Ports in Proximity (Transport and Mobility)

  • 93 556 4
  • Like this paper and download? You can publish your own PDF file online for free in a few minutes! Sign Up

Ports in Proximity (Transport and Mobility)

PORTS IN PROXIMITY Transport and Mobility Series Series Editors: Professor Brian Graham, Professor of Human Geography,

1,612 63 4MB

Pages 332 Page size 402.52 x 600.945 pts Year 2009

Report DMCA / Copyright

DOWNLOAD FILE

Recommend Papers

File loading please wait...
Citation preview

PORTS IN PROXIMITY

Transport and Mobility Series Series Editors: Professor Brian Graham, Professor of Human Geography, University of Ulster, UK and Richard Knowles, Professor of Transport Geography, University of Salford, UK, on behalf of the Royal Geographical Society (with the Institute of British Geographers) Transport Geography Research Group (TGRG). The inception of this series marks a major resurgence of geographical research into transport and mobility. Reflecting the dynamic relationships between sociospatial behaviour and change, it acts as a forum for cutting-edge research into transport and mobility, and for innovative and decisive debates on the formulation and repercussions of transport policy making. Also in the series Railways, Urban Development and Town Planning in Britain: 1948–2008 Russell Haywood ISBN 978 0 7546 7392 7 Transit Oriented Development Making it Happen Edited by Carey Curtis, John L. Renne and Luca Bertolini ISBN 978 0 7546 7315 6 The City as a Terminal The Urban Context of Logistics and Freight Transport Markus Hesse ISBN 978 0 7546 0913 1 Ports, Cities and Global Supply Chains Edited by James Wang, Daniel Olivier, Theo Notteboom and Brian Slack ISBN 978 0 7546 7054 4 Achieving Sustainable Mobility Everyday and Leisure-time Travel in the EU Erling Holden ISBN 978 0 7546 4941 0 For further information about this series, please visit www.ashgate.com

Ports in Proximity Competition and Coordination among Adjacent Seaports

Edited by TheO NOTTebOOM University of Antwerp, Belgium CÉSaR DucRueT, Paris-I Sorbonne University, France PeTeR de LaNgeN Eindhoven University of Technology, The Netherlands

© Theo Notteboom, César Ducruet and Peter de Langen 2009 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise without the prior permission of the publisher. Theo Notteboom, César Ducruet and Peter de Langen have asserted their right under the Copyright, Designs and Patents Act, 1988, to be identified as the editors of this work. Published by Ashgate Publishing Limited Ashgate Publishing Company Wey Court East Suite 420 Union Road 101 Cherry Street Farnham Burlington Surrey, GU9 7PT VT 05401-4405 England USA www.ashgate.com British Library Cataloguing in Publication Data Ports in proximity : competition and coordination among adjacent seaports. -- (Transport and mobility series) 1. Harbors--Location. 2. Harbors--Economic aspects. 3. Harbors--Management. I. Series II. Notteboom, Theo. III. Ducruet, César. IV. Langen, Peter W. de. 387.1-dc22 Library of Congress Cataloging-in-Publication Data Langen, Peter W. de. Ports in proximity : competition and coordination among adjacent seaports / edited by Theo Notteboom, César Ducruet and Peter de Langen. p. cm. -- (Transport and mobility) Includes bibliographical references and index. ISBN 978-0-7546-7688-1 -- ISBN 978-0-7546-9385-7 (ebook) 1. Harbors-Case studies. 2. Competition--Case studies. I. Notteboom, Theo. II. Ducruet, César. III. Title. HE551.P84 2009 387.1--dc22  ISBN 9780754676881 (hbk) ISBN.V)

2009016976

Contents

List of Figures   List of Tables   List of Contributors   Preface  

1 Introduction    Theo E. Notteboom, César Ducruet and Peter W. de Langen

ix xi xiii xxv

1

PART I  CONCEPTUALIZATION OF PORTS IN PROXIMITY 2

Revisiting Inter-Port Relationships under the New Economic Geography Research Framework   César Ducruet, Theo E. Notteboom and Peter W. de Langen

3

Ports in Proximity, Proximity in Ports: Towards a Typology   Peter V. Hall and Wouter Jacobs

29

4

Port Regions and Globalization   César Ducruet

41

5

Path Dependency and Contingency in the Development of Multi-port Gateway Regions and Multi-port Hub Regions   Theo E. Notteboom



11

55

PART II  THE GOVERNANCE OF PORTS IN PROXIMITY 6

Proximity and Port Governance   Brian Slack, Elisabeth Gouvernal and Jean Debrie

75

7 Regional Integration and Maritime Range   Arnaud Lemarchand and Olivier Joly

87

8

99

Does the EU Port Policy Strategy Encompass ‘Proximity’?   Athanasios A. Pallis and Patrick Verhoeven

vi

Ports in Proximity

PART III  THE NORTH AMERICAN CASE: CORRIDORS AND GATEWAYS 9

Gateways are More than Ports: The Canadian Example of Cooperation among Stakeholders   Robert J. McCalla

