Maritime Gateways as Paradigms of Globalization Jean-Paul Rodrigue Associate Professor, Dept. of Economics & Geography, Hofstra University, New York, USA Email: ecojpr@hofstra.edu Paper available at: http://people.hofstra.edu/faculty/Jean-paul_Rodrigue First, I would like to thank Profs. Kafkalas and Pitsiava for inviting me to give this presentation. Gateways have become fundamental medium of interaction between the global and the regional.

Elements of the Maritime / Land Interface Foreland (Shipping Network) Maritime Freight Distribution The maritime / land interface concerns the relationships between maritime freight distribution and inland freight distribution, which are two domains of freight circulation. Maritime shipping is entirely dependant on the performance of inland freight distribution as it insures a continuity in supply chains. While economic activities, such as production and retailing are built on the concept of interdependency, distribution mainly forms a derived outcome of this interdependency. Yet, the maritime / land interface is particularly important for long distance trade brought by globalization. Thus the growing distances at which freight is being carried in addition to a surge in freight volumes have created multiplying effects on the ability of the maritime / land interface to deal with this new environment. The are four major functional elements that define the maritime / land interface: Foreland. Although conventionally the foreland is a maritime space with which a port performs commercial relationships, in the current context it can be argued that maritime shipping networks area more valid representation. The network represents the level of service offered by maritime shipping companies in terms of port calls, capacity and frequency. Port system. The set of intermodal infrastructures servicing port operations. Focus on gateways granting access to large domains on inland freight circulation. Modes. Each modes has technical constraints. They are structured as corridors accessing the hinterland and inland hubs acting as intermodal and transmodal centers. Modes represent one of the most difficult challenge in terms of reconciling the surge in containerized maritime volume and the capacity of inland transportation to accommodate these flows. Hinterland. Although conventionally the hinterland is the inland space a port maintains commercial relations with, the emergence of supply chain management has placed the freight distribution center (FDC) at the core on hinterland transportation. Macro-economic aspects linked with economic globalization have become particularly important to explain the dynamics of hinterlands. The maritime / land interface can also take many transactional forms, such as exchanges of freight and information. There is a clear trend involving the growing level of integration between maritime transport and inland freight transport systems. Until recently, these systems evolved separately but the development of intermodal transportation and deregulation provided new opportunities which in turn significantly impacted both maritime and inland logistics. One particular aspect concerns high inland transport costs, since they account anywhere between 40% and 80% of the total costs of container shipping, depending on the transport chain. Under such circumstances, there is a greater involvement of maritime actors (e.g. port holdings) in inland transport systems. The maritime / land interface thus appears to be increasingly blurred. Corridors are becoming the main structure behind inland accessibility and through which port terminals gain access to inland distribution systems. Since transshipment is a fundamental component of intermodal transportation, the maritime / land interface relies in the improvement of terminals activities along those corridors. Strategies are increasingly relying on the control of distribution channels to ensure an unimpeded circulation of containerized freight, which include both maritime and land transport systems. The continuity of the maritime space to insure a better level of service takes different forms depending on the region. For North America, rail transportation has seen the emergence of long distance corridors, better known as landbrigdes. The North American landbridge is mainly composed of three longitudinal corridors and is the outcome of growing transpacific trade and the requirement to ship containerized freight across the continent. For Western Europe, barge systems are complementing trucking with inland waterways accounting for between 30 and 40% of the containers going through major gateways such as Rotterdam and Antwerp. Localized alternatives to improve inland distribution, such as the Alameda corridor, are implemented in addition to trans-continental strategies such as the existing North American landbridge and the planned Northern East-West Freight Corridor spanning across the trans-Siberian to the port of Narvik in Norway with an oceanic leg across the Atlantic. Port System Gateways Road Rail Coastal / Fluvial Inland Freight Distribution Corridors and Hubs Hinterland (FDC)

