With COVID-19 reducing the output of Chinese manufacturers by half—sending shocks through the global supply chain and reducing the volume of goods moving worldwide—The Planning Report reached out to Port of Los Angeles Executive Director Gene Seroka to offer a platform for sharing Port priorities for safeguarding operations at the West Coast’s largest trading port. The Director, here, emphasizes the Port’s critical role and responsibility to ensure essential goods, materials, and services move quickly to the people and places they need to be.
“The pandemic itself would have meant economic disaster at any time, but coupled with those trade policies out of Washington, we’ve been hit in the face twice.”—Gene Seroka
The Ports of Los Angeles and Long Beach serve as harbingers of how the global slowdown of trade due to COVID-19 is progressing. Share with our readers what you believe the pandemic’s impact will be on global trade going forward.
Gene Seroka: From our perspective, there have been two huge shocks to the international supply chain and the port systems in the past couple of years. One is the ill-advised trade policy in Washington with respect to China that ended with a 16.5 percent decline in volume for the Port of Los Angeles in the fourth quarter of 2019.
The second shock is obviously this global health pandemic, COVID-19, which in this first quarter of 2020 will show that our volume will be down 18 percent year on year—one-eighth. Those numbers will probably get a bit worse, and the knock-out effects of the coronavirus will go through the end of this year.
The latest reporting on trade flow includes signs of recovery for China’s exports, but also that demand is faltering in the US and Europe. Does this square with what’s occurring at the Port of Los Angeles?
Yes. Right now, it looks like China’s manufacturing is at about 50 percent of normal capacity. That’s basically cross-referenced—not just by our decades-long contacts on the ground after having worked in China, but also we compared those numbers to energy consumption, traffic patterns, and even smog—and all of those are right around that 40 to 50 percent mark.
While some were hopeful, we start to see a modest uptick in manufacturing capacity capabilities. It’s being met right now with a retail market that is shuttering doors and trying to cut back on inventory through delaying or eliminating purchase orders.
There’s a new Brookings report that asserts that in the midst of market uncertainty, two points are clear: some places are more exposed than others when it comes to managing the movement of goods; and, that millions of workers in those places will directly feel COVID-19’s effects. Could you elaborate on Brookings’ findings?
I totally concur with that. We’re seeing cargo movement that is about 80 percent—or maybe less—than normal. Mainly on the heels of the fact that our book of business with China amounts to about 50 to 55 percent of all cargo that moves through the Port of LA. Our level of exposure is higher than some based really on geographic proximity and decades of relationship development.
On the worker side—with Safer at Home—everyone except the essential workers stay at home, while that definition of ‘essential workers’ continues to be honed at federal, state and local levels. Many Americans and many workers worldwide are being impacted as we all know. We’ve all read the mass media reports of what’s tragically taking place in Spain, France, Italy, and many other countries. Slowly, even Britain jumped on board yesterday, finally.
Workers worldwide will be impacted, and I’ll give you a couple of stats from around here. One is that our Longshore groups have been working at about two-thirds of normal levels for the better part of this year, meaning about a third of their jobs have been cut, simply because there’s not enough cargo moving. In some cases—with the regular folks—they’re receiving a pay guarantee to be at home, as part of their coastwide NLRB sanction contract.
Truck drivers are not pulling as many loads, and some warehouses appear to be conflicted right now because of the unclear definition of ‘essential work’. Folks aren’t not willing to take a chance on having their warehouse open, deliveries made, etc., trying to understand what the letter of an essential goods really means as issued by these governmental orders.
We’re doing our level best to try to make sure people have an understanding, clear interpretation, and government level contracts to make sure there is no confusion about who should be on the job today. Obviously—being an economy who rests 70 percent of its success on you and me, the consumer, it’s going to take a hit.