Underscoring the importance of trade: Economic impact of port slowdown, apple exports

It’s been more than a year since the West Coast port slowdown came to an end and as U.S. News reports, the effects are still being assessed. The linked article cites an economic impact assessment published by the Washington Council on International Trade. The report summary states,

Based on analytic modeling, the reduction in cargo handling productivity between October 2014 and March 2015 resulted in total near-term losses of $769.5 million to Washington businesses. This value represents the sum of net delinquent shipments and additional costs, specifically warehousing and truck idling fees.

In addition, the analysts write,

…the above findings represent only the short-term costs Washington businesses incurred due to the delays. Future costs, such as damaged client relations resulting in the loss of business or sole source contracts, can have long-lasting impacts on Washington businesses. While these impacts are not quantified in this report, they are real and potentially much greater than the near-term costs presented above. 

A year ago, Washington analysts expressed concern about lasting effects, as we noted here and here. A recent Yakima Herald-Republic editorial also cites the WCIT analysis and emphasizes the importance of international trade to the state’s agricultural industries. 

The trade council report notes that its $769.5 million loss figure includes spoilage, lost sales and lost market share to overseas competition. It doesn’t include long-term losses, such as trade that is rerouted through Canada or U.S. ports outside the West Coast. The report didn’t offer an overall figure of lost jobs, though it did cite one major sales and marketing group, Chelan Fresh Marketing, which was forced to lay off 250 workers and cut 100 full-time workers to part-time.

It’s a familiar refrain: The flow of goods from the Yakima Valley to overseas destinations is essential to the Valley’s economy.

Today the Washington Research Council writes of the importance of trade to the state’s apple industry, citing U.S. Department of Agriculture data demonstrating the domestic demand for apples has been almost stagnant since the 1980s. The WRC notes,

This means that export markets are even more important for Washington growers. In the 1980s, 13 percent of production was exported; in the 2014/2015 season, 29 percent was.

Trade agreements can help Washington growers, the WRC writes,

The agreement with China is already helping with our growers’ competitiveness. Another current trade policy example is the Trans-Pacific Partnership (TPP). Vietnam and Japan are both big markets that are parties to that agreement. According to the Northwest Horticultural Council, Washington apples are currently subject to tariffs of 10 percent in Vietnam and 17 percent in Japan. Under the TPP, U.S. apples would have duty-free access to those markets.

As important, surely, is a global awareness that West Coast ports will continue timely, efficient operations. Back to the U.S. News story,

Whether an end is in sight for costs related to last year’s port dispute remains to be seen. But a year since a resolution that was celebrated for bringing an end to months of West Coast port sluggishness, the economic consequences the dispute managed to generate appear to be anything but resolved.

The WCIT report says,

In fact, the long-term consequences of the port delays have the potential to be just as impactful to exporters as the direct costs; once a contract is lost, there may not be an opportunity to win back that business for five years or more. Foreign buyers not only need their products delivered on time and as expected, but they make business decisions based on reliability and reputation.

If Washington exporters are considered untrustworthy because of concerns about future disruptions at West Coast ports, further economic losses could result. While these impacts were difficult to quantify for the purposes of this report, they are significant and should not be ignored.

It’s difficult, impossible, to quantify the long-term costs of lost opportunity or to ascribe the costs to a single event. But it’s clear that in our trade dependent state, reliable port operations are critical. As our foundation report states,

Washington’s economy is highly dependent on global trade. The state ranks second in the nation in exports per capita…Washington’s many existing trade-dependent jobs, as well as the ones that can be created in the future, depend on an efficient, intermodal transportation system sending goods to and from our state.

Last year’s slowdown reminds us of the negative consequences for our state when that system breaks down.