Gateways and Hubs as Central and Intermediate Locations Gateways & hubs Nodes offering an accessibility to a large system of circulation. Obligatory (semi) points of passage. Convergence of transport corridors. Centrality and intermediacy. Gateways Favorable physical location. Intermodal and stable in time. Hubs Transmodal and subject to change. Commercial decisions. Delays vs. frequency of services. Intermodal Gateway Gateways are the prime vector supporting the maritime / land interface. More specifically: Gateway. A location that promotes the continuity of circulation in a transportation system servicing supply chains. It is the interface between different systems of circulation and includes terminal facilities, but also the numerous related activities such as distribution centers, warehouses and even insurance and finance. Gateways reap advantage of a favorable physical location such as highway junctions, confluence of rivers, seaboards, and have been the object of a significant accumulation of transport infrastructures such as terminals and their links. A gateway generally commands the entrance to and the exit from its catchment area and commonly imply a shift from one mode to the other (such as maritime / land). In other words, a gateway is a pivotal point for the entrance and the exit of merchandise in a region, a country, a continent. The emergence of intermodal transportation systems reinforces gateways as major locations of convergence and transshipment and has modified their geography with increased locational flexibility. While major terminals have expanded and relocated to more peripheral locations, namely port facilities, many distribution centers have relocated even further away along corridors. Hub. A central point for the collection, sorting, transshipment and distribution of goods for a particular area. This concept comes from a term used in air transport for passengers as well as freight. It concerns collection and distribution through a single point such as the “Hub and Spoke” concept. A hub is thus the outcome of commercial decisions linked with a desired level of service in terms of frequency. System-wide the delays imposed by transshipments at the hub (instead of direct services) are compensated by higher frequencies of services between all points. The transport system is subject to remarkable geographical changes even if many of its infrastructures are fixed. Flows, origins, destination and the modes used can change rather rapidly. What remains relatively constant are gateways, which can be seen as semi-obligatory points of passage, while a hub is a central location in a transport system with many inbound and outbound connections of the same mode. Gateways also tend to be most stable in time as they often have emerged at the convergence on inland transport systems while the importance of a hub can change if transport companies decide to use another hub, as common in the airline industry. Thus, gateways tend to be intermodal entities while hubs tend to perform transmodal (within a mode) operations. Transport corridors are commonly linking gateways to the inland. The functions of centrality and intermediacy are particularly relevant to the emergence of a global nodal space since one focuses on nodes as an origin or destination of traffic while the other focuses on nodes as intermediate locations where transshipment is performed. The functions of centrality and intermediacy are particularly relevant to the emergence of a global nodal space since one focuses on nodes as an origin or destination of traffic while the other focuses on nodes as intermediate locations where transshipment is performed. While central locations obviously correspond to large metropolitan areas, intermediate locations have developed a rather unique geography. Transmodal Hub

Changes in the Global Trade Environment Before 1970s Immobile Factors of Production Bulk point-to-point Country A Country B 1970s – 1990s Mobility of Factors of Production Container shipping Significant changes in international trade took place in recent decades as the economy became increasingly globalized. Although it is difficult to clearly separate the specific phases of globalization, three of them can be brought forward: Immobile factors of production. For reasons mainly linked with customs restrictions and transport costs, commodities (minerals, oil, grain) tended to be the most traded. International trade mainly took place to cope with scarcity, implying that countries were trading products they did not readily have available. Any other product which could in theory be produced nationally was subject to a variety of protectionist policies. International transport was dominantly serviced by bulk point-to-point services since the most suitable to this type of trade. Mobility of factors of production. Through the 1970s new circumstances came into play to favor a higher mobility of the factors of production, particularly through foreign direct investments and the diffusion of containerization. Much of the international trade framework was liberalized with lower duties and simpler custom procedures. The outcome was a significant increase in the level of economic efficiency as lower labor (input) costs and economies of scale were achieved. In several sectors a concentration of production took place. Cheaper and more efficient containerized transportation supported such a process to locations that previously were mainly outside global economic trends, namely China. This process has for long been advocated by economic theory (e.g. Adam Smith and Ricardo) but never took place at a notable scale. Still, some integration existed before the 1970s, such as in North America (USA – Canada) and Western Europe (early stages of the EU). Global production networks. From the 1990s, the application of supply chain management permitted the emergence of integrated commodity chains servicing global markets. By setting or capturing a commodity chain, a corporation is able to generate added value and compete more effectively. Containerization has become imbedded in freight distribution, from the global commodity market to distribution centers close to the final consumer. 1990s onward Global Production Networks Commodity chain Commodity Market Global Market

