Global Logistics-June 2007
Port congestion remains a common concern for U.S. companies importing goods from overseas, and for good reason: one in nine of the world’s maritime containers are either bound for or coming from the United States, according to America’s Container Ports: Delivering the Goods, a new report from the U.S. Bureau of Transportation Statistics.
The report ranks the United States as second to China in world maritime container traffic—an estimated 46.3 million 20-foot equivalent units (TEUs) passed through U.S. ports in 2006, up from 22.6 million in 1996.
Interestingly, U.S. container traffic is becoming more concentrated as an increasing number of large, fast, specialized vessels call at a decreasing number of ports capable of handling them, finds the report. The top 10 U.S. container ports accounted for 85 percent of U.S. containerized traffic in 2005, up from 78 percent in 1995.
Overall, nearly 26 million containers of various sizes entered the United States via all modes of transportation in 2005, up 37 percent from 19 million in 2000. Of those containers, more than 15 million entered the nation by truck and rail from Canada and Mexico, while the remaining 11 million were imported as ocean freight. Other interesting findings include:
- Taken together, U.S. container trade in 2005 and 2006 more than double corresponding trade numbers from one decade earlier.
- Since 1996, total world container trade more than tripled, resulting in a decline in the U.S. share of world container trade from 16 percent to 11 percent.
- China has exceeded the U.S. share of world container trade since 1998.
Though China receives the most buzz when it comes to low-cost logistics, manufacturing, and technology capabilities, some Asian business leaders are more excited about growth opportunities in India, according to the UPS Asia Business Monitor.
Respondents to the UPS study rank China as the area with the greatest prospects for economic growth, followed by India and Hong Kong. But they report ambivalence about China’s growing economic power, finds the survey of 1,200 small and mid-sized enterprise (SME) executives in Asia.
Asian SME leaders are equally divided between viewing China’s continued dominance as a boost (34 percent) and perceiving it as both a boost and a threat (34 percent). Many also feel they are unable to compete with Chinese companies in terms of low labor and production costs (38 percent), and express growing concern regarding increased price competition (25 percent).
In contrast, SME leaders across Asia cite a desire to capitalize on India’s rapid growth by leveraging its continued rise as a manufacturing base (30 percent) and outsourcing location (25 percent). They also seek to become an outsourcing destination for India (20 percent), and an exporter of raw materials to India for manufacturing (19 percent).
Eighty-five percent of respondents say India is or has the potential to be a regional economic leader, and 81 percent feel certain that India’s economy will grow in 2007.
Small business leaders in India are optimistic about their country’s trade growth—83 percent of Indian respondents project strong U.S.-India trade growth this year. In terms of overall prosperity, 89 percent of Indian SMEs expect greater economic prospects for their businesses in the year ahead.
Other survey highlights include:
- Respondents widely agree that China will surpass the United States as the world’s largest consumer economy in 10 years or sooner.
- Small business leaders expect intra-Asia trade growth to continue its upward climb, with 74 percent of respondents saying that regional trade will grow strongly in 2007.
- A majority of small business leaders in India (85 percent) say that globalization brings benefit to their businesses, whereas 55 percent of business leaders in Japan say it is a disadvantage.
Though China plays an increasingly important role in the air transportation industry, the country faces five specific challenges on its road to leadership, according to Giovanni Bisignani, CEO of the International Air Transport Association (IATA).
“China is at a critical moment, and to build a successful future it has to avoid mistakes made in other parts of the world,” he explains.
The challenges, according to IATA, are:
1. Efficient air traffic management: China’s goal is to use global standards to make its airspace among the most effective in the world at meeting demand safely and efficiently. Current traffic management challenges include congestion delays in the Golden Triangle region and an inefficient airspace design in the busy Pearl River Delta.
2. Environmental sustainability: To ensure sustainability, China’s aviation industry will need to use technology to further improve fuel efficiency, avoid taxes and charges, and adopt global solutions for emissions trading.
3. Cost-efficient airport infrastructure: China currently maintains among the highest infrastructure charges in Asia, which could hinder further progress. “IATA is working with the government to develop a charges regime that challenges airports on efficiency, provides a reasonable return to investors, and supports a competitive industry,” notes Bisignani.
4. Internal cost control: Though China’s aviation industry is growing, ignoring productivity issues could come back to haunt it. China can turn to cost allocation to understand where cost and productivity gaps occur, and identify areas for improvement, says IATA.
5. Commercial freedoms: China has made significant commercialization progress recently through U.S. and EU open-skies agreements, but it still has a way to go. China’s fast-growing economy demands efficient air transport links, and China has the opportunity to shape policy where America and Europe have failed to do so, finds IATA.