/[written by Jerome Gilbert, project leader, Nai-Ching Sun, Amos Ilan; consulting editor, Walter Hamshar]. United States.Maritime Administration. Gilbert, Jerome. [Washington] :U.S. Dept. of Commerce, Maritime Administration : for sale by the Supt. of Docs., U.S. Govt. Print. Off.,1978. Harbors United States. United States Economic conditions 1971-1981. Lw zRM V@ VMF@ nN m @01 Oll Ig CZIC COLLECTIO@l HE 553 U643 1978 c.2 d ao:ff@@ MARITIME ADMINISTRATION DEPARTMENT OF COMMERCE 1950 U.S. DEPARTMENT OF COMMERCE Juanita M. Kreps, Secretary Sidney Harman, Under Secretary MARITIME ADMINISTRATION Robert J. Blackwell, Assistant Secretary for Maritime Affairs Marvin Pitkin, Assistant Administrator for Commercial Development Armour S. Armstrong, Director, Office of Port and Intermodal Development September, 1978 Property of CSC Library U.S. DEPARTMENT OF COMMERCE NOAA COASTAL SERVICES CENTER 2234 SOUTH HOBSON AVENUE CHARLESTON , SC 29405-2413 For sale by the Superintendent of Documents, U.S. Government Printing Office Washington, D.C. 20402 Stock Number 003-007-00091-0 amll "Jill 44 rn. Alma R7 I% Air vm 1-04 031 -,map- -ink t Ira W_7@ 40 --WNT JL CONTENTS PORTS ARE GROWTH CENTERS 4 THE MEASURING ROD 9 PORTS ARE ECONOMIC ASSETS 10 Ilk PORTS ARE MORE THAN PIERS 12 PORTS ARE SERVANTS 14 A PORTS ARE CUSTOMERS '19 PORTS PROVIDE- INCOME 22 PORTS PROVIDE JOBS 27 PORTS PAY TAXES 28 PORTS ARE INVESTORS 31 PORTS AND GOVERNMENT 33 PORTS; LIFEBLOOD: FOREIGN TRADE 36 p-@ WHAT WOULD HAPPEN IN THE PORTS IF .... 41 Con su rnelr"S@end i-n-g increases Ji 'Certain. Industry -Sales Levels Go Up There"*Is,-A Two-Moriths Dock Strike MF@AGT TABLES 52 j WIN -goo mm@ m 40 T7 A, or, 401 A-4- In olden days the arrival of a ship Ports have continued through the PORTS ARE was a great occasion. Almost years to be exciting centers of everyone in the port community human endeavor and interest. GROWTH turned out to watch her from the From these centers have grown CENTIMMED-Mm moment she first came into sight. the regions that became great nations and empires. "What ship is she? Where is she from? What is she carrying? What. The steady progress of the United kind of voyage did she have?" States to its world leadership in These were only a few of the commerce and knowledge has many questions asked as the stemmed from its ports. The vessel proceeded to her berth. original 13 colonies began as ports along the Atlantic coastline. The scene was repeated in all As the Nation expanded, new ports, whether they were on the ports were founded along its oceans, lakes,'or rivers. In those mighty rivers and Great Lakes. simple days everyone knew that The digging of canals to link its any arrival was a benefit for their inland waters with the seacoasts port and its community. The stimulated the founding of more Every major metropolitan cargo meant new stock for the new ports. region of the United States merchants' shelves. Availability of the vessel meant activity for the Today some 170 major com- centers around a port. exporters. The loading, storing, mercial ports on the Nation's repairs, and other port services coastlines, rivers, lakes, and she would require meant jobs for canals serve as.centers of the port's workers. regional commerce and growth. Every major metropolitan region Newly arrived vessels had an of the United States centers added significance in those days. around a port, or is closely linked Besides the cargo in t.heir holds by rail or highway with a port. and the passengers on their decks they carried news and In these sophisticated times a ideas from the outside world. whole town rarely turns out for These were the materials from the arrival of a vessel - even a which civilization was being new vessel - as they did in the fashioned. colorful days of the river steam- boats and of the glamorous ocean liners and superliners. Yet the containerships, freighters, tankers, ore carriers, and huge flotillas of barges that arrive daily at river, lake, canal, or coastal ports still symbolize the essential activities of those ports. 01 O,V 7@, ij 04- '7' 4 Aim LL 'MEN lQu IPA mA rl !49 ..... ..... WA Every person in this Nation The Maritime Administration depends in some ways on its (MarAd) of the U.S. Department of ports. For through the marine Commerce is required by Federal terminals move the domestic and law to promote and encourage re- foreign commerce that con- gional, State, local and national stitutes the food, shelter, and efforts to provide a dynamic port transportation of modern industry. civilization. Traditionally American ports,have The United States Government acted independently in planning has long recognized the vital im- and developing shoreside port portance of adequate ports to the facilities as the broad and divers- Nation's economy and defense. ified port industry that exists in the Nation today. The strategic importance of its . ports has been apparent in every MarAd has focused on port plan- war in which the United States ning and development activities has become engaged. World Wars that can result in benefits for all I and 11 required unprecedented the Nation's ports. In carrying out Government has long recog- port activity in supplying military its mandate, MarAd has under- nized the vital importance of and civilian needs during and taken many research projects, after the conflicts. alone and in cooperation with adequate ports. various regions, which have had Since the founding of this a nationwide application. country, the Federal Government has played a diversified role To fulfill its mission, MarAd has under legislation that has been determined that it needs precise adopted from time to time by the information about the port in- Congress to assure a healthy and dustry's impact on the national efficient national port industry. economy. Although everyone has been generally aware that parts The U.S. Army, through its Corps mean much in the Nation's of Engineers, is mandated to economic life, no one can say provide and maintain suitable how much. channels in all the Nation's navigable waters. Federal To fill the information vacuum, expenditures to carry out this MarAd sponsored this input- mandate on the sea coasts, rivers, output study. It is the first nation- and Great l2akes amount to many wide economic evaluation of the millions of dollars annually. United States port industry. The analysis was contracted to the Although everyone has been The U.S. Coast Guard acts as a Port Authority of New York and safety and policing agency. The New Jersey and accomplished generally aware that ports Coast Guard maintains light- through the creation of an input- mean much in the Nation's houses and channel markers for output (1-0) model with data economic life, no one could inland and offshore navigation. It supplied by the Department of say how much. operates ice breakers to keep the Commerce. ports open during winters. It serv- ices harbor radar systems to regu- late port traffic. It also licenses merchant marine personnel and enforces safety regulations in ocean and inland ports. AM= .14 77 IMIM "A lit pit", 40 40 00i mm IVA THE The input-output model is an The ability to produce multipliers economic tool that is used by in- is a property peculiar to '1-0 dustrial and government econo- models. Analysts have known MEASURING mists throughout the world for about economic chain reactions measuring and forecasting eco- for a long time, but until Nobel ROD nomic phenomena. Prize Winner Wassily Leontief .devised the 1-0 model technique, In this country it consists of more no reliable means existed for than 8,000 items of data on the measuring it. Nation's industries arranged in input columns and output rows. Multipliers differ substantially This part of the model measures from one industry to another, de- in dollars the production of all pending on the complexity of the goods and services in the United chain relationships that are initi- States. In short, it depicts the ated. in the production processes entire economy. of the various industries. With the assistance of the The model gave a multiplier of 1.6 computer and by a complicated for the chain reactions initiated Each dollar of sales to the mathematical procedure, the by all purchases for port industry model's data can be used to operations throughout the Nation. port industry in the base year derive multipliers that measure This meant that each dollar of of the study produced $1.60 the chain reactions that occur in sales to the port industry in the in sales within the economy. the transactions depicted by the base year of the study produced model. This enables the analyst $1.60 in sales within the to determine not only the direct economy. This consisted of $1 of economic impact of a transaction, direct sales plus 60 cents of but also its ripple effects indirect sales. throughodt the economy. For example: The purchase of a crane by the port industry directly affects the company that manu- factured and sold that crane. But it also affects the manufacturer and supplier of parts for the crane; the manufacturer of the steel used in making the parts; the mini,ng company that produces ore for the steel; and the trans- portation companies that move each component, from the mine to the crane's final position on the port's waterfront. That chain of event produces the indirect impact. 9 Application of the port industry The analysis also revealed the PORTS ARE multiplier to the model's data following: proved conclusively that the ports Port industry handling of U.S. ECONOMIC are indeed the valuable economic waterborne exports and assets,to,the Nation that they had imports in 1970 was respons- ASSETS been believed to be. ible. for $16.2 billion of revenues in the Nation's This analysis showed that in 1970, economy. the data year of the study, the The movement of each ton of port industry was directly and waterborne cargo in U.S. indirectly responsible for: - foreign trade, therefore, @ Gross sales (revenues) of $28 generated port revenues of billion within the economy. $34. Application of the 1.6 9 A $15 billion contribution to multiplier meant that each the gross national product ton of waterborne foreign (G N P). trade contributed direct and * 1,046,800 jobs. indirect revenues of $55 to e Personal income of $9.6 the U.S. economy in 1970. billion. The port industry's handling Gross sales (revenue) of $28 * Business income of $3.7 of each 600 tons of foreign billion within the economy. billion. trade in 1970 was responsible e Federal taxes of $5.2 billion. for one job in the national A $ "1.5.0 @illion contribution to 9 State and local taxes of $2 economy. the gross national product (GNP). billion. Every million dollar increase in U.S. exports brought about The base year for the model was an average increase of 1970 because it was the latest $160,000 in demand for port year for which complete official services. figures were available. GNP is * Every one million dollar in- known to have doubled to $1,890 crease in imports required .an billion - from 1970 to 1977. Thus average $229,000 increase in it can be assumed that 1977 demand for port services. dollar figures for the port industry e Direct purchases of goods would be approximately double and services by the port those of 1970. in,dustry from other industries in 1970 totaled $8.9 billion. It must be remembered in making - The direct and indirect im- such an adjustment that nondollar pact on the economy of port figures such as those for employ- investments in 1970 totaled ment and tonnage may not be $2.1 billion. Since GNP has doubled from doubled since they are not as re- sponsive to inflationary trends base year (1970) of study, all and other economic forces that dollar impact totals in 1977 have acted recently on the would be nearly double American dollar. 