The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger

by Marc Levinson

  21. No accurate measures of insurance-rate changes are available. Insurers initially resisted lowering rates for container shipments, mainly with the reasoning that container shipping might lead to less frequent but larger losses if an entire container were stolen or damaged. In addition, a full container was usually handed off from one carrier to another without being opened, making it difficult to determine which carrier was responsible if damage did occur. Fairplay, September 2, 1971; Insurance Institute of London, “An Examination of the Changing Nature of Cargo Insurance Following the Introduction of Containers,” January 1969. By 1973, an insurance expert was ready to admit that “[c]argoes carried in containers appear to be bringing improved claims experience.” Fairplay, July 5, 1973, p. 55.

  22. Marad, “Current Trends in Port Pricing” (Washington, DC, 1978), p. 19.

  23. Real oil prices in dollar terms rose until 1981; see U.S. Department of Energy, Annual Energy Review (Washington, DC, 2003), Table 5.21. The German liner-freight index discussed above also began to decline in the late 1970s, after adjustment for inflation.

  24. Pedro L. Marin and Richard Sicotte, “Exclusive Contracts and Market Power: Evidence from Ocean Shipping,” Discussion Paper 2028, Centre for Economic Policy Research, June 2001; comment from J. G. Payne, vice chairman of Blue Star Line, in Fairplay, April 11, 1974, p. 7.

  25. The former competitors involved in the North Atlantic Pool were American Export-Isbrandtsen Line, Belgian Line, Bristol City Line, Clarke Traffic Services, Cunard Line, French Line, Hamburg-American Line, Holland-America Line, North German Lloyd, Sea-Land Service, Seatrain Lines, Swedish American Lines, Swedish Transatlantic Lines, United States Lines, and Wallenius Line. On shippers’ councils, see U.S. General Accounting Office, Changes in Federal Maritime Regulation Can Increase Efficiency and Reduce Costs in the Ocean Liner Shipping Industry (Washington, DC, 1982), chap. 5. UNCTAD encouraged the formation of regional shippers’ councils, which were formed in Central America, East Africa, and Southeast Asia.

  26. Fairplay, July 1, 1971; UNCTAD, Review of Maritime Transport 1972–73, p. 80, and 1975, p. 44.

  27. Office of Technology Assessment, An Assessment of Maritime Technology and Trade, p. 72.

  28. U.S. General Accounting Office, Centralized Department of Defense Management of Cargo Shipped in Containers Would Save Millions and Improve Service (Washington, DC, 1977).

  29. Author’s telephone interview with Cliff Sayre, former vice president of transportation at DuPont, January 24, 1992.

  30. According to Sayre, DuPont had more than fifty loyalty agreements and had relationships with more than three hundred individual ocean carriers in 1978.

  31. Prior to containerization, Evergreen Line operated as a nonconference carrier on the Japan-Red Sea route, pricing 10 to 15 percent below conference rate. On the Japan-India route, however, Evergreen decided to join the conference after finding that Japanese steel mills would not use its services because they had loyalty agreements with the conference. See Fairplay, August 9, 1973, p. 60.

  32. Broeze, The Globalisation of the Oceans, p. 65.

  33. Fairplay, September 21, 1972, p. 11; November 23, 1972, p. 59; and June 28, 1973, p. 44; Eric Pace, “Freighters’ Rate War Hurting U.S. Exporters,” NYT, September 11, 1980; Fairplay, February 12, 1981, p. 9.

  34. James C. Nelson, “The Economic Effects of Transport Deregulation in Australia,” Transport Journal 16, no. 2 (1976): 48–71.

  35. U.S. General Accounting Office, Issues in Regulating Interstate Motor Carriers (Washington, DC, 1980), p. 35.

  36. Matson Research Corp., The Impact of Containerization, 2:64; U.S. General Accounting Office, Combined Truck/Rail Transportation Service: Action Needed to Enhance Effectiveness (Washington, DC, 1977). One company reported in 1978 that sending a trailer on a flatcar the 1,068 miles from Minneapolis to Atlanta cost $723; the cost of through trucking service for the same commodity was $693. See Frederick J. Beier and Stephen W. Frick, “The Limits of Piggyback: Light at the End of the Tunnel,” Transportation Journal 18, no. 2 (1978): 17.

  37. Iain Wallace, “Containerization at Canadian Ports,” Annals of the Association of American Geographers 65, no. 3 (1976): 444; “The ‘Minibridge’ That Makes the ILA Boil,” Business Week, May 19, 1975; General Accounting Office, American Seaports—Changes Affecting Operations and Development (Washington, DC, 1979); Lee Dembart, “‘Minibridge’ Shipping Is Raising Costs and Costing Jobs in New York,” NYT, February 27, 1977; Marad, “Current Trends in Port Pricing,” p. 20.