115



Port-hinterland Divergence along the North American Eastern Seaboard   Jean-Paul Rodrigue and Changqian Guan

131

11

Competitiveness of Green Gateways: A Blueprint for Canada   Claude Comtois and Brian Slack

10

151

PART IV  THE EUROPEAN CASE: COORDINATION IN A COMPETITIVE ENVIRONMENT 12

A Best Practice in Cross-border Port Cooperation: Copenhagen Malmö Port   Peter W. de Langen and Michiel H. Nijdam

163

13 Rethinking Proximity: New Opportunities for Port Development. The Case of Dunkirk   Antoine Frémont and Valérie Lavaud-Letilleul

175



14 15 16

Italian Port Authorities Approaching the Post-reform: The Ligurian Case   Claudia Caballini, Laura Carpaneto and Francesco Parola

191

A Geographical Perspective on Port Performance in the United Kingdom, 1999–2007   Anthony Beresford and Stephen Pettit

209

External Influences on the Humber Estuary Ports, the Largest Concentration of Port Activity in the UK   John Mangan, Amy Proctor and David Gibbs

225

PART V  THE ASIAN CASE: MAJOR CHANGES IN PORT SYSTEMS’ HIERARCHIES 17

Port Competition Paradigms and Japanese Port Clusters   Masato Shinohara

237

Contents

vii

18

Port Challenge in Northeast Asia: Korea’s Two-hub Port Strategy  247 Sung-Woo Lee and Geun-Sub Kim

19

Hong Kong in Transition from a Hub Port City to a Global Supply Chain Management Centre   James J. Wang



List of References   Index  

261

273 301

This page has been left blank intentionally

List of Figures

2.1 4.1

Geographical overview of port spatial analysis Correlation between population and container traffic at port city level, 1975–2005 4.2 Gross Regional Product and port traffic by region size, 1996–2006 4.3 National importance of port regions by indicator, 2005 (Unit: %) 5.1 Terminal development options in a port system 6.1 Pre-reform and post-reform status in France and Canada 7.1 The North European maritime range, 1997–2001 7.2 The South European maritime front, 1997–2002 7.3 The Asian maritime front, 1999–2002 7.4 Korean and Japanese maritime ranges, 2001–2005 7.5 North American maritime ranges, 1992–2002 8.1 Diversity of European ports 9.1 The main components of a gateway with its corresponding corridor 9.2 Gateway-corridor model 10.1 A schematic representation of the Eastern Seaboard 10.2 Change in container traffic at Eastern Seaboard port 10.3 Container traffic at main Eastern Seaboard ports, 2007 10.4 From convergence to divergence: the Eastern Seaboard (annual growth rates and share of top four ports, 1985–2007) 10.5 Strong divergence: Montreal and Halifax, 1981–2007 10.6 Factors behind the resurgence of all water services to the east coast 10.7 Eastbound and westbound maritime routes: zone of contestability 10.8 The reemergence of the ‘hinterland factor’: inland corridors 12.1 Cultural differences between Swedes and Danes (according to CEO of CMP) 13.1 The threefold spatial context for a port: network, range and territory 13.2 Typology of ports and interport relationships 13.3 Strategies of actors in terms of interport competition/cooperation 13.4 Dunkirk and its port region 13.5 The ownership web in the Le Havre–Rotterdam range 14.1 Location and traffic portfolio of Ligurian ports 14.2 Gateway container throughput: Ligurian ports vs. Northern range and West Med 15.1 General activity patterns in British ports 15.2 Regional port groupings 1999–2007; England and Wales 15.3 Change in port traffic 1981–1989

21 46 48 49 60 79 91 93 94 95 96 100 116 117 134 136 137 138 140 141 144 148 172 176 179 181 182 188 201 203 210 211 213



15.4 15.5 17.1 17.2

Ports in Proximity

Change in container port traffic 1989–1999 Change in container port traffic 1999–2005 GDP of Asian countries in 2007 Japan’s trade in containers by counterpart region (unit: million TEU) 17.3 Super hub ports and rural economies in Japan 18.1 Location of Korean Two-hub Ports 18.2 Trade and cargo movements in Northeast Asia 19.1 Value-Added in Hong Kong transport and logistics sector 1996–2005 19.2 Employment in major transport and related services, Hong Kong 19.3 Hong Kong transport and logistics sector: changes in firm size 1981–2005 19.4 Hong Kong exports by mode of transport, 1993–2006 19.5 Hong Kong imports by mode of transport, 1993–2006 19.6 Hong Kong re-exports by mode of transport 19.7 LSP projected 3-year changes in gateway usage 19.8 Global Value-Added Logistics Space (GVALS) model