19701s. 10 @lf IN Ilk 4 On, Ae kwl- -7t PORTS ARE What is a port? Other definitions included produc- tion activities that took place in a This simple question can evoke port area but which had nothing MORE THAN many answers because the con- to do with the basic function of cept of a port seems to differ with serving waterborne shipping. The PIERS individual interests. production of soap, wigs, coffee, sandwiches, or candy at estab- To those who love tb watch the lishments near the waterfront vessels come and go, the poet would fit into such a means arrivals and departures. To classification. the employees of stevedore com- panies, international banks, The broadest definition included freight forwarding companies, activities producing all goods that marine insurance underwriters, move by water. The growing of and the U.S. Customs Service it wheat 1,000 miles from a port means much more. would be included as port in- dustry if the wheat was exported. The diversity of port concepts encountered presented a problem The analysts discarded such defi- No definition or classifica- to the analysts in creating the 1-0 nitions as unrealistic, and estab- model for this study. An 1-0 lished the following criteria for a tion of port industry en- model requires a precise defini- definition that would truly de- compassing all port func- tion of an industry or group of scribe port functions and be tions had ever been industries, since the data used in economically measurable. established. constructing it must be pertinent, The definit'ion must refl ect complete, and accurate. the port industry's unique mission to move waterborne The data research showed that no cargo. definition or classification of port The definition must be industry encompassing all port consistent with the true functions had ever been estab- contribution of ports to the lished. As a result, much per- national economy. tinent data-was buried in other The definition must include classifications and had to be only direct activities of port traced and routed out. This was a industry. meticulous and time consuming The definition must be process. formulated in terms of the Examination of the many regional port industry's output. and local port economic studies that have been made from time to Use of these criteria led to a con- time was of little help. They cise definition that would be Port industry is any economic showed almost as many different accurate for any port economic activity that is directly needed in port concepts as there were study: the movement of waterborne cargo. studies. None of them integrated the broad activities of the port Port Industry is any economic industry that truly represent a activity that is directly needed in port's scope and purpose. the movement of waterborne cargo. Some definitions limited port industry to waterfront activities of loading and discharging vessels. But this definition was too narrow. It excluded many func- tions that are part of what ports actually do. 12 This definition not only includes the loading and discharging of ships but also the many port acti- vities that take place beyond the piers. It includes such activities as cargo documentation, freight forwarding of waterborne cargo, marine insurance, international banking, warehousing, land feeder services, and all water carrier services. The definition does not include as part of port industry services (output) the activities of port suppliers and users such as ship repair services, fuel, port machinery, and export products. While such activities are part of a port's economic impact, they are not part of its output. However, the 1-0 model is a flexible tool and it was used in this study to measure such activi- ties as part of the port industry's input. This will be shown in the following pages. L -A This definition not only in- cludes the loading and dis- charging of ships but also the many port activities that take place beyond the piers. wwl 13 Chart 1 MAJOR USERS OF PORT INDUSTRY SERVICES - 1970 P ARE ($ Billions) SERVANTS All other industries $1.65 9MOU, AA gj@g@ a ZW MR! V..4@ Pall,! _%--M Fabrics .20 Elk J-1 MESH HIM"", New construction .21 491 1 S 2, Chemicals .22 U1,15 117, ON. § Q,11, X 0 A g. -0 RUNS 1, A V .9 Industrial Rubber .24 Lumber & wood .25 Users 12, g. $6.7 Non-ferrous metal 40 Mfg. .48 a jr@ g, a q H ME ff Petroleum refining .67 W I11,111-m- tg nw .2 Irgn 11 fffgfi Iron & steel Mfg. 11HURIH, A@ .71 !f "Ap Tra@&,Jagy@i Every day of the study year, Food .75 the Nation's port industry provided an average of $41 0',W.", UPI million in services to its Within port industry 1.22 ME users. Other $ .09 Total Investment .16 Output $17.2 Federal Gov't. .76 Consumption 3.78 Final Users Revenue from intermediate $10.5 sales was 39 percent of the port industry's total output during 1970. Exports 5.71 14 The Nation's port industry p@o- The port industry's intermediate vides water transportation serv- sales are a very significant part of, ices for cargo and passengers. its contribution to the national The services include stevedoring; economy. They represent the underwriting marine insurance; delivery of raw materials and issuing export licenses; cargo and parts to a large number of U.S. baggage inspection; warehousing; industries some of which could bank financing of letters of credit; not function without this type of inland feeder services by railroads port industry service. and trucks; docking and towing; pilotage; freight forwarding; and The intermediate sales (output) water carriage by ship, river or of the port industry in 1970 lake boats, barges or tankers. amounted to $6.7 billion. This was the revenue from sales to users The U.S. port industry in 1970 who required the movement of grossed $1,7.2 billion from the nearly every type of raw material sales of its services. to their factories, processing plants, and refineries. Every day of the study year, the Nation's port industry provided an Revenue from intermediate sales average of $41 million in services was 39 percent of the port indus- Purchases of $749 million to its users-domestic and try's total output during 1970, and worth of port services by the foreign shippers and passengers, is about the same today. Nation's food and kindred and private and Government products industry made It customers. Several key U.S. industries rely the second major in- more heavily than others on port termediate user. In the study's input-output model services for the transportation of those services were sorted into their inputs. They are principally two output classifications called heavy industries such as iron and intermediate and final sales. steel, lumber, rubber, chemical, oil refining, and food processing. The intermediate sales are port services purchased by industries The biggest consumer of port for the movement of goods services is the port industry itself. destined for further processing by In 1970, it paid $1,220 million for the buyers. Moving of crude oil to such services. refineries; shipping ore to steel mills; transporting sand and These payments were for pilot- traprock for road construction, are age, tugboat and towboat ser- examples of intermediate sales vices; stevedoring; hull insurance; services performed by the port and many other internal trans- industry. actions in the port industry. Final sales are classified as final Purchases of $749 million worth demand in the input-output study of port services by the Nation's procedures. They are for pur- food and kindred products in- chases of port services by pas- dustry made it the second major sengers and by shippers for intermediate user of the port moving cargo destined for final industry during 1970. consumption. All exports are rated as final demand because they are moved outside the national economy. Some imports are final demand; many are for further processing and therefore are listed as intermediate sales. Is The petroleum industry paid The food industry's expenditures While it is apparent from the $672 million to the port in- were mainly for waterborne trans- above sales that payments for dustry. portation and cargo handling serv- intermediate port services have ices required in bringing wheat, an important impact on the corn, rice, sugar, coffee, and national economy, none of those other agricultural products by expenditures was directly entered inland and sea transportation to into gross national product (GNP) processing and packaging plants, accounts in 1970. This was throughout the United States. because GNP accounts are Port services for shipments of limited to final sales; intermediate processed food products for final sales are excluded to avoid consumption were not included in duplicate counting of products this category. and services. The huge volume of ore moved by Table I in the back of this book water transport between mines lists the 20 leading intermediate and metal mills provided a large users of the Nation's port in- part of port industry revenue. Pri- dustry and their expenditures in mary iron and steel manufacturers 1970 for port services. paid $705 million for such serv- Exports were by far the ices in 1970; primary nonferrous The sales of port services largest component of the metal manufacturers paid out throughout the Nation in 1970 to port industry's final demand another $484 million. final demand (final consumers) category. were $10.5 billion or 61 percent of The petroleum industry paid $672 the industry's direct revenues for million to the port industry in that year. 1970 for delivery of crude products to refineries. This figure Final sales are by definition GNP has probably more than doubled components. They were broken for 1977 due to sharply increased down in this study's 1-0 model demand and inflation since 1970. into traditional economic classifi- cations: consumption, invest- The lumber and wood products ment, inventory changes, exports, industry's payments for port and Government expenditures. industry services in moving logs and unfinished wood to lumber Waterborne exports were by far mills and other plants totaled the largest component of the port $253 million during the base industry's final demand category. study year. In 1970, they accounted for $5,706 million of the port industry's The rubber and miscellaneous sales. This was one-third of the plastics industry paid $237 million industry's gross revenues that' The Government spent'$756 for port services; the chemical in- year. The remaining two-thirds million for port services. dustry, $223 million; and the con- came from services to domestic struction industry, $205 million. trade and to imports. The port industry's export re- venues included payments for, cargo handling, for carriage of ex- ports on U.S. merchant vessels and on domestic ocean and inland vessels, and payments for financing export letters of credit and cargo insurance. 