  38. Robert E. Gallamore, “Regulation and Innovation: Lessons from the American Railroad Industry,” in Essays in Transportation Economics and Policy: A Handbook in Honor of John R. Meyer, e d. José A. Gómez-Ibañez, William B. Tye, and Clifford Winston (Washington, DC, 1999), p. 515. Number of contracts appears in Wayne K. Talley, “Wage Differentials of Intermodal Transportation Carriers and Ports: Deregulation versus Regulation,” Review of Network Economics 3, no. 2 (2004): 209. Clifford Winston, Thomas M. Corsi, Curtis M. Grimm, and Carol A. Evans, The Economic Effects of Surface Freight Deregulation (Washington, DC, 1990), p. 41, estimate the total saving from deregulation at $20 billion in 1988 dollars, with the loss to railroad and trucking workers estimated at $3 billion.

  39. Gallamore, “Regulation and Innovation, p. 516; John F. Strauss, Jr., The Burlington Northern: An Operational Chronology, 1970–1995, chap. 6, available online at www.fobnr.org/bnstore/ch6.htm; Kuby and Reid, “Technological Change,” p. 282. Paul Stephen Dempsey, “The Law of Intermodal Transportation: What It Was, What It Is, What It Should Be,” Transportation Law Journal 27, no. 3 (2000), looks at the history of regulations governing intermodal freight.

  40. Robert C. Waters, “The Military Sealift Command versus the U.S. Flag Liner Operators,” Transportation Journal 28, no. 4 (1989): 30–31.

  41. Lloyd’s Shipping Economist, various issues; Hans J. Peters, “The Commercial Aspects of Freight Transport: Ocean Transport: Freight Rates and Tariffs,” World Bank Infrastructure Notes, January 1991; author’s interview with William Hubbard.

  Chapter 14

  Just in Time

  1. Paul Lukas, “Mattel: Toy Story,” Fortune Small Business, April 18, 2003; Holiday Dmitri, “Barbie’s Taiwanese Homecoming,” Reason, May 2005. For discussion of the toy industry’s supply chains, see Francis Snyder, “Global Economic Networks and Global Legal Pluralism,” European University Institute Working Paper Law No. 99/6, August 1999.

  2. This description of just-in-time procedures is taken from G.J.R. Linge, “Just-in-Time: More or Less Flexible?” Economic Geography 67, no. 4 (1991): 316–332.

  3. The counts, drawn from approximately a thousand business and management periodicals, are taken from Paul D. Larson and H. Barry Spraggins, “The American Railroad Industry: Twenty Years after Staggers,” Transportation Quarterly 52, no. 2 (2000): 37; Robert C. Lieb and Robert A. Miller, “JIT and Corporate Transportation Requirements,” Transportation Journal 27, no. 3 (1988): 5–10; author’s interview with Cliff Sayre.

  4. According to calculations based on the U.S. National Income and Product Accounts, private nonfarm inventories in 2004 averaged about $1.65 trillion, or about 13 percent of final sales. Through the early 1980s, the ratio was in the range of 22 to 25 percent. That 9 percentage point reduction measured against 2004 final sales of $12.2 trillion yields an annual saving approaching $1.1 trillion. An alternative measurement examines the average length of time goods are held in inventory by retailers, wholesalers, and manufacturers. Analyzed in this way, if inventories had risen at the same rate as sales since the early 1980s, U.S. department and discount stores would have kept an additional $30 billion of stock on average during 2000, durable goods manufacturers would have held an additional $240 billion of inventories, manufacturers of nondurables would have had inventories about $40 billion higher than the actual number, and wholesale inventories might have been $30–$40 billion higher. This method yields a decline in average inventories relative to sales in t
hese sectors of more than $400 billion. See U.S. Census Bureau, Monthly Retail Trade Report, and Hong Chen, Murray Z. Brank, and Owen Q. Wu, “U.S. Retail and Wholesale Inventory Performance from 1981 to 2003,” Working Paper, University of British Columbia, 2005.

  5. On earlier forms of globalization, see Kevin H. O’Rourke and Jeffrey G. Williamson, Globalization and History: The Evolution of a Nineteenth-Century Atlantic Economy (Cambridge, MA, 1999), and O’Rourke and Williamson, “When Did Globalization Begin?” Working Paper 7632, NBER, April 2000.

  6. Robert Feenstra, “Integration of Trade and Disintegration of Production in the Global Economy,” Journal of Economic Perspectives 12, no. 4 (1998); Rabach, “By Sea,” p. 203.

  7. David Hummels, “Toward a Geography of Trade Costs,” mimeo, University of Chicago, January 1999; Will Martin and Vlad Manole, “China’s Emergence as the Workshop of the World,” Working Paper, World Bank, September 2003.

