Through The Looking Glass

Saturday, February 25, 2006
The already nonsensical story regarding the the sale of British company P&O to Dubai based DP World has just veered over into full scale madness. The Port Authority of New York and New Jersey, the quasi-state body which actually operates the ports in the NY/NJ area, has now filed suit to block the sale.

Lets step through the sequence of events here. In 2000 P&O and the Port Authority signed a 30 year lease, under which P&O would take over certain aspects of running the PA's ports. More details here.

P&O have now agreed to be bought out by DP World, one of the largest port management companies in the world.

The Port Authority has decided that the proposed deal "deprived the port authority of the "right to conduct a thorough review of its purchase," thereby violating certain "safeguards for the protection of persons and property" surrounding the facility."


It's astonishing that it is only at this late date that the the states of New York and New Jersey are getting involved in the matter. After all, they are the ones who are most effected by the proposed sale, and they are also the ones who outsourced these operations in the first place. It is hard to believe that the deal has progressed this far without the Port Authority signing off on it. I suspect that, in the unlikely event that any serious reporting is done, we will find that the PA did in fact agree to this sale, or at least failed to raise any prior objections.

The proposed lawsuit here looks very much like an admission that the PA ought not to be outsourcing this work abroad in the first place.

One concept which has apparently gone over the heads of almost all the pundits who have covered this story is that the ports in the United States are not actually the property of the Federal government. They are owned and operated by the cities and states in which they are located. This being so, the sole responsibility for outsourcing port operations lies with the cities and states in question. It is a relief that some acknowledgment of that basic fact is beginning to dawn on people, although I expect that the MSM presentation of the subject will continue to reflect the "Bush administration sells nations ports to Arab terrorists" meme.

16 comments:

truepeers said...

Thanks for keeping us informed, Flenser.

FWIW, space in the Port of Vancouver is included in this deal; in Canada, the federal government does own the ports. But as of yet, no one here, as far as i know, is accusing the government of selling out our security to the terrorists.

David Thomson said...

New Jersey and New York are blue states. Their politicians are highly influenced by the union bosses. That’s what this is really all about. Some people are blaming the Bush administration for not getting ahead of the issue. This is nonsensical. The due diligence had been done. There is no logical reason for all this hullabaloo. Dubai’s various investment groups are not a pig in a poke. They have a long and trustworthy track record. Any alleged increased security risk is hardly worth mentioning.

Perhaps we should also lower the speed limit on our highways to twenty miles per hour? We must always distinguish between reasonable and statically unlikely risks. I am convinced that we are far more endangered by crapping on our Arab allies. This is not even a close call.

terrye said...

flenser:

This deal was done last November. What took them so long?

I don't know where I heard it but I did hear they had signed off on it.

What is to be gained by this? Other than making the country look stupid to all and sundry?

We are in a war and people pull this crap. Fine. If they kill it, what will they do then? What if P&O decides to sue?

Rick Ballard said...

True,

Stevedores, longshoremen, crane operators and warehouse workers aren't government employees up there, are they?

They generally aren't down here which is why I'm a little puzzled by the "they are also the ones who outsourced these operations in the first place." line.

My understanding is that the various "port authorities" acquired most of the real estate in question through purchase or the exercise of eminent domain (about the same thing except for the voluntary part). Originally, private shipping companies built the piers in many places and owned them until the local government people figured out they could put a guy at a desk on the pier and charge so much per cwt for everything coming off a boat.

The Feds do have authority with the locally owned ports for "security" issues of certain types - customs, immigration and actual foreign vessel entry are all Federal responsibilities with local PA's either having their own police function in house or delegating it to local governments.

AFAIK none of those security functions are delegated to the freight terminal, although I believe that the leases at some ports contain provisions for providing physical working space for security personnel - customs offices in particular.

terrye said...

Ports are a lot like airports. Authority and ownership are shared.

I would assume that the Port Authority are the folks that actually manage the ports.

However, as flenser said once the decision was made to sell to foreign companies in the first place..well then it just becomes a matter of discrimination to refuse to allow a company like Dubai to come in if they can not come up with something better than they are Arabs.

It looks to me like Republicans are forming that famous circular firing squad on this one.

They had the Democrats on the run in regards to National Security, by not backing Bush on this they will give them an advantage in that department. Rasmussen has a poll that actually favors Dems..not good.

And of course Buckley is throwing in the towel on Iraq. Good thing there was not 24/7 cable news back in the 40's we would be speaking German today.

David Thomson said...

“It looks to me like Republicans are forming that famous circular firing squad on this one.”

The Democrats are the long term losers on this issue. Still, the Republicans wasted an excellent opportunity to blow them out of the water. If Bill Frist and his fellow idiots had listed to folks like myself---they would have seen a sharp increase in the polls. Their advisors are incompetently awful. They need to be fired.

flenser said...

Rick

"they are also the ones who outsourced these operations in the first place." refers to the outsoucing of port management to P&O. I think everyone is aware the the actual crane operators and so on will continue to be the same people as they have been.

Although given some of the goofy commentary on this deal, perhaps that is too optimistic an assumption.

terrye said...

david:

I know what you mean. I am not too impressed with polls. Just a month ago Dems were taking on the chin because they were whining about the NSA program and bragging they had killed the Patriot Act. A shrine blows up in Iraq and people like Frist act as if Bush is in league with the devil and down it goes. Just who do they think gains from that?

I jus think it is a dumb issue. These are huge companies we are talking about here. They operate in a world of profit and loss, there is no way they would be a part of something that would ruin them. And I do not know what the Republicans think Bush was trying to do. As long as we are not attacked the Bush administration can make the claim they are getting the job done. Treating people like Rumsfeld and Bush as if they don't care about national security is bizarre.