16 The port industry's next highest amount of revenues from final de- mand services in 1970 was $3,783 million for handling freight and in- surance of imported consumer products and the waterborne p@, movement of domestically pro- duced goods headed for final W4 consumer markets. The private consumption category of imports included thousands of % specific commodities - from automobiles and television sets to fruit and meat products. These lz imports required all kinds of cargo handling, including con-, tainer, pallet, sling, and roll-on roll-off techniques. The Federal Government was the port industry's third major provider of final demand reven- ues. In 1970, the Government spent $756 million for port ser- vices to move mat_erials and inputs including military goods. 04- State and local governments spent an additional $36 million in 1970 for port services. The private investment sector of the United States was also a significant final user of port services, accounting for $155 million in revenues during the study year. These payments repre-_ sented the costs of shipping capital goods to their destinations and included domestic and foreign machinery and equipment that moved by water. Inventory changes in the final demand sector of the port. industry itself amounted to $25 million. (See table 2.) @ I! -M-1i 17 Chart 2 MAJOR SUPPLIERS OF TH E PORT INDUSTRY - 1970 ($ Billions) Total Supplies Purchased: $8.9 0 49 inance,, 'nsurance $..40 All others $5.2 petroleum refin .Ing $32. 4A. viale A-A Cl PORTS ARE The port industry must purchase Purchases of fuels for operating various types of inputs to make port machinery, vehicles, and its services available to users. vessels were also a major expend- CUSTOMERS Such purchases range from real iture of the port industry, costing estate and business services to $323 million. Maintenance and re- maintenance, repair, utilities, pair construction amounted to meals, fuels, office supplies, and $251 million. Other key industries other goods and services. which made more than $200 mil- lion in sales to the port industry Direct purchases of suppliesand during 1970 were shipbuilding, service by the port industry in business travel, and communica- 1970 totaled $8,921 million. tions. During the study year, $6,747 million of the port purchases Table 3 lists the 20 principal originated in the domestic sources of inputs for the Nation's economy; $2,174 million in goods port industry in 1970. and services were imported from other nations. Port industry purchases set off a chain reaction important to the Domestic business services The port industry's plant and economy. Direct suppliers of the accounted for the largest equipment capital investment is port industry rely on port pur- not included here, but is dealt chases in indirect ways as well as block amounting to $719 with later in this study. the direct purchases analyzed million. above. That is, goods they sell to Domestic business services such industries other than the port in- as promotion, advertising, con- dustry are used for the production sulting, legal and accounting serv- of other goods and services sold ices, and dozens of other to the port industry. peripheral business services ac- counted for the largest block of By combining the direct and expenditures by the port industry, indirect impact of port industry amounting to $719 million in the purchases a better perspective is base year of this analysis. obtained of the overall reactions. of U.S. industries with port ser- The large expenditures for vices. promotional and other business services indicate the enormous The indirect impact can be mea- competitiveness within the port sured by using the multiplier of industry. Ports and steamship 1.6 that was generated for the companies both stress the im- port industry by the 1-0 model. portance of these aspects of their Application of this multiplier Port industry purchases set port activities. showed that an additional $10,806 million* of indirect output was off a chain reaction. Purchases from other transporta- required throughout the economy tion companies formed the to sustain the direct level of port second leading category of por 't industry sales of $17,150 million industry expenditures, totaling in 1970. $537 million. These were for serv- ices by domestic truck, rail, air, *Adjusted for transferred imports. and freight-forwarding companies in transporting inputs to the port industry. Rental of properties at port and off- port locations cost the port industry $493 million. Finance and insurance charges amounted to $401 million. 19 The industry's total impact Thus the U.S. port industry's com- Five other broad industry groups on the economy averaged bi ned direct and indirect sales im- made direct and indirect sales of about $76 million per day. pact was $27,956 million for the more than $30b million to the port base year of this analysis. It industry and 10 additional groups meant that the industry's total made sales of $200-$300 million. impact on the-economy averaged abo 'ut $76 million per day during Table 4 details the direct and in- that year. direct sales of the port industry's -- 20 leading supplying industries. These figures are quite distinct from the "value added" to gross The )port industry's impact upon national product in the model. the economy other than the above Using the value added concept, groups of industries runs deeply which omits cumulative resale across a broad front of producers values, the port industry's total of goods and services. The pur- annual contribution to GNP in chasing power of the port in- 1970 was $14,953 million and the dustry, with its ripple effect ex- daily average, $41 million. tending to other industries, is of great importance to many sup- The purchasing power of the The ranking suppliers of the port pliers in the Nation. port industry, with its ripple industry, in terms of direct and in- direct sales, closely paralleled the The U.S. shipbuilding industry, effect extending to other port industry's leading direct sup- which sold 5.9 percent of its total industries, is of great im- pliers in 1970. output in 1970 to the port industry portance to many suppliers directly and indirectly, is.among in the Nation. Business services of $1,042 those industries which rely million w ere purchased by the heavily on U.S. port services to port industry directly and by its buy a meaningful share of their suppliers indirectly. Transpor- outputs. It should be noted that tation services other than the port only maintenance and repairs are industry's were the second included here. The purchase of leading group of direct and in- ships is categorized as invest- direct purchases, amounting to ment. $909 million. Other suppliers in this group in- Payments of $78.7 million for real clude the travel industry which estate and rentals formed the sold 2.3 percent of its 1970 output third largest category while the to the port industry; the non- finance and insurance industry waterborne transportation in- ranked as the fourth leading dustry which sold 1.6 percent of direct and indirect supplier at its output; the maintenance and Shipbuilding industry sold $649 million. repair construction, 1.5 percent; and the petroleum refining in- 5.9 percent of its total output dustry, 1.4 percent. in 1970 to the port industry. These percentages include the in- direct effect-the impact gener- ated by the sales of each of these industries to other suppliers of the port industry to enable them to produce such supplies in the first place. 20 JT; 4A iA.2 Ila r-t-7 TIVIFIL 41 il 412; am. r- -qww r,7 Ll NN P Production of port services in the United States during 1970 gener- ated $9,572 million in personal in- PROVIDE come. The port industry itself paid $6,695 million of that sum in PERSONAL direct payroll while port pur- chases from other industries were INCOME directly and indirectly responsible M"A-- for $2,877 million in wages and salaries. Transportation services not part of the port industry were the most benefited in 1970,,with $359 mil- av lion in personal income generated directly and indirectly during the study year by port purchases . Direct and indirect wages and salaries earned in the business Production of port services in the United States during services industry through port purchases amounted to $303 1970 generated $9,572 million while $269 million in million in personal income. personal income were generated in the finance and insurance industry. Other industries that were strongly affected in 1970 in terms of direct and indirect personal in- come initiated by port purchases were the maintenance and repair construction, $252 million; wholesale and retail trade, $172 million; printing and publishing, $107 million; Federal Government enterprises, $99 million; and communications, $94 million. ZVI TM (See Table 5). The port industry itself paid $6,695 million of that sum in direct payroll while port purchases from other in. ti dustries. were directly and Ctlyr ,indire responsible for $2,877 million in wages and salaries. 22 T4 rj7v - T@ -14 Az 41 v J, It t., all on At A4, 'n Rli 4 41 j4 -23 Port activities in the U.S. are im- PORTS portant producers of business incomes such as rentals, interest, PROVIDE and profits. In 1970, the port in- dustry generated $3,741 million in BUSINESS direct and indirect business in- come. 'INCOME Gross profits within the industry itself were $1,661 million while business income generated in J other industries was $2,080 mil- lion during the study year. This impact was based on an income multiplier of 2.2 derived in the 1-0 model. Service industries were the major business income beneficiaries from port activities during, 1970 Port activities in the U.S. are Real estate and rental activities important producers of grossed $433 million; business business incomes in cases services, $239 million; other trans- such as rentals, interest and portation outside the port indus- profits. try, $154 million; and State and local government enterprises, $124 million in income from the port industry during 1970. Communications, crude petroleum, electric, gas, and water suppliers grossed a total of $279 million from the port in- dustry; the wholesale and retail industry, $63 million; automobile repair and services, $60 million,; and maintenance and repair servi- ces, $40 million. (See Table 6.) ik 24 qMOM OR P,9 25 Ad 41P 4 1 Idi W ir V!, ww 1.11, L;z .......... w4k PORTS The U.S. port industry's services Business services hired some require the efforts of every type of 40,600 persons during the study worker-skilled and unskilled; year to supply the port industry; PROVIDE professional and nonprofessional; wholesale and retail companies, white collar and blue collar. 