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Chairman Cordero’s TOC Remarks

Posted
October 12, 2016

Good morning.

It is a pleasure to be here today, especially as it allows me to discuss an issue of keen interest to me for many years now—how we can better integrate the economies of the United States and Latin America.

You may recall back in 2009, President Obama within his first 100 days in office attended the Summit of the Americas to further both political and economic relations between North and Latin America. Last year at the 7th Summit of the Americas in Panama the President reaffirmed the commitment of the United States to furthering the economic partnerships with the Americas and the importance of the role the private sector.

This has been a monumental year to be at the intersection of shipping, trade, and the Americas. Two events stand out as being particularly historic and consequential: steps toward normalization of relations between the United States and Cuba; and the opening of the expanded Panama Canal. I have no doubt that 2016 will be remembered as a pivotal year for U.S.Latin America commerce for a number of reasons.

Cuba represents some very interesting tourism and business opportunities for American companies. To be realistic, this bilateral economic relationship will require a lot of work before the full potential of this market is realized. Nevertheless, when the tourism and trade opportunities to be found in Cuba begin to be realized, maritime is going to play an absolutely essential role in the success of American companies doing business there.

Additionally, as each of you know, the newly expanded Panama Canal was inaugurated in late June. I was very fortunate to be on hand as part of the official U.S. Delegation witnessing the celebration of this milestone. My congratulations to our friends in Panama for this great achievement. The expanded Canal represents more than an impressive achievement of engineering and construction, it represents a way to change trade patterns.

One of the key contributions the expanded Canal is going to make is giving shippers more options for where and when their cargo will enter the United States. The proximity of west coast ports to Asia may no longer be the only consideration that drives decisions about where discretionary cargoes land. If port productivity is low, or ancillary fees are too high for the services rendered, shippers definitely have more options open to them than they did only a few years ago.

Shortly after the Canal dedication ceremony, I was fortunate to be able to join my friends at the Port of Miami to welcome the first Neo-Panamax vessel to call southern Florida. The arrival of the “MOL Majesty” means that Miami has the potential to be not just a strong regional port, but it can compete as a national gateway for international commerce.

Similarly, there is talk about how ports on the Gulf of Mexico are now potential competitors to more traditional container facilities on the Atlantic and Pacific Coasts. While these ports may soon be competing for ever larger container ships calling the Southeastern United States after sailing from Asia through the Canal, it strikes me that the real opportunity for new port business is finding ways to harness the potential of the north-south trade routes between the United States and the nations that lay south. After all, Mobile, Alabama is closer to Cape Horn than it is to Shanghai; and bear in mind, no vessel would have to sail that far south to pick-up cargo.

The thesis that there is trade growth to be had between the United States and Latin America is a sound one. It is a region that is home to 600 million people; you will find two of the top 15 trading partners of the United States in Latin America; and, it has been called the “Next Global Breadbasket”. The opportunities for trade are bountiful and transportation companies are taking note. Indeed, CMA-CGM recently announced it has established service between New Orleans in the United States and ports in Chile, Peru, and Ecuador. This is in addition to existing service to Latin America provided by carriers such as Crowley, Hapag-Lloyd, Seaboard, Maersk, and others. I do not doubt we will be hearing about more companies expanding their service offerings to Central and South America in the years to come. Latin America is a region of consumers, markets, and resources that has been largely untapped. Even more significant, it is a part of the world where many of its nations have recently enjoyed years of prosperity, driven in large part by demand from China.

It is not hard to see why so many nations in Latin America would be attractive trading partners for the Chinese. For a resource hungry nation with growing middle and upper classes, the oil, gas, food, precious metals, aquaculture, and other resources found in the Southern Hemisphere are the very commodities China desperately needs to secure. It was natural that China would seek to establish and expand economic ties.

While the countries of Latin America should pursue trade relationships with as many nations as they can—including China—it has long been my hope that the Americas—North, Central, and South—would find ways to embrace each other as the natural trading partners they should be. Our friends in Latin America should look north to the United States, a nation with which they have a terra firma connection.