214 214 238 239 243 248 252 263 264 265 266 266 267 268 269

List of Tables

2.1 Comparison of agglomeration outcomes in NEG and port studies 2.2 Selected studies on port system concentration, 1963–2008 2.3 Selected studies on economic agglomeration at seaports, 1958–2008 3.1 Proximity and ports 3.2 Typology of ports in proximity and proximity in ports 4.1 Correlation evolution between port traffic, population, trade and production at country level, 1990–2000 4.2 Distribution of ports and regional units by country 4.3 Regional specializations and traffic growth, 2000–2005 4.4 Regional specialization and port performance, 2005 5.1 Ranking of major container handling regions in the world (in million TEU) 6.1 Governance of ports in France and Canada 7.1 Factors of port range emergence 8.1 A historical overview of EPP 8.2 Summary of the 2007 Commission Communication on EPP 9.1 Container throughput (million TEU) at Canada’s major container ports 9.2 Membership in the GVGC and HGC 9.3 Vancouver and USA west coast ports’ container throughput (million TEU) 9.4 Estimated Asian–USA trans-Pacific container trade (million TEU) 9.5 International cargo tonnages handled at Eastern Canadian ports, 2005 10.1 Transit Time (in days) between Selected Pacific Asian and East Coast Ports 10.2 Port infrastructure development at the top five east coast ports: The harbour/hinterland duality 12.1 An overview of cooperation between ports based on annual reports 12.2 Cargo turnover at CMP (2006)  12.3 Throughput Malmö and Copenhagen combined (1000 tonnes) 12.4 Key figures of CMP 12.5 Advantages of cooperation 12.6 Division of responsibilities between CMP and other public agencies 14.1 Major typological forms of coordination among ports in proximity 14.2 The vertical fragmentation of power among the major players 14.3 Throughput and added-value per employee

16 18 23 33 39 45 47 50 51 56 78 92 103 104 118 122 124 124 126 143 146 164 167 168 168 169 173 193 196 203

xii

Ports in Proximity

15.1 Distances and haulage rates, Felixstowe to selected destinations 15.2 Distances and haulage rates, Hull to selected destinations  15.3 Distances and haulage rates, Southampton to selected destinations 15.4 Inland haulage from London Gateway: Distances and projected rates to selected inland destinations 15.5 Regional markets by percentage 16.1 Top ten ports in the UK in 2007  16.2 UK port operator take-overs  17.1 World port ranking in container handling 1980/2006 (in 1000 TEU) 18.1 Historical Process of Korea’s Two-hub Strategy 18.2 Container port ranking in East Asia (unit: ’000 TEUs) 18.3 Comparison of container cargoes throughput between metropolitan and two hub port (unit: ’000 TEUs) 18.4 Concentration of Northeast Asian port range 18.5 Total container growth of Northeast port range (unit: TEU)

220 220 221 221 223 226 229 240 249 251 253 255 257

List of Contributors

Theo Notteboom Theo Notteboom is President of ITMMA (Institute of Transport and Maritime Management Antwerp), an institute of the University of Antwerp in Belgium. He is also affiliated with the Faculty of Applied Economics of the University of Antwerp and a part-time Professor in Maritime Transport at the Antwerp Maritime Academy. He holds a visiting professorship at Dalian Maritime University in China and has given guest lectures at a dozen other universities in Asia, US/Canada and Europe. He has published widely in academic journals and books on transport and maritime economics, transport geography and transport policy, including market organization, spatial developments, maritime transport and inland transportation. His research output covers applications to Europe, Asia/China and North America. He has received seven international awards for his academic work. He is a member of the editorial boards of Journal of Transport Geography, Maritime Policy and Management, Maritime Economics and Logistics and WMU Journal of Maritime Affairs and acts as guest reviewer for a large number of other academic journals. He is Council member of the International Association of Maritime Economists (IAME), Fellow of the Belgian Royal Academy of Overseas Sciences and a member of the boards of directors of BIVEC (Benelux Inter-University Group of Transport Economists) and BITO (Belgian Institute of Transport Organizers).

César Ducruet Dr. César Ducruet has worked since January 2009 as Researcher for the French National Centre for Scientific Research (CNRS) at Paris-I Sorbonne University. His research interests as a geographer include the spatial analysis of transport networks and territorial integration, through the looking glass of urban/regional and port development worldwide, with a special focus on Europe and Asia. His past experiences in South Korea (KRIHS) and the Netherlands (Marie Curie fellow FP6-EIF, Erasmus University) have resulted in several collaborations with many French, Korean, and Dutch colleagues, finalized in numerous book chapters and peer-reviewed journals such as Journal of Transport Geography, Maritime Policy and Management, Geojournal, Geoforum, Urban Geography, Annals of Regional Science, Global Networks, Regional Studies, Transport Reviews, Cybergeo, Mappemonde (editorial board), and L’Espace Géographique. His ongoing interest is the graph visualization of – and application of gravity models to – maritime

xiv

Ports in Proximity

networks through collaboration with computer scientists and physicists. His research networks include S4 (Spatial Simulation for Social Sciences), SPANGEO (Spatial Networks in Geography), International Geographical Union (IGU), and International Association of Maritime Economists (IAME). Finally, he has given regular lectures in Asia (Korea, China) and Europe (France, The Netherlands).