31,800; the finance (banking) and JOBS- insurance business 30,700 to fill The input-output model showed port commitments; State and that 1,046,800 jobs throughout the local government enterprises, United States were directly or in- 13,400; and in Oort activity related directly attributable to the opera- work and Federal Government tions of the port industry in 1970. enterprises, 12,100. Of these, 686,800 persons were directly employed and 360,000 in Other industries benefiting the various industries supplying directly or indirectly in employ- the ports. ment from port activities were the maintenance and repair con- Transportation that is not part of struction, 17,200 jobs; printing the port industry was the most and publishing, 12,100; ship- strongly affected in 1970 with building, 12,000; and communk 1,046,800 jobs throughout 45,300 port related jobs in the car- cations, 11,100. (See Table 7.) the United States were riage, transfer, and storage of goods. directly or indirectly at- tributable to the operations of the port industry in 1970. 686,800 persons were directly employed and 360,000 in the various in- dustries supplying the ports. V R 'NAR2 4 `@ J, iww i I'M RV g,14-nn, 2 Arl% TiNN"; A 0 Vtt 4 -k A T M-1 AKE k@@ Z., -A07 A 444 nz, WA u5b, Al'v,@-V@, go Not 27 Port activities in the United PORTS PAY States are a significant source of Government revenue at all levels. TAX S During 1970 the U.S. Treasury VW collected $5,198 million in taxes directly or indirectly generated by port operations. EpM Personal income taxes of $1,180 million from incomes generated by port activities were collected by the Treasury; business income taxes totaled $672 million; and Federal excise taxes on water- borne goods came to $1,258 million. In 1970, Customs collections on waterborne imports totaled $2,088 During 1970 the U.S. million. They are included in the port industry's tax category Treasury 'collected $5,198 above. Although such collections million in taxes. at the ports are a direct function of port operations, they should be viewed for fiscal planning as a separate source of Federal in- come. Customs duty payments are better reflected as a function of the value of imports. Such values may be derived independ- ently of the input-output frame- work. Aside from the revenues that accrued to theFederal Govern- ment, the port industry also con- tributed meaningfully to State and local tax revenues. In 1970, $1,975 million was received by State and local governments from taxation sources directly or indirectly gen- erated by port operations. $1,975 million was received by State and local govern.- ments from taxation sources directly or indirectly gener- ated by port operations. WgA 28 "I - - - -- - ----- Ak '44 orrm i" la ROOM .1 10 4i @Flk, w3, -, - &"w Lill 64 IT VA !'eitm All PORTS ARE Long-term capital investments for Therefore, the induced impact port machinery, vessels, construc- that would be generated in future tion of wharves and sheds, inter- years as a result of the invest- INVESTORS modal containers, computer hard- ments in new capacities and ware, and many other die mients technologies in the port industry are of key importance to the port is not a part of the total impact industry. This has been especially figures in this study. true in the last two decades, in which rapid technological Analysis of private investment changes and a strong growth in within this study's framework trade have required increased showed that $1,187 million was capital expenditures. spent by the port industry in 1970 on purchases of capital goods. Private industry and Federal, They included ships, communica- State, and local governments tions equipment, harbor craft, make capital investments in the river barges and towboats, Nation's ports. This section of the loading equipment, and other port MarAd port analysis will focus on m6chinery. private investment. Government $1,187 million was spent by investment will be analyzed in the Application of the relevant sec- the port industry in 1970 on next section. toral multipliers from the 1-0 model to each type of investment purchases of capital goods. The input-output model is a static showed that the direct and in- analyzing tool that provides a pic- direct impact of the port in- ture of only 1 year's economic dustry's capital purchases ac- transactions. It is not possible to tually totaled $2,057 million use the model t 'orneasure fully during the study year. the dynamic impact of port in- vestments. Shipbuilding was the largest single investment category of the A static analysis of capital invest- port industry that year. The direct ments' impact on the national and indirect impact of new economy is limited to the short- merchant ship purchases run impact-per-dollar delivered to amounted to $664 million. They the gross national product-as is covered the costs of new U.S. the case, for example, of annual cargo ships and tankers. Ship operating expenses. In contrast, repairs and maintenance pur- the dynamic impact of long- chases were not classified as in- term capital expenditures would vestments. take into account the impact of improvements in operating The second leading category of efficiency over the years. The private port investment was com- The direct and indirect model's development has not yet munications equipment. The port impact of the port industry's reached that capability. industry purchased $146 million capital purchases actually in communications equipment for totaled $2,057 million during harbor, channel, and open-sea the study year. navigation. Radar systems and other sophisficated electronic and telecommunications instruments accounted for the bulk of these purchases. 31 The primary iron and steel in- 'sj dustry was the third largest beneficiary from port industry capita) investment-$93 miljion- mostly through the indirect im- pact of its sales of materials for low new construction of ships, harbor _4= craft, and pier facilities. The direct and indirect sales im- pact of private port investment in new construction in 1970 was $82 million; in boat construction, $81 million; transportation equipment other than communications, $68 million; motor vehicles and equip- ment, $59 million; wholesale and retail purchases, $58 million; engines and tubes, $31 million; and finance and insurance, $25 million. (See Table 8.) It should be noted that annual port investrnents fluctuate more 77 than port operations expend- itures. Port operations tend toward a continuous volume of W traffic flows from year to year; investments tend to be more sporadic. In some years, many -more investments are made than in others, depending on the state of the economy. ge ';g "a; NO M M-A-1 314e QUA, 501 - 7]4 32 PORTS AND While the private sector of the Also excluded were maritime sub- U.S. port industry is by far the sidies representing a transfer of most important element of port funds, and government wages GOVERNMENT operations, the government sector which were not measurable also plays an important role in directly from the 1-0 model's final waterborne cargo movements. @Jemand sectors. Federal, State and local govern- ments provide a variety of support Fedefal Government expenditures services and investments that are covered such activities as chan- an integral part of the port in- nel dredging, waterway mainten- dustry. ance, and the construction of public locks and dams by the Although port authorities usually Corps of Engineers; coordination are technically part of State of maritime"af fairs by the governments, they were treated in Department of Commerce; ad- this study as part of the private ministration of ocean freight rates sector of port industry because of and other regulations by the the nature of their port activities Federal Maritime Commission; and the technique of the 1-0 collection of tariffs and inspec- Government port activities model. tion of merchandise by the United c States Customs Service; and totaled $641 million in 1970. Government port activities such implementation of vessel traffic as services, equipment, materials, control systems and water safety and facility construction improve- operations such as channel mark- ments by government agencies ihg, harbor radar systems, and the totaled $641 million in 1970'. licensing of merchant seamen by the United States Coast Guard. Application of appropriate in- dustry multipliers to each form of State and local governments also government expenditures on ports directly participate in various increased the total impact aspects of port planning, con- throughout the economy to $1,457 struction, and operations. These million for the study year. activities are included in the above impact totals. These figures excluded govern- ment expenditures for the ship- In addition, State and local gov- ping services that were previously ernments generally provide for analyzed in this study as part of new infrastructure requirements the output of port industry. around ports such as highway access, traffic signals, and the like. But indirect expenditures of this type are rarely associated Appropriate industry multi- with the handling of waterborne pliers increased the total -cargo and are not included in this impact throughout the analysis. economy to $1,457 million. 33 Government port expenditures Government port functions also had a powerful direct and indirect produced a meaningful number of impact on many U.S. industries jobs. While the 1-0 model does during 1970. Most affected was not provide estimates of the num the new construction industry ber of government jobs directly with sales of $348 million stem- related to port activities, other ming directly and indirectly from sources such as the "Budget of government projects. the U.S.-1970" indicated that about 23,000 Federal employees The maintenance and repair con- were primarily engaged in the struction industry benefited by facilitation of waterborne cargo $83 million from government port movements in 1970. expenditures that year. Business services directly and indirectly Federal jobs ranged from top ad- sold $79 million worth of services; ministrators to engineers to wholesale and retail industry transportation specialists in the came to $48 million. Maritime Administration and the Corps of Engineers. However, the The ripple effects of govern- 23,000 figure does not refer to the Government port ex- mental port expenditures were jobs generated in quasi-govern- penditures had a powerful strongly felt in demand for ment enterprises such as the construction materials such as Export-Import Bank and the St. direct and indirect impact on metals, lumber, heati 'ng and Lawrence Seaway Development many U.S. industries during plumbing equipment, and other Corporation. They were counted 1970. Most affected was the supplies. The heating and plumb- as part of the private sector new construction industry ing industry benefited directly employment. with sales of $348 million. and indirectly by sales of $36 million; stone and clay products, Aside from creating jobs within by $31 million; primary iron the Government itself, govern- and steel, also $31 million; and mental port spending strongly primary nonferrous metal, $29 affects civilian employment. Port- million. (See Table 9.) related government purchases of goods and services were re- sponsible for an additional 42,000 jobs in the economy in 1970. Government port spending in 1970 created 11,890 construction jobs. More jobs were created in construction than in any other category. Wholesalers and re- Ripple effects of government tailers provided 4,190 jobs in 1970 to expedite various materials and port expenditures were supplies for government port strongly felt in demand for functions. Other business serv- construction materials such ices accounted for -4,140 jobs. as metals, lumber, heating (See Table 10.) and plumbing equipment. 