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THE IMPORTANCE OF PRODUCTIVE, EFFICIENT INTERMODAL TRANSPORTATION FOR INTERNATIONAL COMPETITIVENESS ROBERT KLEIST The business of world trade is exceedingly competitive, but with tremendous opportunities for the United States as well as for the rest of the world. There is Tots of world trade; it needs stimulation, and it needs productive transportation available in order for it to succeed. Productivity in the liner industry, in ports, and in the whole intermodal process is important to the business of world trade. Port productivity cannot be measured simply in terms of ter- minals, wharves, cranes, and people. It must include the port's location as well as the political, social, and environmental atti- tudes of the people it serves. There are many external influences over which the port management has little control. World trade grew at the rate of about 9 percent in 1984, and probably at a rate of 5 percent in 1985. Total world trade between all nations in 1984 exceeded $3 trillion. The United States was responsible for more than half a trillion, $543 billion out of the total of $3 trillion. Imports to the United States amounted to $323 billion, exports to $220 billion, leaving the United States Robert Kleist, who presented the closing address at the symposium, is vice-president of Evergreen Marine Corporation. 185

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186 with a deficit in 1984 of $113 billion. Sadly, in 1985, the deficit in our export account is expected to reach $140 billion. When you take a look at this, it isn't too hard to understand that the balance of cargo movement between the United States and almost everywhere else is decidedly one-sided. A little bit of the history of world trade is in order for those who may not be all that familiar with it. Before World War II, the United States engaged in two-way trade to the extent of ap- proximately $30 billion per year. Of course, U.S. participation in world trade had been adversely affected by the Smoot-Hawley Act, protective tariff legislation passed at the beginning of the De- pression to protect American industry. Actually, it probably drove more American industry out of business than it protected. After World War IT, American business began to pay more attention to the value and the potential of international trade. Yankee traders traveled around the world and did a very good job of selling more than just simply American goods, products, and services. They also sold American ideals. Those of us involved in international trade in the early 1950s recall a lot of talk to the effect that "you can't expect to export unless you import," because the nations of the world need to earn dollars in order to buy U.S. exports. Obviously, when you take a look at today's $113 billion deficit, we oversold the case considerably. The United States had been running at the rate of $7 billion to $10 billion surplus in our trade account, and now the country is paying for it with interest. What are some of the factors that influence productivity in our industries, and how do they affect international trade? What does our collective transportation system need to do? What do we need from each other, to not only handle international trade, but to contribute to its well being? What are the factors that affect or limit our industry's productivity, and how do we view the role of the ports and other intermodal elements in the scheme of things? What do we need, and therefore what do we expect, and what can be expected of us? How do we view the effect of the productivity of the respective elements, particularly the ports, on our activities? In looking into what the people in world trade think about the matter of productivity, ~ found a report made by the famous accounting and consultant firm of Touche, Ross and Company. One of the articles in the report was written by Thomas J. Murrin of Westinghouse. In his conclusion he wrote,

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187 We will delude ourselves tragically if we think that there are substitutes for improved productivity and quality in our efforts to maintain the standards of life that have made our country the envy of less fortunate lands. If our nation as a whole regards productivity as a matter affecting only corporate balance sheets or stockholders' dividends, little will be achieved in meeting the productivity challenge. But if all of us come to see productivity and quality for what they in truth are, crucial elements, not only of our personal prosperity, but also our capacity to thwart Soviet ideological and military ambitions, then they will become achievable. Although the challenge we face is a formidable one, the United States should not be presumed to be the latest in the long list of countries that used to enjoy world economic leadership. No other nation ever has possessed human and natural resources of the nature and magnitude of ours. We can prevail if we do our best. Nothing more is needed, but nothing else will do. ~ spent about a year with the Pacific Far East Line in Japan observing productivity Japanese style. One experience in partic- ular showed me the importance attached to productivity by that trading partner. One of our ships happened to have the misfortune of running into a tanker after it had departed from Tokyo. It came back under its own power into Tokyo Bay, arriving at about five o'clock in the morning. ~ had been alerted to it and was on a launch out to the ship before daybreak. Instantly at daybreak there were three potential repair facilities that had their launches out inspecting the damage to the ship. It was hardly possible that they could have even known about the accident, because it had only occurred about 6 hours earlier. But somehow, whether people still talk about Japan, Incorporated or not, it really works as if it's incorporated. Within 12 hours we had made an agreement to take the vessel into an available dry dock. ~ was instructed by our head office to have temporary repairs made to the ship. We gave the order for temporary repairs, and they were done in about 72 hours a large hole in the hull had been patched, a crack in the propeller had been repaired, and the vessel was again out to sea. When it arrived back in San Francisco for its permanent repairs, the inspection proved that the temporary repairs were better than the permanent repairs would have been had they been performed elsewhere. That was the level of productivity, the quality of the work that was done.