Where were these people when the Chinese got the port deal?

People can say Bush should have known better than to support something Carter was for, by the same taken Republicans should have known better than to rally behind Hillary Clinton and Chuck Schumer.

terrye said...

flenser:

True. Honestly I do not knwo where some this is coming from.

Rick Ballard said...

"Although given some of the goofy commentary on this deal, perhaps that is too optimistic an assumption."

At this point, I'm rather at a loss. Even when I write "freight terminal", I find myself wondering how many people even know what that means. Just because I've had to actually deal with logistics doesn't mean that very many others have. This one is making me run through a number of basic assumptions concerning what "a typical person" actually might know.

My ignorance is evidently unbounded.

terrye said...

rick:

I have been amazed at the fact that people really believe Bush would let this deal go throw if he thought it was dangerous. Why? Someone said it was becasue UAE gave 100 million to Katrina relief. Since they are Muslim it is assumed this was some evil thing they did to buy his loyalty.

Christ, people are stupid.

I guess a poll out says that 70% are not comfy with the deal. My guess is that 70% would prefer no foreign companies were involved. And the media is not helping. They are still saying that Dubai is taking control of ports. Crazy.

We have been allies with these people since the 70's and we have a huge military presence there. Bashing them right now is not good.

Peter UK said...

Here's a picture of the container terminal at Longbeach.
Not something to get emotionally attached to.

Rick Ballard said...

Terrye,

Consider the number of people who seem to believe that milk and eggs come from the dairy section at the A & P. Who flat wouldn't have a clue as to why a dairyman checked his backup generator regularly or why he even had a backup generator to begin with. Who wouldn't understand that an increase in the cost of caustics or power or replacement of an electric motor could cause almost as much grief as losing a first planting of silage. If they knew what silage was.

The number of people who know how to do more than manipulate symbols seems to be diminishing. Or maybe I'm just getting crankier as that first blossom of youth recedes.

terrye said...

Rick:

Yes, this is true. People do not know what they are talking about.

Well it will hurt Bush, but at the same time I really do not know what else could have happened. People seem to think Bush gave Dubai a break, that they could not have gotten this deal without him, but the truth is they won the bidding war and if people don't like that then they should nationalize the ports.

truepeers said...

Rick,

Stevedores, longshoremen, crane operators and warehouse workers aren't government employees up there, are they

-no they're not, at least not directly. I don't know exactly how it works, but there is a Port Authority which is an independent crown corporation, with board appointed by government and industry. They do the port admin; i'm not sure how the operations work breaks down, i.e. how much directly under the PA and how much is contracted out. And then there are the shipping companies that buy rights in the ports; i'm not sure exactly what jobs they do. In any case, there doesn't seem to be much worry locally about the sale of P&O rights.

Skookumchuk said...

OK, I'm back, and can actually pontificate about an area where I have a modicum of knowledge. In the US - and to a degree in Canada, too - ports fall in two broad classes. There are "operating ports", in which a publicly-owned or very rarely a private entity owns both the land and the assets on the land including the terminals and their equipment. The port operates the terminal, schedules and works the ships, and hires the unionized labor force. To generalize, most small US and Canadian ports are operating ports.

The second category includes "landlord ports", in which a publicly-owned or private company owns the land and provides some services (e.g., the fireboats) but leases the terminals to private operators. This is very much like an airport allocating gate space to the various airlines. The airport owns the gates, but American leases C2 through C46. Since the 1980's, these private operators have often been the steamship lines.

The shipping lines have preferred to do this for several reasons. The first is that as ships get bigger and as increasing numbers of containers are transferred between vessels, trucks and railcars, the lines find it more efficient to do everything themselves - in other words, a single work force does all the coordinated loading and unloading of vessels, trucks, and railcars. This coordination has become much more critical given the increasing sizes of ships and the demands of just-in-time shipping. So since the 1990's, large shipping lines have increasingly chosen to demand their own terminals. This work force is unionized, but under the operational control of the shipping line. The APM terminal on Pier 400 at the Port of Los Angeles is an example of this, as are numerous other installations at many ports.

Increasingly, large shipping companies form "alliances" with other shipping companies as a way to reduce the chronic overcapacity in the ocean shipping industry. If a shipping line is in such an alliance, it helps if all members of the alliance call at the same terminal. This serves to counter somewhat the tendency of shipping lines to seek exclusive control of their own leased terminals. What they really want is that the terminal serve the "alliance". Sometimes, a large shipping company can take other smaller feeder lines under its wing. An example would be Terminal 5 in Seattle, where APL, a Singaporean company, hosts other smaller carriers. Again, the analogy to the airlines, where a major carrier may sublease space to the little puddle-jumpers of a small subsidiary or affiliate.

Thus the growth of "terminal operating companies" like P&O or DPW. They allow alliances to manage their activities without these alliances always having to create their own terminal management companies.

Since the virtual disappearance of the US-flag deepwater fleet in the 1970's, most of the innovation in marine transportation and terminal technology has come from Europe and increasingly from Asia. Just as there are no world-scale US shipping lines, and no prospect of any appearing in the foreseeable future, so there are no US world-scale terminal management companies. So it is DPW or Singapore or the foreign-flag container shipping lines or nothing.

Returning to ports - in practice, an individual port is usually an amalgam of both the "operating port" and "landlord port" models. In other words, there may be one terminal - usually a small general cargo facility or maybe a cruise ship terminal - that is owned and operated by the port. The remaining terminals, normally the large containter facilities, are owned by the port, but leased to the shipping lines.