34 Af Ta k7, .woo& PORTS, The port industry serves the Cargoes valued'at $24.5 billion Nation by moving its waterborne were carried out of the United LIFEBLOOD: domestic an .d foreign commerce. States on merchant vessels in Most U.S. international trade, 1970, or 57.8 percent of the $42.6 measured either by weight or billion in exports moved that year. FOREIGN value, moves into or out of the Overland movements to Canada country by water transport. and Mexico and international air TRADE Exports and imports are the cargo accounted. for the lifeblood of the ports. remainder (42.2 percent). The input-output model has been All waterborne exports, regardless used to this point of the port of the flags of the ships on which industry study to analyze the in- they moved across the seas, re- dustry's interaction with other. quired port services in this industries and to examine the country. During the study year, impact of port activities on jobs, the port industry provided $5,706 income, and taxes in the national million in direct services for economy. moving exports. Most U.S. international trade, The model can also be used to Other port activities, including a measured either by weight or analyze the impact of economic variety of waterborne services re- events on the port industry itself. quired by the port industry itself value, moves into or out of Analysis of the impact of foreign in obtaining its input supplies for the country by water trans- trade upon the port industry is an handling exports, added another port. example of the model's useful- $421 million. ness in examining cause and The model can also be used effect relationships from this A further $667 million. in port to analyze the impact of perspective. services was incorporated in the economic events on the port value,of the exports. These were industry itself. In 1970, port services for handling services needed in moving raw the Nation's waterborne exports materials and other input cargoes and imports were responsible for by water to the export produc.ing $16.2 billion of output in the industries. national economy. The Nation's total exports of This means that the movement of $42.6 billion in 1970 therefore each ton of waterborne cargo by generated a demand for port the U.S..port industry in foreign services amounting to $6,784 trade generated $34 of port million-the total, of the three revenue. Applying the port multi- impact areas. This came to 16 plier of 1.6 the direct and indirect percent of the total value of U.S.- revenue throughout the economy merchandise exports. Port services for handling amounted to $55 per ton. This the Nation's waterborne does not include the value of the This means that every million- exports and imports were cargo itself. dollar increase in U.S. exports responsible for $16.2 billion would require an average increase of output in the national International trade not carried by of $160,000 in port services, , economy. ships consists of the growing assuming proportionate increases volume of high-value international in the types of export mer- cargo that moves by air transport chandise. and the two-way commerce that moves by overland highway and rail transport between the United States and Canada and between the United States and Mexico. 36 of 1.6. the direct and indirect Applying the port multiplier revenue throughout the economy amounted to $55 per ton. -4w 4 awl I The Nation's total exports of $42.6 billion in 1970, therefore, generated a demand for port services amounting to $6,784 million. KI, tj This means that every million- dollar increase in U.S. exports would require an average increase of $160,000. in port services. 37 Agricultural exports valued However, application of such a Most U.S. exports of construction, at $3,206 million had to move general ratio throughout the in- manufacturing, and oil field through U.S. ports. The in- dustry is impractical because machinery are far too bulky and dustry handled 70 percent of changes in the level of shipments heavy to move overseas by air the Nation's agricultural ex- for specific export commodities transport In 1970, 76 percent of ports during the.study year. have varying impacts on port in- such exports, valued at $1,372 dustry in proportion to their trans- million, were handled by.the port port costs and their relative industry. Most of the remaining reliance on vessel shipments. 24 percent moved to Canada or Such characteristics as weight, Mexico by overland transport. s.ize, and value of shipments de- termine their dependence'on Other leading export products water transport. that were handled principally by the port industry in 1970 were Because of the weight and bulk primary iron and steel, 77 percent of their products, many industries with a value of $972 million; paper have no feasible alternative to and allied products, 91 percent, water transport for exporting their valued at $922 million; special products to overseas points. An industry machinery, 75 percent, Waterborne imports, increase in these exports to such valued at $843 million; and destinations would therefore re- general industrial machinery, 67 amounting,to $25.4 billion in quire port facility expansion in percent, valued at $539 million. 1970, accounted for 63.8 many instances. For instance, all (See Table 11.) percent of the total U.S. of the Nation's $646 million of merchandise imports of coal exports and 98 percent of its Waterborne imports, amounting to $39.,8 billion that year. $645 million of tobacco manu- $25.4 billion in 1970, accounted facturing exports moved abroad for 63.8 percent of the total U.S. by water transport. merchandise imports of $39.8 billion that year. Agricultural exports valued at $3,206 million had to move Proportionately more imports than through U.S. ports in 1970 exports were carried by seagoing because most of them were bulk vessels because of an abundance shipments of grain which could of bulky commodities such as not feasibly move by other agricultural products, petroleum, transport. The port industry and ores that constitute the handled 70 percent of the Nation's inbound cargoes. Nation's agricultural exports dur- Waterborne imports weighed 42 ing the study year. The remaining percent more than waterborne 30 percent, mostly fresh fruits exports in 1970. Hence, imports and vegetables, moved by over- required a much larger per- land and air transport. centage of the port industry's capacity than exports. Food and kindred products were the second leading classification The 1-0 framework treats imports of U.S. exports handled by the differently than exports. The port industry during the study reason for this is that imports year. Eighty-five percent of such enter the Nation's economic products, valued at $2,060 million, scene much like any other input moved by water carrier. in the production and consump- tion process. They are distin- Third-ranking were chemicals, guished only by whether or not with 77 percent of such exports. they undergo further processing Chemicals valued at $1,766 ' and by the sector purchasing million were handled by the port them. This makes it more difficult industry in 1970. to estimate their industry-by- industry impact on the ports. 38 Movements of waterborne However, it was possible to The primary nonferrous metals imports in 1970 accounted, develop a method of estimating industry was second, with $1,097 directly and indirectly, for this transportation element and million of waterborne imports. $9,440 million of port ser- compute an aggregate impact Next came the new construction vices. figure for imports., industry with imports valued at $1,017 million. Through this method it was de- termined that the, movements of The value of the petroleum waterborne imports in 1970 ac- refining industry's imports totaled counted, directly and indirectly, $1,013 million in 1970 but have for $9,440 million of port services, increased relatively much more slightly less than 23 percent of than any other U.S. import the $39.8 billion in United States commodity and far exceeded the imports that year. 100 percent increase in GNP noted earlier for the period 1970- .This meant that generally for each 77. (This is because of a com- increase of a million dollars of im- bination of inflationary pressures, ports, the demand for port serv- increased demand for oil pro- ices would go up an average of ducts and petroleum production $229,400. controls that have been imposed This means tha t'for each by the countries that export oil to increase of a million dollars The higher increase in port serv- the United States'since the oil of imports, the demand for ices per dollar of imports com- embargo of 1973-74.) port services would go up an pared to exports wa's due in part average of $229,400. to the higher tonnage of imports Waterborne primary iron and steel carried by vessels, as noted imports during the study year above. Other factors.included U.S. amounted to $1,003 million; radio, customs duties and excise taxes television, and commercial equip- associated only with imports to ment imports, $729 million; motor this, country. vehicles, $675 million; livestock, $479 million; rubber and miscella- Here too, many U.S. industries neous plastic products, $451 mil- depend heavily on water transport lion; lumber and wood, $379 mil- in their production process, since lion; chemicals, $375 million; vessels offer the only economical paper a 'nd allied materials, $320 transportation for the imports of million; and heating and plumbing raw materials or partly finished supplies, $272 million. (See Table products they need. Such in- 12.) dustries' production could be greatly disturbed if foreign inputs were not available. Consequently, these industries have a great stake in the viability of port services. The food and kindred products industry depended most on port industry for handling its imports, valued at $3,111 million in 1970. 