  8. Ximena Clark, David Dollar, and Alejandro Micco, “Port Efficiency, Maritime Transport Costs, and Bilateral Trade,” Journal of Development Economics 74, no. 3 (2004): 417–450.

  9. Erie, Globalizing L.A., p. 208; Miriam Dossal Panjwani, “Space as Determinant: Neighbourhoods, Clubs and Other Strategies of Survival,” in Davies et al., Dock Workers, 2:759; Robin Carruthers, Jitendra N. Bajpai, and David Hummels, “Trade and Logistics: An East Asian Perspective,” in East Asia Integrates: A Trade Policy Agenda for Shared Growth (Washington, DC, 2003), pp. 117–137.

  10. David Hummels, “Time as a Trade Barrier,” mimeo, Purdue University, July 2001.

  11. Joel Mokyr, The Gifts of Athena: Historical Origins of the Knowledge Economy (Princeton, 2002), p. 232.

  12. Clark, Dollar, and Micco, “Port Efficiency,” p. 422; Nuno Limão and Anthony J. Venables, “Infrastructure, Geographical Disadvantage and Transport Costs,” World Bank Economic Review 15, no. 3 (2001): 451–479; Robin Carruthers and Jitendra N. Bajpai, “Trends in Trade and Logistics: An East Asian Perspective,” Working Paper No. 2, Transport Sector Unit, World Bank, 2002.

  13. Clark, Dollar, and Micco, “Port Efficiency,” p. 422.

  14. Increase in shipping volume cited in Carruthers and Bajpai, “Trends in Trade and Logistics,” p. 12; on Hamburg, see Dieter Läpple, “Les mutations des ports maritimes et leurs implications pour les dockers et les regions portuaires: l’exemple de Hambourg,” in Dockers de la Méditerranée, p. 55.

  15. Claude Comtois and Peter J. Rimmer, “China’s Competitive Push for Global Trade,” in Pinder and Slack, Shipping and Ports, pp. 40–61, offer an interesting discussion of the logic behind Chinese port development.

  16. Clark, Dollar, and Micco, “Port Efficiency,” p. 441.

  17. Gibson and Donovan, The Abandoned Ocean, articulate in detail the connection between U.S. maritime policy and the decline of American shipping.

  18. Chinitz, Freight and the Metropolis, pp. 161–162 and p. 100. For examples of such studies, see A. D. Little, “Containerisation on the North Atlantic,” and Litton Systems, “Oceanborne Shipping.”

  19. Container data estimated from UNCTAD, Review of Maritime Transport 2004, pp. 73–76, and Institute for Shipping and Logistics, “Shipping Statistics and Market Review” (Bremen, 2004).

  20. Jeffrey C. Mays, “Newark Sees Cash in Containers,” Star-Ledger, February 4, 2004; Natural Resources Defense Council, “Harboring Pollution: The Dirty Truth about U.S. Ports” (New York, 2004); Deborah Schoch, “Pollution Task Force to Meet for Last Time on L.A. Port,” Los Angeles Times, June 21, 2005.

  21. Institute for Shipping and Logistics, “ISL Market Analysis 2005: World Merchant Fleet, OECD Shipping and Shipbuilding,” viewed July 31, 2005 at http://www.isl.org/products_services/publications/pdf/comment_1–2-2005_short.pdf; Richard C. Roenbeck, “Containership Losses Due to Head-Sea Parametric Rolling: Implications for Cargo Insurers” (paper presented to International Union of Marine Insurers, 2003), available at http://www.iumi.com/Conferences/2003_sevilla/1609/RRoenbeck.pdf. Among the early proposals for offshore ports was one at Scapa Flow in the Orkney Islands, off the northern coast of Scotland. As envisioned, huge ships arriving from Asia or North America would make such a location their only port of call in northern Europe; the savings in ships’ port time and sailing time were estimated to more than make up for the additional cost of transshipping the containers. See Scottish Executive, “Container Transshipment and Demand for Container Terminal Capacity in Scotland” (prepared by Transport Research Institute, Napier University, December 2003).

  Bibliography

  Archival Collections

  Containerization Oral History Project, National Museum of American History, Smithsonian Institution, Washington, DC.

  International Longshoremen’s Association District 1 Files, 1954–56, Kheel Center, Catherwood Library, Cornell University, Ithaca, NY.

  International Longshoremen’s Association Files, Robert F. Wagner Labor Archives, New York University, New York, NY.

  Mayor Abraham Beame Papers, New York Municipal Archives, New York, NY.

  Mayor John V. Lindsay Papers, New York Municipal Archives, New York, NY.

  Mayor Robert F. Wagner Papers, New York Municipal Archives, New York, NY.