Peter de Langen Prof. Dr. Peter W. de Langen works at the Port of Rotterdam Authority, in the Department of Corporate Strategy as Senior Adviser and is involved in various strategic renewal projects. Furthermore, he works one day a week as Professor of Cargo Transport and Logistics at Eindhoven University of Technology. Previously, Peter worked for almost ten years at Erasmus University Rotterdam, where his PhD was on ‘the performance of port clusters’. He has published articles on port selection, port policy, and international transport and logistics chains in various scientific journals, provided guest lectures at various universities abroad and participated as speaker and session chairman in a large number of (industry) conferences. His main scientific contributions are: 1) application of cluster theories to (maritime) transport, ports and logistics, with specific attention for governance in clusters, 2) the analysis of coordination in (multimodal) hinterland transport chains, 3) analysis of the effects of concession policies, entry barriers and intraport competition and, 4) the analysis of strategies of port authorities.

Anthony Beresford Dr. Anthony Beresford is Senior Lecturer of Logistics and Operations Management at the Cardiff Business School. Prior to his current post, he was Research Associate at the University of Birmingham specializing in developing a road safety system for winter conditions. He has been involved in a broad range of international research and advisory projects including: transport efficiency and trade facilitation in Africa, and transport corridors in Indo-China, both for the UN; and a variety of port expansion projects for UK port operators. Anthony has published over 150 academic papers and reports with many of his papers appearing in front-rank academic journals. His research is currently focused on multimodal transport systems, road traffic management, port operations and policy, and environmental aspects of transport.

Claudia Caballini In 2004 Claudia Caballini obtained her degree in Management Engineering at the Faculty of Engineering of Genoa University in Italy. From 2004 to 2006 she

List of Contributors

xv

worked for Costa Crociere SpA and for a Finmeccanica consulting project where she acquired skills in process reengineering. Since 2007 she has been working at CIELI – Italian Center of Excellence in Integrated Logistics of the University of Genoa, as a PhD student in ‘Transport, Logistics and Territory’. In 2007 she collaborated on the Logistics Regional Plan for the Ligurian Region, where she worked on port systems and Ligurian port railways. Her research activity is mainly focused on intermodality, ports and logistics with a major focus on railway transportation in ports.

Laura Carpaneto Laura Carpaneto graduated in Genoa (Italy) in 2000 and studied for her PhD on EC Transport Policy. In 2004 she became a lawyer and joined a law firm. Her favourite research topics are port, port governance and EC transport law and policy. She is Contract Professor at the Faculty of Law in Genoa (Imperia Campus) and member of the Italian Centre of Excellence for Integrated Logistics. She is author and coauthor of papers and articles in international and maritime law reviews.

Claude Comtois Claude Comtois is Professor of Geography at the Université de Montréal, Canada. He has a degree in Political Science, a Masters in Geography from Laval University and a PhD from the University of Hong Kong for his research in the field of transportation. He is affiliated with the Research Centre on Enterprise Networks, Logistics and Transportation of the Université de Montréal. He has over 10 years experience as transport project director for the Canadian International Development Agency in China. Visiting professorships include more than 15 foreign universities. His teaching and research are centred on transport systems with an emphasis on shipping and ports. He has been involved in consultancy studies on marine policy, intermodal transport and environmental issues. He is co-author of The Geography of Transport Systems, published by Routledge and has published many articles in scientific journals on port and marine transport. He currently supervises a project on sustainable ports and inland waterways.

Jean Debrie Jean Debrie is Researcher at the French National Institute for Transport and Safety Research in the research unit ‘Production Systems, Freight and Logistics’. He holds a Doctorate in Geography (from Le Havre University in 2001). His work concentrates on the organization and morphology of freight networks, in particular the practices of private sector operators and how these impact on institutional

xvi

Ports in Proximity

spaces. He is currently involved in a research program about the process of port decentralization in France and port devolution in Canada He is also involved in a program about the local services of railway freight (economic and territorial perspectives). He lectures at the Paris-I Sorbonne University, the Ecole Nationale des Ponts et Chaussées and the University of Montreal on the subject of transport geography.

Antoine Frémont Holder of the ‘Agregation’ of Geography, Dr. Antoine Frémont is Research Director at INRETS (French National Institute for Transport and Safety Research). His research addresses the role of shipping lines in globalization: the organization of their maritime networks, their involvement in inland services and their role in the logistics chain. He is developing a new research program about logistics in metropolitan areas in relation with ports. His research output has been published in books and academic journals. He participates regularly in international conferences. He is associate editor of the European Transport Research Review and corresponding editor of L’Espace Géographique.

David Gibbs David Gibbs is affiliated with the University of Hull in the United Kingdom.

Elisabeth Gouvernal Dr. Elisabeth Gouvernal is Senior Researcher in the French National Institute on Transport and Security, and head of the research unit ‘Production Systems, Freight and Logistics’. She holds a Doctorate in Economics and Planning. She led a major study on the competitiveness of transport chains for the World Bank and the European Commission. She has held a position in the shipping company CMA-CGM. Her research focuses on maritime transport, the organization of transport chains, multimodality and problems of inland haulage to and from ports. Her present research focuses on port governance and devolution. She has directed two very large surveys in 1989 and 2004 of shippers and the transport chain employing a new methodology. She lectures at the Paris-I Sorbonne University and the Ecole Nationale des Ponts et Chaussées on the subject of maritime transport.