39 Sz. JI .1N WHAT The input-output model's a 'bility Decisionmakers in the port in- to determine impact in two dustry are continually confronted directions - impact of the port with the problem of interpreting WOULD industry on the national economy various available economic in- and impact of economic events dicators in a way that is mean- HAPPEN on the port industry - makes it a ingful to their operations. valuable economic forecasting 9 IFE M 0 0 and planning tool. Personal consumption data published routinely as part of the The model can be used to national accounting system can simulate external changes in the be put to good use as business economy and determine their indicators via the 1-0 model's effects on the port industry. It can built-in linkage between the also analyze the effects of simu- private consumption sector of the lated changes in port activities economy and the port industry. or investment. However, this does Private consumption, in this not mean that the model can context, would act as a barometer serve as a mechanical forecaster. mainly to demand for port. service It'does not automatically generate in handling domestic cargo and The input-output model's solutions and answers. imports. ability to determine impact Extensive sets of assumptions Consumer expenditures through- in two directions -impact of usually must be made whenever out the United States in 1970 the port industry on the the 1-0 model is used to simulate totaled $615 billion. This included national economy and im- the conditions of an external de- $8,171 million for the waterborne pact of economic events on velopment. These assumptions movements of these consumer the port industry-makes it a may relate to the current state of goods (including expenditures for valuable economic the economy, anticipated changes passenger travel by water). forecasting and planning in technology, the possible im- tool. pact of other global develop- A little more than half the costs ments, and, above all, to of waterborne movements - assumptions that are implicit in $4,060 million - represented all 1-0 analyses, that is the con- direct andindirect payments for stancy of input proportion and the the transportation of imported transfer of imports and secondary products and domestic mer- production to primary industries. chandise for final consumption. Furthermore, special adjustments By using the inverse matrix of the of the model may be necessary 1-0 model, it was possible to for particular applications. identify and measure the amount of port services absorbed by $4,060 million represented The following examples illustrate private consumers through their the model's ability to answer purchases of all consumer goods direct and indirect payments three hypothetical questions: and services. This showed that for the transportation of $4,111 million was paid for port imported products and How Would Increased Consumer services indirectly generated by domestic merchandise for Spending Affect the Demand for consumers through purchases of final consumption. Port Industry Services? domestically produced goods and The most prevalent problem that services from industries that confront producers of goods or purchased port services for services is when, Where, and how various inputs in their production to adjust to variations in con- processes. sumer demands for their products, especially increased demands. When this occurs, too little expansion of capital facilities can result in bot- tlenecks; overexpansion in economic waste. 41 $4,111 million was paid for For example, the model was able Since each industry requires a dif- port services indirectly to determine that the private ferent amount of port services in -generated by consumers consumer was responsible for order to increase its output, the through purchases of the indirect consumption of impacts of their output changes domestically produced $1,109 million of port industry will vary. Industries that have a goods and service@. services in 1970 through the strong demand for waterborne purchases of $72 billion of transportation services or indirect output from the food and kindred linkages to other supplying indus- products industry. This amount tries that are heavy port users, of port services was incorporated have a substantially greater into the value (prices) of the,out- economic impact on ports than put of food and kindred products do industries with little direct or industry during its production indirect linkages to the port in- process. dustry. Through these techniques the 1-0 Furthermore, the total impact of model can be used to estimate each industry's sales on the port the impacts of changes in con- industry depends not only on the sumer expenditures on demand strength of these linkages but The model was able to for port services as follows: also on the size of each industry's determine that the private output. Naturally, industries with Assuming that proportionality of greater absolute sales will tend to consumer was responsible input-to-output holds, a 10 per- have a greater overall impact on for the indirect consumption cent increase in consumer spend- the ports. of $1,109 million of port ing would result in an increase'in industry service in 1970 demand for port services of $817 Two methods can be used to through the purchases of $71 million (.10 X $8,171 million). This demonstrate how a change in the billion of -output from the amounts to 5 percent of the port output of each industry affects food and kindred products industry's total output of $17.2 demand for port service. One em- industry. billion. phasizes the absolute changes in industries' outputs; the other em- How Would Changes in Industrial phasizes the relative changes in Output Affect Demand for Port their outputs. Services? Will changes that occur from year The first kind of output simulation to year.in the output of every in- by individual industries is to com- dustry in the economy make new pare the impact on the industry of demands (requirements) upon the a $1 billion increase in output in Nation's port industry? each industry. Industries with larger port multiplier effects Forecasts of output changes by (direct and indirect demand) will most industries are available f rom register larger impacts than in- Assuming that propor- governmental and private sources. dustries with small multipliers. tionality of input-to-output From these forecasts it is pos- holds, a 10 percent increase sible to estimate future demand The model showed that the in- in consumer spending would for port services by applying the dustry with the largest impact on result in an increase in projections to coefficients the port industry in 1970 was the demand for port service of developed in this study's 1-0 iron and ferro-alloy industry. Every $817 million. model. billion dollars in new sales by this industry required $61 million in new port services. 42 ZAV 7 ep A, tv- ;IRS I tee AV War 1 @-777@ . . . . . . . . . . ik The industry with the largest The second leading impact in- If a 10 percent increase in output impact on the port industry dustry was the primary nonferrous is analyzed separately for each in- in 1970 was the iron and metal manufacturing industry, dustry, a specific dollar amount ferro- alloy industry. Every which generated $39 million in of new port services can be billion dollars in new sales new port services for each billion determined in every case based by this industry required $61 dollars of new output. on the existing 1970 interindustry million in new port services. relationships and the sales levels Other important impact industries existing in that year. with more than $30 million in new port services demanded for each The model showed that a 10 billion dollars of new sales were percent increase in the *output of primarily heavy industries that the food'and kindred products in- required wide usage of port serv- Idustry would have the greatest ices in their production proces- impact, generating a $162 million ses. These industries were demand for new port services. nonferrous metal ore mining, $38 The second ranking impact in- million; primary iron and steel, dustry was the iron and steel with $35 million; petroleum refining, $121 million. New construction $33 million; and lumber'and wood was third with $109 million, and The model showed that a 10 products, $30 million. petroleum refining came fourth percent increase in the The textile goods industry was with $104 million. output of the food and the leading light manufacturing The demands for new port serv- kindred products* industry industry in this category. Each bil- ices generated by 10 percent would have the greatest lion dollars of new output of increases in output by other in- impact, generating a $162 textile goods required some $35 dustries were: Primary non-fer- million demand for new port million in new port services. rous metal, $102 million; chem- services. Other industries which generated icals and selected chemical considerable demand for new port products, $52 million; wholesale services, according to the model and retail, $49 million; lumber and for each billion. dollars of new wood products, $45 million; and sales, were: forestry and fishery broad and narrow fabrics, $43 products, $25 million; leather million. (See Table 14.) tanning and industrial leather products, $24 million; equipment This information can be very use- for other transportation (outside ful for the port industry in making port.industry), $24 million; and long-term growth projections. rubber and miscellaneous plastics What it actually demonstrates is products, $23 million. (See Table that demand for port services is a 13). derived demand and that the logi- cal approach to projecting de- The second method of comparing mand for new port services is via the impact of changes in indus- those industries that generate the trial output on ports is to simu- demand in the first place. late an equal percentage increase in output for all,industries regard- less of their sales levels. By doing so, the stress is put on the overall growth impact of each industry's demand for port serv- ices rather than the strength of the multipliers. 44 ------------ Even broad indications about the future growth of each of the key industries could be useful from this perspective. For example, if it Yy is expected that a leading impact industry will have sharp growth rates in the short run but much J. lower growth rates in the long term, a strong signal should be perceived in the port industry about the level of demand for its services. Capacity should then be moderated despite the shortrun boom. However, if such a key impact in- dustry has a steady long-term growth potential, the demand for new port capacity may be more soundly based despite short-run 44_1 f luctuations. Finally, this analytical tool can also help determine whether 0 certain economic developments have only a remote bearing on port traffic. Those industries M all amounts which need only sm of port services directly and indi- rectly in their production process would not materially affect the port industry even if their output were to double. 77MI.I. By recognizing such industries as QIO- wooden containers, chemical fertilizer and mineral mining, agn- cultural forestry, and fishery serv- 51- t ices, port management can reac R. much more rationally to future de velopments in the marketplace. How Do Dock Strikes Affect the Creation of an input-output Economy? model for this study provided Dock strikes always have a tool for assessing the triggered questions as to their economic impact of dock effects upon the economy. strikes. Assessments of such effects have appeared in the business trade press from time to time, often with little explanation as to how the assessments were made. Such informal analyses have, nonetheless, found wide accept- ance because of the port in- dustry's great importance to almost every industry in the economy. 