The Emergence of Gateways Flows Network Stage GPN Parts and raw materials Bulk shipping Commodity Gateway High volumes Low frequency Unit shipping Manufacturing and assembly Supply Chain Average volumes High frequency Manufacturing Gateway The emergence of gateways is the direct outcome of containerization and globalization. The priority is now shifting to the geographical and functional integration of production, distribution and consumption. Geographical integration implies using effectively the comparative advantages of space while maintaining the cohesion, capacity and efficiency of the freight distribution systems. Functional integration implies more effective relations within existing supply chains. “Just-in-time” and “door-to-door” strategies are relevant examples of interdependencies created by new freight management strategies. Both geographical and functional integration take place concomitantly. Transportation has become much more integrated in the production and retailing process, enabling several corporations to establish what can be called global production networks. The outcome are complex networks involving flows of information, commodities, parts and finished goods have been set, which in turn demands a high level of command of logistics and freight distribution. Global production networks has been advocated as an adequate paradigm to represent and explain the current global setting. In such an environment, powerful actors have emerged which are not directly involved in the function of production and retailing, but mainly taking the responsibility of managing the web of flows. In addition, entirely new nodal locations have emerged since geographical integration led to industrialization in new regions, significant changes in the routing of flows and well as new strategies to manage these flows. Gateways as logistical poles where value added activities are performed. This often took place at entirely new locations. Transport Chain LTL shipping Distribution Commercial Gateway Low volumes High frequency Market Market

Four Paradigms for Gateways Functional Customer Shipper Logistical Demand Pull Transport Four major paradigms help articulate the concept of gateways within the global economy: The locational layer relates to the geographical location of a gateway vis-à-vis the central places in the economic space and forms a basic element for the intrinsic accessibility. The concept of centrality and intermediacy fits well within this maritime locational perspective. A good intermediate location can imply a location near the main maritime routes such as offshore hubs (e.g. Singapore, Mediterranean load centre ports such as Marsaxlokk and Gioia Tauro) and/or near production and consumption centers such as gateway ports (e.g. Rotterdam, New York, Santos). For gateway ports, a good location is a necessary condition for attaining a high intrinsic accessibility to a vast hinterland, which often builds upon the centrality of the port region. It becomes a sufficient condition when the favorable geographical location is valorized by means of the provision of efficient infrastructures and transport services. The infrastructural layer involves the provision and exploitation of basic infrastructure for both links and nodes in the transport system. Containerization and intermodal transportation, particularly the transshipment infrastructures they rely on, have contributed to a significant accumulation of infrastructures in a number of gateways. This is where the intrinsic accessibility is valorized since a port site has little meaning unless capital investment is provided. The transport layer involves the operation of transport services on links and corridors between the port and other nodes within the multimodal transport system and the transshipment operations in the nodes of the system. It is a matter of volume and capacity. The logistical layer involves the organization of transport chains and their integration in logistical chains. This layer is mostly managerial with a decision making process in terms of the allocation of modes and the booking of transshipment facilities. In a demand-driven market environment the infrastructural layer serves the transport and logistical layers. The more fundamental the layer is, the lower the adaptability (expressed in time) in facing market changes. For instance, the planning and construction of major port and inland infrastructures (infrastructural level) typically takes many years. The duration of the planning and implementation of shuttle trains on specific railway corridors (transport level) usually varies between a few months up to one year. At the logistical level, freight forwarders and multimodal transport operators (MTOs) are able to respond almost instantly to variations in the market by modifying the commodity chain design, i.e. the routing of the goods through the transport system. As adaptable as they may be, they are still dependant on the existing capacity, but their decisions are often indications of the inefficiencies of the other layers and potential adjustments to be made. Source: Rodrigue, J-P and T. Notteboom (2007) "Re-assessing Port-Hinterland Relationships in the Context of Global Supply Chains", in J. Wang et al. (eds) Inserting Port-Cities in Global Supply Chains, London: Ashgate. Valorization Infrastructural Spatial Locational Trimodal Container Terminal, Willebroek, Belgium

First Paradigm: Locations  Container Ports Global Port Operators Container yard, Port of Yantian, China

