The New York Times has an excellent page one story today about the resurgence of the Port of New York. The world’s busiest container port until 1985, New York fell out of favor as the ports of Los Angeles, Long Beach and Savannah grew.
For the past twenty years, most shipments to the Northeast from Asia came via the “mini land bridge”, railroads running directly from the Southern California ports to the Northeast. While shipping by sea and rail costs significantly more per container – $300 to $600 more – the “all-sea” route to the Northeast took so long it was worth the additional cost. But shipbuilders are constructing substantially faster container ships – they run at 25 knots, up from 16 knots, making the trip through the Panama canal more logistically feasible for importers.
The trip from major Asian ports to New York now takes 22 days, instead of 35. 65% of all merchandise sent to the US from North Asia comes through West Coast ports… but that’s down from 86% in 1999, reflecting the growth of the New York port.
Draw a 1500km circle around New York – representing, roughly, the destinations that can be served via a 24-hour truck trip from the port of New York. The area you enclose includes 80 million people and is the richest consumer market in the world. Hence, it makes economic sense to build out the Port of New York, even though it requires new rail lines, dredging shipping channels, storage facilities throughout New Jersey and Pennsylvania, and, perhaps, widening of the Panama Canal. (The ships contributing to the New York boom are barely able to fit in the canal – the next generation of ships are too big to fit in the locks.)
The most interesting part of the article for me:
…so far, the mounting Asian trade has been largely a one-way affair. After unloading 1,120 containers from the Glory, the longshoremen reloaded the ship for the return trip. Of 667 containers to be sent back, 419 were empty, being returned to Asia to carry more goods back to the United States. Of the rest, most were stuffed with two of New York’s biggest exports: wastepaper and scrap metal.
The US ran a $600 billion dollar trade deficit last year, in no small part because we’re importing the contents of our WalMarts from China and sending back scrap metal and paper. This has been terrific for Chinese industry, and the Chinese central bank as pegged the yuan to the dollar to keep the yuan cheap. This allows Americans to buy Chinese goods cheaply, which helps expand the trade deficit, as Americans buy foreign, rather than domestic goods.
Helping us sustain our trade deficit, the Chinese and Japanese governments have bought huge quantities of US securities, particularly treasury bills, helping us finance our $412 billion budget deficit. These twin deficits are pushing the value of the dollar down – the dollar is now down 50% against the euro since mid-2000 and at its lowest level in nine years against a basket of foreign currencies. As the dollar slides, foreign investors may be less willing to buy our securities… forcing the Federal Reserve to raise interest rates, which makes it harder for capital-intensive industries in the US to expand… which makes it less likely that US factories will produce anything to go in those containers to send stuff to China.
US manufacturers like a cheap dollar – it makes the relatively expensive goods we produce in this country affordable to Europeans, who have a stronger currency. And it makes the US a great tourist destination, if you happen to get paid in euros. (God help you if you’re an American who – like me – gets paid in dollars and does business in Europe.) In turn, it makes BMWs and brie more expensive, penalizing both “Old Europe” and northeastern liberals. (I drive a Toyota and I’m lactose intolerant, so this doesn’t apply to me…)
The worry that some economists are starting to express is about a dramatic devaluation of the dollar, which could happen if lots of people start selling dollars. One possible trigger for this? If China removes the dollar peg on the yuan, lots of Chinese could sell a lot of dollars very quickly. According to the Wall Street Journal, (quoted in the Christian Science Monitor, which doesn’t restrict access to its archives) Chinese citizens were lined up outside the Bank of China in Shanghai, waiting to sell their dollars for euros, yen or yuan. They know that the yuan will rise when the dollar peg is lifted, and they don’t want to get killed with their life savings in dollars.
(Hmm. My life savings appears to be in dollars. Wonder if I should get in line somewhere.)