List of Contributors

xvii

Changqian Guan Changqian Guan is Associate Professor in the Logistics and Intermodal Transportation Program, Marine Transportation Department, United States Merchant Marine Academy. Previously, he was Assistant Professor at SUNY Maritime College, teaching in both the graduate and undergraduate programs. Prior to his academic career, he had sailed at sea as a deck officer for several years and held several positions with various management capacities in the maritime/ port industry. He has been actively engaged in research and consulting in maritime logistics, port planning, terminal operations management, and infrastructure development for private firms and public institutions. He has also published articles in academic journals and conferences. He provides valuable services to the maritime industry and government agencies such as shipping line, port/ terminal operator, shipyard, port authority, and economic development agency. He is a member of the intermodal terminal design and operations committee, Transportation Research Board, USA.

Peter V. Hall Dr. Peter V. Hall is a Professor in Simon Fraser University’s Urban Studies Program and he is also the Associate Director of the Centre for Sustainable Community Development at SFU. In 2006, he moved to Vancouver from Ontario, where he directed the Local Economic Development Master’s Program at the University of Waterloo. His research addresses the economic development role of seaports, airports, and other public institutions, as well as employment and community development. Before commencing his doctoral studies in city and regional planning at the University of California at Berkeley, he worked in the Economic Development Unit of the Durban Metropolitan Council. This experience led to his doctoral and subsequent research examining the connections between shipping and logistics chains, transport sector employment and the development of port cities. Dr. Hall’s research has been published in several academic journals as well as in edited volumes.

Wouter Jacobs Dr. Wouter Jacobs (1979) is an Assistant Professor at the School of Economics, Erasmus University Rotterdam (EUR). He has a background in spatial planning and holds a PhD in management (2007, Radboud University Nijmegen). His PhD addressed the political-economy of port competition in which he compared developments in Rotterdam, Dubai and Southern California. He currently researches the geographical and economic relationships of specialized advanced services (such as law, insurance, finance) in the international shipping sector. He

xviii

Ports in Proximity

is furthermore involved as Lecturer in (post)graduate courses at EUR and was a visiting scholar at the University of California Los Angeles and American University of Sharjah-UAE. Dr. Jacobs is a member of the board of the Regional Science Association-Netherlands and his research has been published in several international academic journals.

Olivier Joly Olivier Joly is Associate Professor at CIRTAI, Le Havre University in France.

Geun-Sub Kim Dr. Geun-Sub Kim is a Researcher at the Shipping, Port and Logistics Research Department, Korea Maritime Institute, a think tank for developing national policies on port, shipping and logistics. He received his PhD in the area of port competition strategies in 2007. His current research is focused on regional port competition, port development and management, port systems, container shipping and transport networks. He has published a number of articles in academic journals. As a researcher of a public institute, he has participated in numerous projects on port development and logistics networks.

Valérie Lavaud-Letilleul A former student at the Ecole Normale Supérieure (Ulm, Paris), she is holder of the ‘Agregation’ of Geography and Doctor of Geography (PhD from Paris-I Sorbonne University in 2002). She is Associate Professor at the University of Montpellier 3. She works in association with the INRETS (the French National Institute for Transport and Safety Research). She specializes in port and city-port development issues and focuses more specifically on port and non port actors’ strategies in cityports, new scales in port planning, the integration of port activities within coastal areas and more generally speaking, in coastal and marine management. She is currently involved in a research program about the process of port devolution in French ports. She is also involved in a program about the impact of environmental issues in port development. She has published three book chapters and 14 papers in academic or professional reviews.

Sung-Woo Lee Dr. Sung-Woo Lee is a Research Fellow at the Shipping, Port and Logistics Research Centre of the Korea Maritime Institute, a public think-tank in Korea

List of Contributors

xix

specializing in the area of maritime transport and international logistics. He has been involved in various governmental projects, many of which are associated with urban planning and port development. He was previously affiliated with the Centre of Urban Planning and Environmental Management at the University of Hong Kong as a visiting researcher. His interests include managerial and strategic aspects of international logistics and maritime transport, port-city interaction and globalization. He is a member of International Association of Maritime Economists and is a guest editor of International Development Planning Review.

Arnaud Lemarchand Associate Professor in Economic Sciences, he is also director of the Department for Economic and Social Sciences (AES/ECO Gestion) at Le Havre University. His research areas include labour economics, port economics and history, urban economics, labour mobility and housing problems. His recent publications include ‘Travail mobile et habitat non-ordinaire dans les villes portuaires’ in ‘Le logement précaire en Europe’ and ‘Entre l’échelle et le hasard: la gouvernance: districts, rangées, conteneurs’ in ‘Ville productive et mobilisation des territoires’.