Traffic at the 50 Largest Container Ports, 2005 Container shipping indicates a high level of traffic concentration around the largest port facilities, the top ones being Pacific Asian ports. As export oriented economic development strategies took shape, containers handled in Pacific Asian ports, notably Chinese ports, surged. The top 20 container ports account for more that half of the global container traffic. There is also an emerging geography of container ports where there is a specialization between container ports acting as gateways and container ports acting as hubs. Gateway ports command the access of large manufacturing or market regions. Shanghai and Rotterdam are notable examples. Hub ports (or offshore hubs) act as intermediary locations where containers are transshipped between different segments of the global maritime transport systems. Singapore and Dubai are among the most prominent.

Major Port Holdings, 2007 Terminalizaton of transport terminals, particularly ports. The main rationale behind the emergence of large port holdings includes:

The Strategies of Port Operators Financial Assets Large financial assets and the capacity to tap global financial markets. Terminals as equity generating returns. Managerial Expertise Experience in the management of containerized operations. IT and compliance with a variety of procedures. Gateway Access Establishing hinterland access. Creation of a “stronghold”. Provides a stable flow of containerized shipments. Development of related inland logistics activities. Leverage Negotiate with maritime shippers and inland freight transport companies favorable conditions. Some are subdiaries of maritime shipping companies. Traffic Capture Capture and maintain traffic for their terminals. Global Perspective Comprehensive view of the state of the industry. Anticipate developments and opportunities. Financial assets. Port holdings have the financial means to invest in infrastructures as they have a wide variety of assets and the capacity to borrow large quantities of capital. They can use the profits generated by their efficient terminals to invest and subsidize the development of new ones, thus expanding their asset base and their operating revenues. Most are listed on equity markets, giving the opportunity to access global capital, which realized in the last decade that the freight transport sector was a good source of returns driven by the fundamentals of a growth in international shipments. This financial advantage cannot be matched by port authorities even those heavily subsidized by public funds. In other cases, terminals became financial assets per se which can become more valuable as the traffic they handle increases (additional revenue). Financial holdings, such as retirement funds, are thus considering transport terminals and port terminals in particular, as valuable assets to own in a portfolio. Managerial expertise. Port holdings excel in establishing procedures to handle complex tasks such the loading and unloading sequence of containerships and all the intricacies of port operations. Many have accumulated substantial experience in the management of containerized operations in a wide array of settings. Being private entities, they tend to have better customer service and have much flexibility to meet the needs of their clients. This also includes the use of well developed information systems networks and the capacity to quickly comply with legal procedures related to customs, clearance and security. Gateway access. From a geographical standpoint, most port holdings follow a strategy aimed at establishing privileged positions to access hinterlands. Doing so they secure a market share and can guarantee a level of port and often inland transport service to their customers. It can also be seen as a port competition strategy where a “stronghold” is established, limiting the presence of other competitors. Gateway access thus provides a more stable flow of containerized shipments. The acquisition of a new port terminal is often accompanied by the development of related inland logistics activities by companies related to the port holding. Leverage. A port holding is able to negotiate with maritime shippers and inland freight transport companies favorable conditions, namely rates, access and level of service. Some are subdiaries of global maritime shipping lines (such as the A.P. Moller group controlled by the shipper Maesrk) while others are directly controlled by them (such as Hanjin or Evergreen) so they can offer a complete logistical solution to international freight transportation. They are also better placed to mitigate pressures from port authorities to increase rents and port fees. The “footloose” character of maritime shippers has for long been recognized, with a balance of power more in their favor than of the port authorities they negotiate with. Traffic capture. Because of their privileged relationships with maritime shipping lines, port holdings are able to capture and maintain traffic for their terminals. The decision to invest is often related to the knowledge that the terminal will handle a relatively secure number of port calls. Consequently, a level of traffic and revenue can be secured more effectively. Global perspective. Port holdings have a comprehensive view of the state of the industry and are able to interpret political and price signals to their advantage. They are thus in position to influence the direction of the industry and anticipate developments and opportunities. Under such circumstances they can allocate new investments (or divest) to take advantages of new growth opportunities and new markets.