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188 The productivity of a port directly influences its ability to at- tract cargo. Who would have expected, for example, that cotton grown in California would be exported from the United States through the Pacific Northwest? For years, cotton moved through the ports of Los Angeles and Long Beach. North San Joaquin Valley cotton was shipped through the ports of San Francisco and Oakland. For a few years, the Port of San Diego made an intru- sion into the cotton export market, and received quite a bit of the cotton from across the Mexican border at Mexicali. Subsequently the Mexicans opened the Port of Ensenada; that ended significant cotton exports from the Port of San Diego. So it was until several years ago, when an enterprising shipping company executive figured a way to move cotton at a very advan- tageous intermodal rate from West Texas up through the ports of Seattle and Tacoma. Thus, a port that never dreamed it would have cotton exports captured a large share of the trade as a result of the most-productive, least-cost intermodal innovation. Another question is, just how unproductive can ports become when they serve a captive area of 15 million people? Is Long Beach/Los Angeles an area where a port simply cannot fail? Quite likely that is a possibility. But blessed by a neighboring competi- tor, each of these ports has become a vital and major intermodal link with high productivity. So competition is clearly a factor in motivating port and intermodal productivity. The ports have jointly planned for their future. The plan, called the 2020 plan, calls for reclaiming 2,419 acres of land; 500 acres will be developed outside the breakwater. An intermodal truck-ra~l container transfer facility is another recent development. This facility will be able to accommodate up to eight unit trains simultaneously. It is located strategically at about the center point of a line running north joining the two harbors, Los Angeles and Long Beach, a maximum distance of 5 miles from the marine terminals, and as close as 2.5 miles to the nearest terminal in Wilmington and the northern area of the Port of Long Beach. This facility will replace the current rail intermodal tertn~nal, which is between 25 and 27 miles from the harbor. This is the type of productive facility that the Ports of Los Angeles and Long Beach are developing for the accommodation of international trade.

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189 One of the critical issues in improving productivity is the matter of people and their performance. My company provides extensive personnel training. It operates a fully operational, 440 TEU con- tainer training ship that accommodates 200 cadets. Each cadet spends 1 year in training aboard this vessel after having taken basic seamanship and basic training. ~ mention this simply as an example of what the liner industry is doing to accommodate world trade. What is the volume of trade, in a practical sense, that needs to be handled? My company operates around-the-worId service in both east and west directions on a weekly basis. Most of that service is provided by vessels capable of lifting 2,728 TEUs. If you put two 4~TEU units on a railroad car, a Boxcar unit train would carry 100 40-foot containers. It would take 13.5 unit trains, which would measure 10.2 miles of railroad track, to fill one of these ships one time. That certainly is less than would be required by some of the ships that are coming onstream now, which can accommodate up to 4,000 containers. So that is a measure of the extent of cargo implied in the figure of $3 trillion worth of world trade. Facing the reality that the future of U.S. participation in world trade demands the utmost productivity from us, how do we in the liner industry view our own productivity, and how do we approach the need for improvement? We need to appraise our knowledge of our own business, our resources (financial, technological, and human), our resourcefulness, our ingenuity, our imagination, our courage, and our competence. All of these we can do something about, and we'd better, or get out of the business. We need to compare our facilities and services with those pro- vided by others. We need also to consider the environment in which all of this takes place. People are particularly importantour organization, our man- agement team, the work force, labor, organized labor, and others. The public's perception of what we do and why, and how it affects them, is also important. It influences productivity to have your company in the headlines of even a local paper. This can be an influence for productivity, but it also can be a counterproductive influence. It is also helpful to understand the staffs and the commissions of the organizations with which we do business. How often are we really working in the same direction? The customers themselves

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190 need looking at this is the most valuable of all factors, and the object of the whole exercise. Finally, government policies and rules affect our activities. So we come to the conclusion that we're all in this together, and that's why ~ have expressed the optimism that ~ did at the outset. Here we are with some of the best and most conscientious minds in our great country, with the added supercaliber input from abroad, discussing the means by which we can actually become more productive. The age of the Pacific, referred to by Richard King (in this volume), is the most dominant force in world trade. Through intermodalism as well as by direct all-water service, we have the great opportunity to participate in and to benefit from it. Port and intermodal productivity is a vital force in the future of world trade. The great British historian, Arnold Toynbee, said, "I'm glad that I'm growing old in England. Americans are dedicated to the new and super efficient. It must be depressing to be old in the United States." Wouldn't that be a sad commentary to have to make about yourself and about the area in which you have lived and are living? Although the challenge we face is a formidable one, the United States should not be presumed to be the latest in the Tong list of countries that used to enjoy world economic leadership. No other nation ever has possessed human and natural resources of the nature and magnitude of ours. We can prevail if we do our best. Nothing more is needed, but nothing else will do.