John Mangan John Mangan holds the Peter Thompson Chair in Logistics, Management Systems Group, University of Hull Business School. He is also the Director of the University of Hull Logistics Institute and a guest lecturer at the Irish Management Institute and at a number of other universities. He has worked previously at University College Dublin and seven years at the Irish Management Institute. He received a Fulbright Scholar to Boston College in 1997 and taught the international logistics course on MIT’s MLog programme in 2004. John has extensive teaching experience and consulting experience in SCM, logistics, procurement and transport across a range of sectors for a variety of organizations. He chaired the Irish Government Task Force on transport logistics in 2001. His research is focused on global logistics. Within this context he is particularly interested in maritime economics and also the link between global logistics and economic development. He has published in a variety of journals.

Robert J. McCalla Robert (Bob) McCalla is Professor of Geography at Saint Mary’s University in Halifax, Canada and Adjunct Professor in the Maritime Affairs Program at Dalhousie University. His research and teaching interests are in maritime transportation. He has published in journals such as Journal of Transport Geography, Canadian

xx

Ports in Proximity

Geographer, Maritime Policy and Management, Geoforum, and Tijdschrift voor Economische en Sociale Geogra.e . He is the author of Water Transportation in Canada (1994) (Halifax: Formac). He served for four years as an External Examiner of the World Maritime University (Malmö, Sweden) and Shanghai Maritime University. Dr. McCalla was born in Windsor, Ontario, Canada. His BA degree is from the University of Western Ontario; his PhD is from the University of Hull, England where he was a Commonwealth Scholar.

Michiel Nijdam Michiel Nijdam has worked as a Port and Transport Economist at Erasmus University Rotterdam since 2001. He is active in teaching, academic research and contract research. He specializes in port economics and studied various aspects of ports and maritime transport, such as port pricing, entrepreneurship, and port competition. With regard to contract research, he participated in research on comparing European seaports, European policies and regulations in seaports, and entrepreneurship in maritime industries. He is working on a PhD thesis on the performance of the maritime industry in the Netherlands.

Athanasios A. Pallis Thanos Pallis is Assistant Professor at the Department of Shipping, Trade and Transport, of the University of the Aegean, Greece and the holder of a Jean Monnet grant on European Port Policy (since 2003; renewed in 2008). He is a Fulbright Scholar (2008–2009) at the Centre for Energy, Marine Transportation and Public Policy (CEMTPP), Columbia University, New York, US. He also holds an Adjunct Professor post at the Centre for International Trade and Transportation (CITT), Dalhousie University, Halifax, Canada (since 2007), and lectures at the University of Antwerp, ITMMA (since 2006). Thanos has authored 24 journal papers and has presented over 50 peer reviewed papers in international scientific conferences, and was a speaker/session chairman at nearly 30 more professional and scientific conferences. He is a member of the Council of the International Association of Maritime Economists (IAME) and Secretary General of the Hellenic Association of Maritime Economists. He is also a leading member of the Port Performance Research Network (PPRN), and active member of the Special Interest Group Ports and Maritime Transport, World Transport Research Society, the University Association for Contemporary European Studies (UACES) and the European Level Interests Representation (ELIR) Group.

List of Contributors

xxi

Francesco Parola Francesco Parola started his studies in Maritime and Transport Economics at the University of Genoa in Italy, where he received his bachelor degree in early 2001. During his PhD studies he has been visiting researcher at the Center for Maritime Economics and Logistics of the Erasmus University in Rotterdam. He defended a doctoral thesis about the strategies of transnational container terminal operators in the port reform era. His favourite research topics are liner shipping, maritime logistics and port governance. Currently he is Researcher at the ‘Parthenope’ University in Naples, Lecturer at the Faculty of Economics in Genoa, contract Professor at the Italian Naval Academy in Livorno, and Member of the Italian Centre of Excellence for Integrated Logistics. He is author and co-author of many papers and articles in conference proceedings and peer-reviewed international journals.

Stephen Pettit Dr. Stephen Pettit graduated with a BSc Honours degree in Maritime Geography from Cardiff University in 1989 and in 1993 he was awarded a PhD from the University of Wales. He is currently a Lecturer in the Logistics and Operations Management Section of Cardiff Business School. In the last decade he has been involved in a number of transport related research projects. Notably, he was involved in a groundbreaking project for the Department of Transport, studying the requirements for people with seafaring experience within the UK. He has also worked on various international transport projects for EU DGVII (DGTREN) including the economic value of shipping to the UK economy, an analysis of the cost structure of the main TEN ports and Work Organization in Ports. He has produced around 90 academic papers, conference papers and reports on his transport related work.

Amy Proctor Amy Proctor’s doctoral research reflected critically upon the concept of ecoindustrial development as a tool for promoting sustainable industrial development in the UK. The thesis evaluated the extent to which public-private partnership represented a shift towards more effective forms of governance for sustainable development at a local and regional level. After completing her PhD in 2005, she worked in Newcastle as a research officer in local government for a year before returning to Hull and academic research in 2007, to take up a position as a Research Associate in the Department of Geography. Her research interests include regional policy and governance (particularly issues relating to the governance of sustainable development), critical reflections on the role of industrial ecology and

xxii

Ports in Proximity

eco-industrial parks in local and regional development, city regionalism and the role of city regions in a national and international context.