Following a “Value Capture” Strategy Maritime Services Port Holding Port Authority Port Services Inland Services Maritime shipping has a profit margin of only about 2%. Single operator controls the berth-to-gate operations. Maritime shipping lines moving inland to capture value. Port terminal operations. Rail and trucking operations. Distribution centers. Logistics. The creation of “channels”. Vertical Integration Horizontal Integration / Vertical Commodity Chain (Channels) Maritime Shipping Port Terminal Operations Inland Modes and Terminals Distribution Centers

Second Paradigm: Infrastructures  Containerization Freight Corridors Container waiting to be loaded, Shenzhen, China

Paradigm Shifts in Containerization port Containerization of Maritime Transport Systems Pendulum Services Intermodal terminal It can be argued that three major paradigm shifts have taken place within containerized freight distribution systems. Containerization of maritime transport systems. At first, the introduction of the container and its penetration within maritime systems took place. This is particularly the case from the mid 1965s when standardization resulted in common container size and latching systems. The efficiency of port transshipments improved and inland services, dominantly relying on trucking, began to be established. Still, maritime services tended to be on a point-to-point basis. Containerization of inland transport systems. Containerization moved inland, mainly in an attempt to improve the continuity already established within maritime transportation, particularly with the setting of pendulum services. The introduction of doublestacking rail services in the mid 1980s required the setting and redesign of inland container rail terminals in North America. The adoption of the container in Europe gained momentum when an intermodal system started to emerge in the late 1970s. For example, the shift from conventional and highly irregular barge services to scheduled and reliable container services in the second half of the 1970s gave impetus to a fast containerization process along the Rhine basin up to the main ports of Rotterdam and Antwerp. Intermodal and transmodal operations. Since containerization has expanded to cover maritime and inland transport systems, the next phase dominantly aims at improving its overall efficiency. This efficiency is mainly based in the reduction of the number of times a container is handled as well as the velocity at which intermodal and transmodal operations are performed. Also, the growth in containerized shipments placed additional pressures on intermodal transport systems. Establishment of commodity chains. Corridor Containerization of Inland Transport Systems Intermodal and Transmodal Operations

Types and Functions of Freight Corridors Examples Short distance (within a gateway / hub) Modal shift, improved capacity and throughput. Switch carrying, Alameda, “Agile Port”, Panama Hinterland access (between a gateway and its vicinity) Expand market area, reduce distribution costs & congestion Rail shuttles, Landbridge (between gateways) Long distance container flows, continuity of global commodity chains North American landbridge Circum-hemispheric (between gateways with a maritime segment) Integrated global transport chains Northern East-West Corridor, Circum-equatorial beltway

Gateways and Hinterland Effect Pacific Asia North American West Coast Corridor SEZ This figure represents a synthetic structure of the respective hinterlands articulated by trans-pacific gateways. In China, Special Economic Zones (SEZ) are an implicit acknowledgment that the accessibility of the hinterland is weak so that activities must be located as close as possible to gateways. Empirical evidence has underlined that it costs more to move a container from inland China to a coastal port than across the Pacific and across North America. Reflecting these heavy constraints, most of the development in China has taken place along the coast, a process linked with the export-oriented development strategies. It was cheaper to bring labor to coastal SEZ than to bring the manufacturing activities to the labor, a process which is contradictory to what has happened to manufacturing in the global setting (manufacturing going to the labor). As such, more than 120 million peasants have left the countryside since the early 1990s in the largest migration in human history. There are thus many advantages reflecting the Chinese transport and economic reality in the setting of SEZ, such as proximity to global freight distribution. The maritime / land interface of most Pacific Asia is narrow and leaning on the dichotomy of trucking and container terminals. In North America, high capacity and efficient inland freight distribution has been linked with the setting of long distance trade corridors, dominantly supported by rail. The location of economic activities is consequently less constrained, particularly since it focuses on the freight distribution of finished goods, often of high value, over long distance. The maritime / land interface is characterized by extensive long distance linkages using modes in combination. Inefficient Inland Freight Distribution Efficient Inland Freight Distribution

Container Transport Costs from Inland China to US West Coast ($US per TEU) The difference between Chinese and American inland transportation costs is quite eloquent. This is a strong rationale why export oriented activities remain nearby to costs. It also underline a tremendous unmet potential to improve inland freight distribution in China. Source: Carruthers, Robin, and Jitendra N. Bajpai. 2002. “Trends in Trade and Logistics: An East Asian Perspective.” Working Paper No. 2, Transport Sector Unit. Washington, D.C.: World Bank.

