Port Competition and Hinterland Connections

Extracted 02JUN2011 from http://www.internationaltransportforum.org/jtrc/globalisation/index.html


The supply chain industry is subject to increasing vertical and horizontal concentration. This arguably has lead to more efficiency in the movement of cargo, and possibly the concentrated model is more favorable in some respects towards sustainable development than a more fragmented landscape in the sense that it facilitates the development of rail and the internalization of port congestion costs to some extent...

From the ports point of view, the main consequence of developments in supply chains is that their market power has declined. Ports operate in an increasingly competitive environment within their range as well as in their function as nodes in supply chains increasingly prone to switch routings (route competition)... The round table heard divergent views on how ports should respond to their weakening market power, with some supporting increased involvement with hinterland activities, and others doubting the social desirability of such an extended role for ports. Given the competitive context, ports need sufficient operational independence to respond to changing demands from their customers, in order to retain market share.

The growth in port throughput has triggered strong reactions from local communities, and in some cases (such as Los Angeles and Long Beach) policies to mitigate negative impacts have been implemented... Concession agreements between ports and their clients have some potential to reduce local congestion and environmental impacts, but this is a piecemeal approach that intrinsically lacks transparency...

The current diversity in governance models and management arrangements in the port and supply chain business poses a problem for the development of systematic responses to negative impacts...

While the general principles for port and supply chain policies are fairly obvious (ensure a level playing field in the provision of infrastructure and in the handling of externalities between ports and between modes), these principles are far from systematically applied. A failure to price the social costs of hinterland transport use and land development may result in many ports preferring to develop inland distribution centres rather than more efficient port
organization in response to increasing traffic. When the implicit subsidy to road is larger than for rail, this also undermines the performance of rail investments even in major hinterland corridors such as Los Angeles’ Alameda corridor. Unfortunately, piecemeal, and not very effective policy is the norm. Globalisation increases the case for measures (such as road pricing) to internalize congestion costs on hinterland roads and develop explicit policy
towards market power in logistics businesses.