential threats.
Recently, West Coast ports finally settled a long-running conflict with the International Longshore and Warehouse Union with a new six-year contract. However, during the dispute, wildcat work stoppages had tied up traffic through the twin ports and some shippers moved their business to East Coast and Gulf ports.
The Pacific Merchant Shipping Association says that the twin ports saw import volumes decline by nearly 25% in the first six months of 2023, not only due to labor unrest but a sharp downturn in the Chinese economy.
Gene Seroka, the Port of Los Angeles executive director, told the Wall Street Journal that retrieving the business “will be an uphill climb. Our job now is to be absolutely relentless in going after every pound of freight possible.”
The machinery of logistics — ships to trucks to locomotives — produces tons of particulate emissions. They and the warehouses they serve also create traffic congestion and noise and over time the physical presence of logistics breeds resentment that, in turn, morphs into political and legal action.
The South Coast Air Quality Management District has steadily ramped up pressure on the industry to reduce polluting emissions by electrifying trucks and other equipment. The demands impose costs that, industry leaders say, make the region less competitive with alternatives, particularly East Coast and Gulf of Mexico ports.
The SCAQMD is now on the verge of issuing an overall draft rule to limit pollution from the ports and last month, labor and management officials and a variety of business organizations sent letters to the mayors of Los Angeles and Long Beach raising alarm about what they regard as a potentially fatal blow to the ports’ long-term viability.
“The initial SCAQMD staff proposal essentially establishes volume caps on port activities, which will restrict the delivery of critical imported goods including essential construction, manufacturing, and automobile components, as well as medical supplies and halt the export of California’s manufactured goods and agricultural products to foreign markets,” the coalition told the mayors.
In August, as details of the proposed rule leaked out, the state Assembly’s Select Committee on Ports and Goods Movement staged a hearing in which legislators decried the potential economic impact.
Southern California may have made a mistake when it put so many of its economic eggs in the logistics basket but it is now a test case whether California can manage the potentially immense economic fallout from converting itself into a net-zero emission society, as Gov. Gavin Newsom and other political figures pledge to do.