Container Traffic at Major Transpacific Container Ports: Mirror Images? Tokaido Yellow Sea Rim Sunan Delta Pearl River Delta Taiwan / Fujian Singapore Prince Rupert Ensenada San Pedro Bay San Francisco Bay Puget Sound A closer look at maritime facades around the Pacific reveals a significant shift in the balance of commercial power. Pacific Asian container ports handled close to 70% of the global container traffic, which comparatively dwarfs the importance of the West Coast maritime facade. China alone account for 27% of the global containerized traffic. As stated before, an economic correspondence has been established across the Pacific, which is being articulated by major gateways. Because of the structure of distribution imposed by this correspondence, trans-Pacific gateways can be perceived as mirror images (or evil twins…). While Pacific Asian gateways tend to be export-oriented and closely linked to manufacturing, West Coast ports tend to be import oriented and act as the early stages of North American distribution and retailing. Large manufacturing clusters, such as the Pearl River Delta, have emerged along coastal areas. The constraints of poor inland transportation in Pacific Asia have imposed a specific locational dynamic where manufacturers and suppliers tend to be located close to the port. There are no long distance corridors in Asia, except a latitudinal maritime corridor linking the major coastal areas. Pacific Asian gateways are thus mainly exit doors capturing dense but geographically limited hinterlands. In North America, good inland transportation along transcontinental corridors is linked with the continental distribution of imports. North American gateways are thus mainly entry points servicing a sparsely populated market with high economic density clusters with extensive hinterlands. Long distance trade corridors are thus of fundamental importance to the West Coast port clusters. For instance, half the cargo handled by the San Pedro Bay ports, which handle about 70% of the American West Coast containerized traffic, goes east of the Rockies. It reaches Chicago in 3 to 4 days and New York in 5 to 6 days. For the Puget Sound cluster, long distance inland trade is even more pronounced, with about 80% of the traffic bound further inland, a fact underlined by 72% of the containerized traffic handled by the port of Tacoma goes directly on rail. Two new smaller container gateways are getting online, with Ensanada already having container facilities but poor hinterland access and Prince Rupert having excellent hinterland access and the container terminal expected to be online late 2007.

Hinterland Setting and Major Economic Regions North America Western Europe East and Southeast Asia Source: Adapted from Lee, Song and Ducruet (2006) Coastal concentration Landbridge connections Inland concentration Coastal gateways Coastal concentration Low hinterland access Hinterland intensity Freight Corridor hierarchy Gateway hierarchy

Main North American Trade Corridors and Metropolitan Freight Centers A North American lattice of trade corridors where freight distribution is coordinated by major metropolitan freight centers (MFC) has emerged in the recent decades. While MFCs are significant markets, they also command distribution within the market areas they service as well as along the corridors they are connected to. They thus have a significant concentration and logistics and intermodal activities at specific locations. The ongoing accumulation of these activities has led in many cases to the creation of “central freight districts”. The extent of the market area of a MFC is mainly a function of the average length of domestic truck freight haul, which is around 550 miles (880 km). Like many segments of the North American economy and territory, globalization and integration processes, namely NAFTA, have impacted on the nature and function of continental production, consumption and distribution. For international trade, the gateways of this system are major container ports along coastal areas from which long distance trade corridors are accessed. About a third of the American trade took place within NAFTA in 2000, mainly through land gateways (ports of entry) that are gateways in the sense that they are obligatory points of transit commanding access to the United States. For truck and rail flows, virtually no intermodal activities take place at land gateways, although several distribution centers nearby borders and along corridors. Land gateways are dominantly servicing an import function, expanded under NAFTA trade, and connected to corridors of continental freight circulation. These include three main longitudinal (north, central and south) and four latitudinal (west coast, central, NAFTA and east coast) axes. The NAFTA Corridor links the two largest land gateways of North America, Detroit, Michigan and Laredo, Texas. It dominantly relies upon trucking as about 65% of the value of the NAFTA trade is serviced by this mode. However, it is far from being a continuous corridor as northbound flows of Mexican imports and the southbound flows of Canadian imports dwindle as the distance from their respective borders increases. The equilibrium point is around the Tennessee / Kentucky range, past which the respective flows are very small. About a third of the volume involves auto parts produced in Southern Ontario and in the Maquiladoras of Mexico, which are used for low-cost car manufacturing in the Southeast states.