45 To demonstrate how the Creation of an input-output model Canadian, Mexican, or U.S. input-output model can be for this study provided a tool for ports not affected by a stop- used to evaluate the assessing the economic impact page. economic impact of a dock of dock strikes. However, impact Extent of post-strike recovery strike, a simulation was measurement cannot be made of lost tonnage. performed using a with great precision because of a hypothetical set of large number of variables that Given these basic assumptions assumptions. influence the outcome of such a about a strike's duration and strike. effectiveness, the 1-0 model can generate reasonable estimates of Key variables that must be taken losses in output by the port in- into consideration in assessing dustry. Moreover, by including the impact of a strike are: specific assumptions on the re- *Duration of the work stop- sponses of different industries to page. a dock strike, its impact can be *Geographical extent of the estimated for the economy as a strike (ports tied up). whole. *Expectations of the duration Experience gained from past and severity of the walkout dock strikes has shown that the and the extent of anticipatory detrimental impact of a strike inventory buildup by ship- increases exponentially (by geo- pers. metric progression) with time. *Lead time warning before the The daily impact becomes more strike's onset. severe as the strike enters its *Amount of cargo divertable to more advanced stages. other modes or.routes such as air or overland transport to IAJA TI, 7W 7, 1 @11 If-IV 17 7 7_1 A 1111111110- - I @7 -7, 46 If a 6 month dock strike were in Industries that depend only The 1-0 model showed that a effect on all the Nation's coast- slightly on the Nation's foreign 2-month strike would result lines, waterborne foreign trade trade for supplies or markets in a direct and indirect loss and most export production would not be affected to a great of $1,258 million to the throughout the country would extent by a strike of short United States economy. come to a halt. By the end of 6 duration. However, beyond a months there would be a logjam certain amount of 'time, even of exports awaiting shipment with these industries could be injured no space left for storing them. if their domestic suppliers or Alternative short-term outlets of buyers were severely affected by Canadian or Mexican ports.or air such a strike. cargo could not possibly absorb this high level of overflow. Therefore, production losses,re- sulting from a dock strike should Similarly, industries 'that depend be carefully assessed in each in- on imported raw materials with no dustry by taking into considera- domestic substitutes would run tion its individual characteristics into major supply problems that in export production relative to would affect production. Many total production, existing inven- would be forced to shut down for tories, warehousing space, The direct impact would the walkout's duration and for a alternative supplies, potential while afterward, until the flow of bottlenecks, and seasonality of amount to $803 million. imported supplies could be re- shipments. sumed. To demonstrate how the input- As a consequence of a long port output model can be used to eval- industry shutdown, many in- uate the economic impact of a dustries unable to withstand the dock strike, a simulation was strike's effects could be forced performed u sing a hypothetical into bankruptcy with a resulting set of assumptions. They were for increase in unemployment and a strike: other severe economic disrup- 9 Of 2-months' duration; tions. * On the East and Gulf Coasts; In contrast, a strike of only 1 e Affecting all waterborne inter- month affecting one coast would national and all deep-sea have only minor impact con- domestic cargo except sequences for the U.S. economy. petroleum; Meaningful output losses would * With 20 percent of struck occur mainly within the port waterborne traffic (based on industry itself. No major impact value) diverted to air and on production and sales would be overland transport; and noted in such an event, particu- e With 50 percent recovery of larly if the duration of the strike traffic through anticipatory was in line with general expec- shipments and post-strike in- tations before it began, or if the ventory adjustments (50 per- delay of seasonal cargo was at a cent based on value). minimum. The severity of a dock strike's im- pact for any work stoppage be- tween the 1 month and 6 month durations would depend on the above assumptions. But with each passing day of a shutdown, more industries would begin to be affected. 47 The direct impact of such a The 1-0 model showed that such a Th?3 role of expectations is ex- strike therefore would 2-month strike would result in a tremety important because the im- amount to approximately 5 direct and indirect loss of $1,258 pact of a strike can be greatly percent of the port industry's million to the United States@ cushioned by hedging during the annual output. economy. warning period. Industries that de- pend on exports of their products The direct impact within the port can rush to get off as many or- industry resulting from idling of ders as possible before the work ships, machinery, loading, and all stoppage deadline; steamship other parts of the industry would companies push up sailing times amount to $803 million; the rest so their ships will not be caught of the impact would be diffused in struck ports; industries that de- throughout the economy through pend on imports stock up before a chain of lost sales to the port the walkout takes place. industry. Changes in any of the assump- The direct impact of such a strike tions would lead to different therefore would amount to ap- impact figures than those ob- proximately 5 percent of the port tained. industry's annual output. A foot- note to the above figures is that It was also assumed that the 2- the strike's impact on port in- month duration of the strike was come may be relatively less than expected, allowing ample warning on output to the extent that for an anticipatory buildup of ex- overtime is paid in clearing back- ports and imports by shippers. log after the strike is settled or in hedging before the strike is In general, the closer the expecta- called. tions are to the final outcome of the strike, the less negative im- The assumptions for the. hypothe- pact the walkout is likely to have. tical strike were roughly consis- Correct expectations allow tent with the characteristics of shippers and carriers alike to most U.S. dock strikes during the react by hedging or accumulating last two decades. The 2-month inventory to reduce the potential duration of the strike probably re- loss of output. presents the maximum period in which production in most indus- In contrast, incorrect expecta- tries would not be seriously-af- tions can be costly in overtime fected. and storage costs. If no strike is expected, hedging usually is at a The joint shutdown of East and minimum. When an unexpected Gulf ports has been the rule strike takes place, losses will rather than the exception. These then be greater. Similarly, if two coasts handle approximately expectations of a prolonged strike 75 percent of the Nation's water- do not materialize, short-run borne foreign trade., Diversion of misallocations of resources occur 20 percent of the struck cargo to at some cost to the affected other modes and coasts could industries. mean traffic increases of 40 percent to 80 percent for inter- national airlines and Pacific and Great Lakes ports that remain open. 48 The 1970 input-output model The assumption that petroleum Further Applications has many other potential movements would not be affected The 1970 input-output model has applications that,can shed simplified the analysis by elimi- many other potential applications light on various economic nating the possibility of a crisis that can shed light on various stemming from energy shortages. economic questions that are questions that are national in In 1970, petroleum and petro .leum national in scope. Simulations scope. products accounted for 10 per- can be made to answer such cent of the U.S. waterborne im- questions as: port value and less than 4 percent 9 How many jobs are created of the Nation's export value. as a result of port facility construction of a certain. No attempt was made to measure size? losses in export production and * What would be the impact on some other repercussions which the port industry of changes may result from dock strikes. Such impacts cannot be quan- in tax policy? tified without- extensive surveys. What would be the impact on Permanent losses of export the port industry of changes markets during a strike because in Government expenditures? foreign buyers turn to other Special attention would have to countries Are examples of such- be paid in any further simulations unquantified impacts. Domestic of the model to assure that inter- bankruptcies resulting directly pretation of results be made only from dock tie-ups are other within the limitations of the 1-0 examples. model. For example, the model The simulation was therefore does not account directly for based on all the above assump- possible supply shortages in the tions and confined to the direct economy or under-utilized labor and capital resources in specific impact on the port industry and industries. the resulting indirect impact throughout the economy as measured by the port indListry multiplier in the model. 