The benefits of trading with the United States are obvious. Our country is home to the most robust, most reliable, and most stable economy in the World. While some would say we have become an overly litigious society, that is a demonstration of the strong rule of law that provides a welcome security to those who do business and a course to redress in cases where there is a dispute. There is an increased emphasis among American consumers about ethical and responsible sourcing, which means companies are being ever more careful about protecting the environment and workers at their sources. Underpinning everything is that the Americas are literally linked together. We may be two continents, but we are one land mass with many meaningful connections beyond the land underneath our feet. These close connections between the United States, Mexico, Central, and South America are not just commercial, in many cases they are actually familial. I have always found it hard to imagine two regions more naturally suited to trade with one another than the United States and Latin America. That the United States has free trade agreements with 10 of the 20 nations in Latin America, the foundation exists to bring the hemispheric trading relationship to new, mutually beneficial heights.

The evolution of U.S.-Mexico trade partnership demonstrates the potential gains to be had from establishing and expanding north-south trade corridors. The Mexican and American economies have become integrated, and not just regionally along the southwestern border, but at a national level. Indeed, one important aspect of U.S.-Mexico trade is that production sharing takes place over regional supply chains on both sides of the border. The city in the United States that exports the most to Mexico is Detroit. Why Detroit? Because all the parts and components that go into making cars travel back and forth between the United States and Mexico. You may know, 80% of Mexico’s exports go the United States, but many of those exports are like the auto parts trade, each time a component crosses the border north-to-south or south-to-north, value is being added. In reality, companies on both sides of the border are not only collaborating in what is truly a “win-win” situation, they are working cooperatively to build products. This is not a trading relationship where the United States is only interested in extracting Mexico’s natural resources, moving those commodities home, and turning them into a product in its own manufacturing facilities. Quite the opposite. It is a model that has helped create jobs, taught skills, created opportunities for economic growth, and assisted in developing communities. While it might be difficult for nations in Latin America to replicate all the advantages of the U.S.-Mexico trade and manufacturing relationship given they do not share a border with the United States, there are still many more benefits to seeking closer economic and trade ties than avoiding them.

Beyond trade deals and boosterism, it is port and supply chain productivity that will underpin the ability to move cargo and will be critical to tying our regions together more closely. It does no good to liberalize trade if commerce cannot actually move at the fastest possible velocity and with the least amount of impediment. Here is where we find the greatest challenge for our industry—reducing supply chain barriers.

I am happy to report that freight mobility is becoming a matter of interest to a broader group of policymakers and legislators than it has ever been in the past. Indeed, there is a growing understanding at all levels of government that supply chain problems create economic problems and maintaining high levels of port productivity is vital. I am proud to say that the Federal Maritime Commission recognized early on the importance of moving freight efficiently and has engaged on the issue for years now. Most recently, we established the Supply Chain Innovation Teams as a way to find commercially viable innovations to congestion issues. The teams were created to harness the unique relationships the FMC has with all the parties involved in the movement of ocean containers. This initiative is being led by Commissioner Rebecca Dye and I am extremely pleased with the progress she has made on this project since it was launched in February.

Another area of potentially significant consequence is that of “off-peak” and “night gates”. There is no reason why at the busiest ports of the United States we should not be working to achieve 24-7 gate operations and in the interim: dependable, predictable extended gates. In recent months, both Oakland and Seattle/Tacoma have debuted extended gate hour programs that provide an interesting contrast to PierPass in Los Angeles, both in terms of the model and the fees charged. It is too soon to draw any substantive conclusions if one of these three operations represent the model for what a night gate should be, but it is encouraging that ports are looking to find ways to extend their hours and increase their efficiencies.

Extended gate hours is only one of the steps that marine terminals in the United States can take to improve efficiencies and we should not be afraid to look elsewhere to see what we can do better. Several years ago I had the opportunity to visit the port facilities at Valparaiso, Chile. I was impressed by the efficiency of the operation there, despite being an urban seaport. One key to their productivity was a staging area for port truckers established away from the terminals, but linked via dedicated truck lane. Truckers were able to rest, eat, shower and wait in comfort at the staging area before they drove to pick-up a container at an appointed time. Very honestly, that is a model we should replicate. Clearly, there is a lot that can be done to make the ports of the United States function more efficiently and I would welcome the opportunity to benefit from any thoughts you, as operators, might have as to how we can make our ports more productive.

I am unapologetically optimistic about the potential that exists for trade growth and economic development between the United States and its neighbors to the south. I have every confidence that we are on a cusp of an era where Latin America finally begins to realize the potential so many of us have believed it has had for so long. Engaging with trading partners, such as the United States, that seek commercial ties that are truly mutually beneficial, will help generate prosperity for the people of the region. That promising future is one that is going to be delivered via the people of our business and I think that is not only an exciting prospect, but a noble enterprise.

Thank you.