  National Archives and Records Administration, Modern Military Records Branch, College Park, MD.

  Operational Archives Branch, Naval Historical Center, Washington, DC.

  Penn Central Transportation Company Archives, Hagley Museum and Library, Wilmington, DE.

  Port of New York Authority records (Doig Files), New Jersey State Archives, Trenton, NJ.

  Regional Oral History Program, Bancroft Library, University of California, Berkeley, CA.

  Robert B. Meyner Papers, New Jersey State Archives, Trenton, NJ.

  Robert F. Wagner Labor Archives, New York University, New York, NY.

  Robert F. Wagner Papers, LaGuardia and Wagner Archives, LaGuardia Community College, Queens, NY.

  U.S. Army Materiel Command Historical Office, Fort Belvoir, VA.

  Vernon H. Jensen papers, Kheel Center, Catherwood Library, Cornell University, Ithaca, NY.

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  _. Transport Statistics in the United States. 1954–74.

  Interstate Commerce Commission, Bureau of Transport Economics and Statistics. Monthly Comment on Transportation Statistics. 1945-April 1955.

  _. Transport Economics. May 1955-December 1957.

  Office of Technology Assessment. An Assessment of Maritime Trade and Technology. Washington, DC: U.S. Government Printing Office, 1983.

  U.S. Army, Corps of Engineers. Waterborne Commerce of the United States. Annual.

  U.S. Bureau of the Census. Census of Manufactures. Washington, DC: U.S. Government Printing Office, various years.

  _. County Business Patterns. Washington, DC: U.S. Government Printing Office, various years.

  _. Historical Statistics of the United States. 2 vols. Washington, DC: U.S. Government Printing Office, 1975.

  _. U.S. Census of Population and Housing. Washington, DC: U.S. Government Printing Office, various years.

  U.S. Congress, Joint Economic Committee. Discriminatory Ocean Freight Rates and the Balance of Payments. Washington, DC: U.S. Government Printing Office, 1964.

  U.S. Department of Commerce, Bureau of Economic Analysis. National Income and Product Accounts.

  U.S. Department of Commerce, Federal Maritime Board and Maritime Administration. Annual Reports.

  U.S. Department of Commerce, Maritime Administration. “Shoreside Facilities for Trailership, Trainship, and Containership Services.” Washington, DC: U.S. Department of Commerce, 1956.

  U.S. Department of Transportation, Bureau of Transportation Statistics. Transportation Statistics Annual Report. Washington, DC: U.S. Department of Transportation, 1994–2004.

  U.S. Department of Transp
ortation, Maritime Administration. United States Port Development Expenditure Report, 1946–1989. Washington, DC: Office of Port and Intermodal Development, 1989.

  U.S. Economic Stabilization Program, Pay Board. “East and Gulf Coast Longshore Contract.” May 2, 1972.

  U.S. General Accounting Office. American Seaports—Changes Affecting Operations and Development. Washington, DC: GAO 1979.

  _. Centralized Department of Defense Management of Cargo Shipped in Containers Would Save Millions and Improve Service. Washington, DC: GAO, 1977.

  _. Changes in Federal Maritime Regulation Can Increase Efficiency and Reduce Costs in the Ocean Liner Shipping Industry. Washington, DC: GAO, 1982.

  _. Combined Truck/Rail Transportation Service: Action Needed to Enhance Effectiveness. Washington, DC: GAO, 1977.

  _. Issues in Regulating Interstate Motor Carriers. Washington, DC: GAO, 1980.

  U.S. House of Representatives, Committee on Merchant Marine and Fisheries. Cargo Container Dimensions. October 31 and November 1, 8, and 16, 1967. Washington, DC: U.S. Government Printing Office, 1968.

  _. Hearings on HR 8637, To Facilitate Private Financing of New Ship Construction. April 9, 27, 28, 29, and 30, 1954.

  _. Study of Harbor Conditions in Los Angeles and Long Beach Harbor. October 19–21, 1955 and July 16, 1956.

  U.S. National Academy of Sciences. Roll-On, Roll-Off Sea Transportation. Washington, DC: U.S. Government Printing Office, 1957.

  U.S. National Research Council. Research Techniques in Marine Transportation. Publication 720. Washington, DC: National Academy of Sciences, 1959.

  U.S. National Research Council, Maritime Cargo Transportation Conference. Cargo Ship Loading. Publication 474. Washington, DC: National Academy of Sciences 1957.

  _. The SS Warrior. Publication 339. Washington, DC: National Academy of Sciences, 1954.

  _. Transportation of Subsistence to NEAC. Washington, DC: National Academy of Sciences 1956.

  U.S. National Research Council, Transportation Research Board. Facing the Challenge: The Intermodal Terminal of the Future. Washington, DC: Transportation Research Board, 1986.