Third Paradigm: Transportation (Flows)  Imbalanced Trade Flows Imbalanced Container Flows Maritime Shipping Networks The elephant in the leaving room. APL Distribution Center, Shenzhen, China

World’s 10 Largest Exporters and Importers, 2006 Source: WTO

Balance of Containerized Cargo Flows along Major Trade Routes, 1995-2006 Source: UNCTAD, Review of Maritime Transport, various years. Container flows are quite representative of global trade imbalances, which have steadily been growing since the 1990s. For instance, there are 3 times as much containers moving from Asia to the United States (13.9 million TEUs in 2005) than there are from the United States to Asia. This implied a combined American imbalance of 9.6 million TEU with Asia and Europe. By 2005, about 70% of the slots of containerships leaving the United States were empty with major container ports, particularly along the West Coast (e.g. Los Angeles and Long Beach) handling large amounts of empty containers, 2.3 million TEU alone were exported in 2005. The Asia-Europe trade route is facing a similar imbalance, but at a lesser level; a total of 4.3 million TEU. Thus, production and trade imbalances in the global economy are clearly reflected in imbalances in physical flows and transport rates. For Transpacific trade, it costs more per TEU for eastbound flows than for westbound flows, making freight planning a complex task for container shipping companies. For Asia-Europe flows, westbound rates are higher than eastbound rates. Thus, production and trade imbalances in the global economy result in imbalances in physical flows and transport rates. Even if eastbound trans-Pacific rates are lower than westbound trans-Pacific rates, in theory conferring an advantage to American exports, costs differences are so in favor of Asia (China) that the American economy does not take much advantage of this benefit.

Major US Modal Gateways, 2004 A gateway is a location that promotes the continuity of circulation in a transportation system servicing supply chains. It is the interface between different spatial systems that includes terminal facilities, but also the numerous activities linked with freight circulation such as distribution centers, warehouses and even insurance and finance. These separate but closely integrated activities, along with the terminals they are linked to, form an agglomeration of freight distribution. Conventionally, geographical factors linked to the site and situation of “hard” terminals (especially for maritime terminals) were bounded with the location of articulation points. Around these facilities agglomerated many freight handling and distribution activities. The emergence of intermodal transportation systems reinforces gateways as major locations of convergence and transshipment and has modified their geography with increased locational flexibility. While major terminals have expanded and relocated to more peripheral locations, namely port facilities, many distribution centers have relocated even further away along corridors. The earlier macro-economic observations about trade and physical flows imbalances are clearly reflected at major gateways; points of entry or exit of international trade in the United States. Almost every gateway, land, maritime and air alike, are characterized by traffic imbalances where inbound traffic far exceeds outbound traffic. This is particularly the case for maritime gateways linked with long distance international trade, which the Pacific range the most imbalanced both in the number of gateways handling the bulk of the traffic and the direction of the traffic. Long Beach and L.A. handle 75% of the total dollar value of products brought in through the West Coast. NAFTA trade gateways tend to be more balanced, but still negative.

Liner Shipping Networks: Variety of Scales and Services Regional Port System Regional Port System Conventional liner / break bulk services Mainline services One important element of the foreland is the structure of liner shipping services, which can be characterized in terms of port calls, volume and frequency. The conventional liner / break bulk service was a point to point venture, often involving several direct connections between regional ports as well as between port systems. Such a structure is still prevalent in bulk shipping networks and commonly involves empty backhauls. The setting of pendulum services has favored two particular types of network structures. The first is the emergence of feeder services from smaller ports to the hub port. The second is the emergence of a hierarchy of services ranging from high capacity and high frequency services between first tier ports to second and third order networks servicing smaller ports. This network hierarchy interconnects at offshore hubs. Source: Adapted from Robinson, R. (1998) “Asian Hub/Feeder Nets: The Dynamics of Restructuring,” Maritime Policy and Management, 25: 21-40. Feeder services Third order network First order network Second order network