Jean-Paul Rodrigue Jean-Paul Rodrigue is an Associate Professor in the Department of Global Studies and Geography at Hofstra University, New York. His research interests primarily cover issues related to freight transportation, logistics and globalization, particularly over North America and Pacific Asia. His recent work is focusing on the integration of maritime and inland freight distribution systems. Dr. Rodrigue, as project director, contributed to the development of a high impact web site about transport geography (which became a textbook in 2006) and was chair of the Transport Geography Specialty Group of the American Association of Geographers (2004–2006). He also acts as the Van Horne Researcher in Transportation and Logistics.

Masato Shinohara Masato Shinohara is Professor of Maritime Economics and Logistics at the School of Marine Science and Technology, Tokai University, Japan. He is a Graduate of the Faculty of Economics at Osaka City University. His PhD degree was granted by the Erasmus University Rotterdam in 2006. He started his shipping career at Mitsui OSK Lines and assumed numerous management positions during his 28 year service, including directorship of Mitsui OSK Finance PLC (1991–1993) and managing directorship of MOL Logistics Netherlands BV (1998–2000). From 2001 to 2004, he was an Independent Management Consultant and Researcher at Erasmus University Rotterdam. Since 2004, he has been in his current position. He is also a member of Shizuoka Prefecture Ports Strategic Committee and the board of directors of the Tokyo MOU Secretariat. His research area covers maritime economics, port management and cross-cultural supply chain management. He is author of European and Japanese Logistics Paradigms: An Explorative and Comparative Study of the Dynamics of Logistics Management (2006) (Tokyo: Maruzen Planet).

Brian Slack Brian Slack is Graduate of the London School of Economics and McGill University, and his academic career has been anchored at Concordia University, Montreal. A transport geographer with an interest in container shipping and intermodal transportation, he has published widely on these topics and has occupied visiting academic positions around the world. His present research focuses on three areas:

List of Contributors

xxiii

port governance and devolution, shipping and sustainability, and the cultural dimensions of container shipping.

Patrick Verhoeven Patrick Verhoeven is Secretary General of the European Sea Ports Organisation (ESPO) which groups more than 800 port authorities in the maritime Member States of the European Union and neighbouring countries. Based in Brussels, the organisation acts as the principal interlocutor of the port sector with the institutions of the European Union. Patrick Verhoeven holds a Masters Degree in Applied Economics from the University of Antwerp where he is currently preparing a doctoral thesis on port governance reform in Europe.

James Jixian Wang James Jixian Wang is Associate Professor at the School of Geography, the University of Hong Kong and Fellow of Chartered Institute of Logistics and Transport (Hong Kong). He was born and grew up in Beijing, and received his BA in Economics from the People’s University of China, his Masters from the University of Hong Kong, and his PhD from the University of Toronto. His research area is Transport Geography, with special interests in port city development and transportation in China. He has published widely in international journals, and is on the editorial boards of Journal of Transport Geography and Transportmatrica. He is the principal editor of the book Ports, Cities, and Global Supply Chains published by Ashgate in 2007. As a consultant for port city development, he has participated in more than 25 port city planning projects in China for the past 10 years.

This page has been left blank intentionally

Preface

In December 2007, the Institute of Transport and Maritime Management Antwerp (ITMMA) of University of Antwerp and the Department for Regional, Port and Transport Economics of Erasmus University Rotterdam jointly organized a conference on the theme ‘Ports in proximity’. The theme of ports in proximity is highly relevant: while most of the port users are international companies, most ports are governed by local institutions. While competition between ports is healthy and contributes to port efficiency, cooperation between ports, and especially ports in proximity, may be beneficial for port authorities and port users alike. The topic is especially relevant in the Rhine-Scheldt Delta, a region where the two largest ports of Europe (Rotterdam and Antwerp) are located, as well as other large European ports such as Ghent, Zeebrugge and Zeeland Seaports. The ports of Antwerp and Rotterdam are market leaders partly because of their marketorientation and their commitment to operational excellence, good governance and a well-balanced stakeholder policy. At the same time, the ports strengthen each other through the competitive process, but also by fully benefiting from existing synergies between the two large port complexes. While competition among the ports in the Delta remains fierce, various forms of cooperation and coordination have developed over the years. For instance, cooperation between Rotterdam and Zeeland Seaports in the joint exploitation of port land, cooperation between the Flemish ports mainly in the field of marketing and cooperation between Port of Rotterdam and Port of Amsterdam in the area of Port Community Systems. While it is still unclear to what extent and how cooperation will develop, it is certain that the Rhine-Scheldt Delta will remain an important laboratory for this type of research. For this reason, we both were happy to support this conference, and participate in the industry event, where issues in ports in proximity where discussed among port authorities, market players, government representatives and academics. This book builds on the papers presented at the conference. It contains a state of the art of academic research on ports in proximity. The contributions in the book provide many relevant insights and international cases such as Korea’s two hub strategy, Japan’s port policy, Hong Kong’s transformation to a logistics coordination centre, Canada’s gateways policy and Copenhagen Malmö’s cross border merger. These insights are relevant for port managers and the port industry alike. We hope that this book will provide an interesting read for researchers, policy makers and practitioners, but also for students that may be interested to

xxvi

Ports in Proximity

learn more about this fascinating topic. We certainly encourage and will continue to support more academic interest in these and other issues in seaports. Hans Smits, CEO of Port of Rotterdam and Eddy Bruyninckx, CEO of Port of Antwerp Rotterdam and Antwerp, 2009