17 -0 J "R, K A R-, 49 The national 1-0 model also The model provides estimations Since different regions tend to be can be applied in analyzing based on conditions existing in more specialized in the handling regional impact of ports. the survey year. These must be of different commodity groups, compared with any new develop- and since regions also tend to ments in the economy that are have a nonhomogenous produc- not intrinsic to the model. tive base, the regional economic impact of ports cannot be Updating results into current achieved by dividing the national dollars is another aspect of the impact by any simple-weight analysis which must be handled factor. with great caution. Assumptions of fixed coefficients may hold For example, it is not appropriate less for certain specific industries to use regional trade volumes by - than for others. vessels as proxies for regional im- pacts. Nor should any other Moreover, real economic growth single indicator such as regional and inflation vary by industry. It population, income, or production may be insufficient to merely use serve such a purpose. trends in real gross national pro- duct growth and price deflators to The national model can be ex- obtain a current dollar impact fig- tremely useful, however, in draw- ure for the port industry. It would ing some inferences from the be preferable to use more precise linkages of regional ports to spe- data'for such purposes. cific national industries. The model is able to pinpoint the The national 1-0 model also can industries that benefit most from be applied in analyzing regional the existence of a port industry. impact of ports. Obviously, the Conversely, the model can pin- total impact of the national port point the port industry that industry is made up of the various benefits most from certain in- regional components, with each dustries. Each region can evalu- region contributing its share ate its own position relative to the depending on the amount of national standard. In addition, by di:rect port.activities taking place using various adjustments, within it and on the direct link- national impact yardsticks derived ages that it has with the rest of by the model can be refined to the economy. approximate regional impacts. For example, regions that handle bulk items primarily could com- pensate their impact estimates per ton by lowering them in some proportion to the national norm. On the other hand, regions that specialize in general cargo com- modities, or which have a strong international banking sector, could compensate in the other di- rection above the national average. so Although these crude methods do The national model can be not provide precise regional extremely useful, however, in measures, they could serve a drawing some inferences useful purpose in gauging overall from the linkages of regional impact trends in various regions. ports to specific national Actually, all of the factors that industries. make a region unique economi- cally must be taken into consider- ation when making inferences from the national model. Not only must ratios of bulk to general cargo be analyzed but also the proportions of export, import, and domestic trade as well as regional production and consumption patterns. All of which indicates that while the national 1-0 model does pro- vide a valuable blueprint for the derivation of a regional 1-0 study of individual ports, the national study in itself is not a substitute for a more refined regional analysis. 4 5A '40,ffl Res,I A hr 51 TABLE 1 TABLE2 IMPACT Interindustry Sales of the Expenditures for Port Services by U.S. Port Industry - 1970 Final Demand Sectors - 970 TABLES ($ Millions) ($ Millions) Purchasing Industry Amount Final Buyers Amount Port services $1,220 Exports $5,706 Food & kindred products 749 Consumption 3,783 Primary iron & steel Federal Government 756 manufacturing 705 Investment 155 Petroleum refining 672 State & local government 36 Primary nonferrous metal mfg. 484 Inventory 25 Lumber & wood products 253 Rubber & misc. plastic products 237 Chemicals 223 New construction 205 Fabrics, yarn & thread 199 Paper& al I led products 183 Stone & clay mining 181 Radio, television & communication equipment 178 Other agricultural products 170 Misc. manufacturing 127 Federal Government enterprises 114 Misc. textile goods 112 Wholesale & retail trade 107 Iron & ferroalloy ores mining 97 Nonferrous metal ores mining 84 .00"" 71 52 TABLE3 TABLE4 TABLE5 Direct Input Requirements of the The Direct & Indirect Direct and Indirect Personal U.S. Port Industry by 20 Leading Requirements of the U.S. Port Income Generated by the U.S. Supplying Industries - 1970 Industry by 20 Leading Supplying Port Industry by the Ten Leading ($Millions) Industries - 1970 Supplying Industries - 1970 .($ Millions) ($ Millions) Supplying Industries Amount Business services $719 Supplying Industry Amount Supplying Industry Amount Other transportation 537 Business Services $1,042 Other transportation $359 Real estate and rental 493 Other transportation 909 Business services 303 Finance and insurance 401 Real estate 787 Finance & insurance 269 Petroleum refining 323 Finance & insurance 649 Maintenance & repair State and local gov't Maintenance & repair construction 252 enterprises 320 construction 477 Wholesale & retail trade 172 Maintenance & repair Petroleum refining 456 Printing & publishing 107 construction 251 Wholesale & retail 402 Federal Government Shipbuilding 251 State & local enterprises 99 Business travel & government enterprises 395 Communications 94 entertainment 228 Business travel 311 Primary iron & steel Communications 203 Primary iron & steel 297 manufacturing 85 Automobile repair & services 169 Printing & publishing 288 State & local Other fabricated Communication 287 government enterprises 81 metal products 149 Electric, gas 280 Wholesale & retail trade 117 Food & kindred products 261 Food & kindred products 105 Shipbuilding 253 Electric, gas, water Crude petroleum 229 and sanitary 88 Primary nonferrous metal 234 Primary iron & Steel Other fabricated metal, 218 manufacturing 81 Automobile repair& service 217 Federal Government Paper& allied products 195 enterprises 73 Rubber& misc. plastic products 70 Primary nonferrous metal manufacturing 68 General industrial machinery &equipment 61 53 TABLE6 TABLE7 TABLE8 Direct and Indirect Business Direct & Indirect Employment Direct and Indirect Sales Impact .Income Generated by the U.S. Impact of the U.S. Port of Private Port Investment in the Port Industry by the Ten Leading Industry in the Ten Leading 20 Leading Supply Industries - 1970 Supplying Industries - 1970 Supplying Industries - 1970 ($ Millions) ($ Millions) Supplying Industry Employment Supplying Industry Amount Supplying Industry Amount Other transportation -45,300 Shipbuilding - $664 Real estate & rental $433 Business services 40,600 Communication equipment 146 Business services 239 Wholesale & retail 31,800 Pri m'ary iron & steel 93 Other transportation 154 Finance & insurance 30,700 New construction 82 State & local Maintenance & Repair Boat construction 81 government enterprises 124 construction 17,200 Other transportation Communications 102 State and local government equipment 68 Crude petroleurh 101 enterprises 13,400 Nonferrous metal 66 Electric, gas and water 76 Printing and publishing 12,100 Motorvehicles & Wholesale& retail 63 Federal Government equipment 59 Automobile repair enterprises 12,100 Wholesale & retail 58 & services 60 Shipbuilding 12,000 Heating & plumbing 46 Maintenance & repair Communications 11,100 Business services 39 services 40 Other transportation 3,4 Engines & tubes 31 General industrial machinery 31 Lumber & wood products 30 Other fabricated metal products 28 Finance and insurance 25 Real estate and rental 25 Electronic components 21 Electric, gas 19 54 TABLE9 TABLE 10 Direct & Indirect Output Impact Direct & Indirect Jobs Of Government Port Expenditures Generated By Direct Government on the Twenty Leading Supplying Port Expenditures in the Industries - 1970 Twenty Leading Supplying ($ Millions) Industries - 1970 Supplying Industry Amount Supplying Industry Jobs New construction $348 New construction 11,890 Maintenance & repair Wholesale & retail 4,190 construction. 83 Business services 4,140 LPN Business services 79 Maintenance & repair Wholesale & retail 48 construction 2910 Heating & plumbing 36 Hotel & personal services 1:390 Stone & clay products 31 Other transportation 1,240 Primary iron & steel 31 Stone & clay products 1,120 Primary nonferrous metal 29 Primary iron & steel 900 Lumber & wood products 28 Printing & publishing 790 Other transportation 26 Electric industrial equipment 720 Electric & gas 20 Finance & insurance 530 Construction & mining mach. 19 Construction & mining Electric industrial equipment 19 machinery 520 Printing & publishing 19 Primary nonferrous metal 490 Hotel & personal services 18 Other fabricated metal Real estate & rental 16 products -' 400 Service industry machines 14 Sh.ipbuilding 390 Finance & insurance 13 Office & computing Shipbuilding 13 machines 350 Petroleum refining 12 Federal Governme .nt enterprises 290 Electric lightih g equipment 250 Communication 240 Forestry & fishing products 220 55 TABLE 11 Leading Waterborne Export Industries in'the United States - 1970 ($ Mil(ions) Industry Value Water Penetration Agricultural products 70% Food & kindred products 2,060 85 Chemicals 1,766 77 AXIM, Construction, manuf. & oil field mchy. 1,372 76 Primary iron & steel 972 77 Motor vehicles & equipment 959 33 Paper& allied products 922 91 Petroleum refining 874- 92 Special industry machinery 843 75 Primary nonferrous metal 828 76 Coal mining 646 100 Tobacco manufacturing 645 98 General industrial machy. 539 67, Lumber & wood products 471 77 Service industry m 'achines 425 83 Metal working machy. 419 67 Engines & turbines 373 70 Other fabricated metal products 362 66 Drugs, cleaning & toilet preps 359 57 Ordinance & accessories 342 86 56 TABLE 12 TABLE 13 Ranking of Waterborne Imports Increase in Port Industry's Output Resulting from by Consuming Industry in the Additional Sales of Other Key Industries - 1970 United States - 1970 (Mil I ions of Dollars per $1 Bi Ilion Sales by Other Industries) I$ Millions) Industry in Which Output Resulting Port Output Industry Value Increased $ 1 Billion (in $ millions) Food & kindred products $3,111 Iron & ferro-alloy ores mining $ 61 Primary nonferrous metals 1,097 Primary nonferrous metal manufacturing 39 New construction 1,017 Nonferrous metal ore mining 38 Petroleum refining 1,013 Primary iron & steel 35 Primary iron & steel 1,003 Misc. textile goods 35 Radio, television & Petroleum refining 33 comm. equipment 729 Lumber & wood products 30 Motorvehicles 675 Forestry &.fishery products 25 Livestock 479 Leather tanning and industrial leather products 24 Rubber & misc. Other transportation equipment 24 plastics products 451 Rubber& misc. plastic products 23 Lumber & wood products 379 Misc. manufacturing 21 Chemicals 375 Chemicals 20 Paper& allied products 320 Paper& allied products 19 Heating & plumbing products 272 Paints & allied products 19 Wholesale & retail 255 Metal containers 19 Other agricultural products 245 Other fabricated metal products 18 Office, computing & Plastic & synthetic materials 18 accounting machines 234 Heating & plumbing equipments 18 Electric & gas 220 Special industry machinery 17 Misc. manufacturing 219 Business services 182 57 r7 TABLE 14 Increase in Port Industry's Output Resulting from Ten Percent Additional Sales of Other Key Industries - 1970 Millions) Industry in Which Output Increased Resulting Port Output Food & kindred products $162 Primary iron & steel 121 New construction 109 Petroleum refining 104 rimary nonferrous metal 102 Chemicals & selected chemical products 52 Wholesale & retai 1 49 Lumber & wood products 45" Broad & narrow fabrics 43 Rubber & misc. plastic products 40 Paper & al I led products 38 Livestock & livestock products 36 Real estate & rental 34 Other agricultural products 33 Apparel 32 Radio, television & communication equipment 31 Electric & gas 28 Other fabric metal products 26 Other transportation 26 Heating & plumbing equipment 25 U.S, GOVERNMENT PRINTING OFFICE 1978 0-273-284 58 11- -IT cX inn @-.4=cmw Milo ..7 071@ or 4< @-@ Report written by: Economists Jerome Gilbert, project leader Nal-Ching Sun Amos Ilan Technical assistance provided by: John Pisani, Maritime Administration and Philip M. Ritz, Bureau of Economic Analysis, U.S. Department of Commerce Consulting Editor Walter Hamshar Report designed and produced by Port Authority Graphic Services 4 @t 1`4 jm@ IT DATE DUE GAYLORDIN. 2333 3 66 38 14106@9650