Three Major Pendulum Routes Serviced by OOCL, 2006

Circum Hemispheric Rings of Circulation Pacific Connector Singapore North American Landbridge Eurasian Landbridge Arctic Routes Colombo The most significant offshore hubs are along the circum-equatorial highway. Kingston Atlantic Connector Gioia Tauro Algeciras Circum-Equatorial Maritime Highway Jeddah

Fourth Paradigm: Logistics  Production / Distribution Embeddedness Gateways and Logistics Chassis waiting to be picked, Corwith Rail Yard, Chicago

Level of Embeddedness of Production and Distribution Pure Standardization Segmented Standardization Customized Standardization Tailored Customization Pure Customization Design Design Design Design Design Parts Parts Parts Parts Parts Assembly Assembly Assembly Assembly Assembly Source: adapted from W. Delfmann (2007) “The Changing Role of Gateways in the Context of Global Value Chain Dynamics”, Canada’s Gateway and Corridors Initiative Conference, Vancouver, British Columbia. Distribution Distribution Distribution Distribution Distribution Market Market Market Market Market Processing without order Shipment to order Assembly to order Manufacturing to order Design to order Push (expectation) Pull (response)

Embedding Gateways and Logistics Massification Atomization Frequency Capacity GLOBAL HINTERLAND REGIONAL LOCAL Shipping Network Corridor Segment The "Last Mile" (or "Last Kilometer") is a common distribution problem. Although it was initially conceived for the telecommunication sector (e.g. phone and cable services), it applies particularly well for freight distribution. Long distance transportation tends to be well serviced by high capacity modes and terminals and is prone to economies of scale. As we get closer to the final customer, economies of scale are increasingly difficult to apply as the size of batches tends to diminish. It would be rare, for instance, for a single customer to be the consignee of a whole containership. For an international shipment, the global shipping network offers very high capacity levels and, depending on the routes, a reasonable frequency of services (for instance, one port call every two days). Hinterland transportation, which links gateways to inland terminals often using rail or barge services, is of lower capacity but of higher frequency. Once freight consignments arrive at an inland terminal they are collected and brought to distribution centers through regional segments, mostly by truck. The "Last Mile", notably for retailing, often consists of truck deliveries taking place over short distances, but likely in a congested urban setting. It is often one of the most complex element of the commodity chain to organize as it reconciles many customers, a variety of shipments and reliability difficulties related to congestion. The "Last Mile" concept also applies to the "First Mile" which involves consolidation to a nearby transport terminal. The containerization process is thus confronted with a growing tension between a massification at sea and an atomization on land. Growing vessel size has led to the massification of unit cargo at sea. On terminals and at the landside, massification makes place for an atomization process whereby each individual container has to find its way to its final destination. A major challenge consists in extending the massification concept as far inland as possible. Postponing the atomization of container batches shifts the container sorting function to the inland and as such eases the pressure on port terminals. High-volume rail and barge corridors including inland terminals play a crucial role in this process. Customer “Last Mile” Inland Terminal Distribution Center Gateway

Overcoming Uncertainty in Freight Distribution Efficient transport systems Supply chain management Functional Integration M1 M2 p(T) p(Ta) A factor of gateway and corridor selection. T0 Ta Geographical Integration

The Emergence of Gateway Regions Phase 1: Scattered ports Phase 2: Penetration and hinterland capture LAND SEA Phase 3: Interconnection & concentration Phase 4: Centralization Phase 5: Decentralization and insertion of ‘offshore’ hub Phase 6: Regionalization Source: Notteboom, T. and J-P Rodrigue (2005) “Port Regionalization: Towards a New Phase in Port Development”, Maritime Policy and Management, Vol. 32, No. 3, pp. 297-313. Freight corridor Regional load centre network (Gateway Region) Load center Interior centre Deepsea liner services Shortsea/feeder services

Modal Shift and Freight Diversion within Gateway Regions Road Rail Port A B

Conclusion: Gateways as Paradigms of Globalization Embededness Customer Shipper Logistical Network Structures Transport Corridors Infrastructural Value Capture Locational