Chapter 1

Introduction Theo E. Notteboom, César Ducruet and Peter W. de Langen

In many coastal areas ports are located in proximity to each other. Location qualities, demand characteristics and actors’ strategies define the potential of locations to develop port functions such as transhipment activities, warehousing/distribution, port related manufacturing activities, trading and value-added logistics. The growth in cargo volumes around the world has allowed smaller or new ports to enter the global scene and to start competing with large established ports. The interaction between ports constitutes an important research topic. In many studies that focus on the analysis of seaports located in the same region, authors have avoided considering ports individually while attempting to look at groups of ports forming larger functional or spatial units. The often complex linkages in the governance and management of port areas and terminals within the same port system receives much attention in academic literature. Wang and Slack (2000) analyse the complex port interactions in the fast growing Pearl River Delta. Cullinane et al. (2005) discuss competition between Shanghai and Ningbo in the Yangtze Delta. Several chapters in Cullinane and Song (2007) are dedicated to competition, cooperation and governance issues in the Yangtze Delta, the Pearl River Delta, Singapore and Tanjung Pelepas and the South-Korean twin hub Busan and Gwangyang. The port governance book edited by Brooks and Cullinane (2006) also discusses the situation in many European gateways. Charlier (1996) and Notteboom (2007a) pay special attention to the Benelux seaport system. Marti (1988) zoomed in on the Pacific load centres on the North American west coast, while Starr (1994) and Shashikumar (1999) discuss port dynamics in North American gateways along the east coast. However, the diversity of local contexts motivates the search for generalization and conceptual synthesis, which is one goal of this book. Ongoing economic integration, including integration of value chains, transport infrastructure and tax laws may create a case for cooperation and coordination between ports in different regions or countries. While most port users are international companies (this applies to shipping lines, see Heaver et al. 2000, terminal operating companies, Slack and Fremont 2005, and forwarding companies), many ports are still strongly ‘territorially constrained’, e.g. the institutional structure of such organizations prevents investments outside their ‘territory’. This territory is often a municipality. Some ports have actively aimed to develop port networks (Van Klink 1997), with the aim to strengthen the competitive position of the ‘home port’. Furthermore, these port networks are often not the



Ports in Proximity

result of the strategy of the port authority, but an issue of the port community at large (De Langen and Chouly 2004). This internationalization of all types of port users leaves many ports as ‘pawns in the game’ (Slack 1993) and leads ports to reconsider their spatial scope. Consequently, ideas of port competition and coordination have emerged (Song 2003). This book aims to unravel the factors contributing to the dynamic development of ports in proximity. Adjacent ports are typically fierce competitors, a competition that often contributes to the strong market positions of the respective seaports. However, the relationship between adjacent ports has also grown stronger in the sense that port executives as well as the private sector stress that, while maintaining a healthy competition, opportunities for cooperation and coordination can be further explored. This book not only provides an overview of the state-of-the-art of research in this field, but also sets an agenda for further research on ports in proximity. Consequently, the book develops a clear academic view on opportunities for cooperation and identifies avenues for further joint research which is useful to ports in proximity all over the world. The book aims to provide multidisciplinary insights on ports in proximity. Throughout the book, concepts of strategic management, supply chain management, port and transport economics and economic and transport geography are applied to offer an in-depth understanding of the processes underlying spatial and functional dynamics in port systems. The book also discusses policy outcomes and implications relevant to port systems all over the world. By doing so, the book aims to advance research in the fields of the interaction (competition and coordination) between adjacent seaports in a logistics-restructured environment and the implications for port governance structures and policy makers. The first part entitled ‘Conceptualization of Ports in Proximity’ provides a methodological and conceptual background to the main themes of this book. Chapter 2 by César Ducruet, Theo Notteboom and Peter de Langen discusses the potential to apply insights from New Economic Geography (NEG) to ports. The authors demonstrate that NEG has moved beyond traditional economic geography in the early 1990s by applying a modelling approach to the explanation of changing spatial structures, and by attempting to put economic geography in the economic mainstream. By bringing together international trade theories, micro-economic theories, and spatial analysis, it proposes a renewed framework explaining the uneven distribution of activities across geographical space, understood in terms of agglomeration, dispersion, and regional integration. The chapter identifies two important issues where NEG can be applied to ports: the changing concentration of traffic within a port system, and the uneven agglomeration of economic activities around port areas. In Chapter 3, Peter V. Hall and Wouter Jacobs deal with the question of how proximity influences relationships between ports and among major port users. They argue that proximity within and between ports in this global age cannot be understood in geographic terms alone. Proceeding from the position that

Introduction



proximity is important for learning, innovation and resolving collective action problems, they discuss five dimensions of proximity in the ports context. Each of these dimensions must be appropriately balanced; too much proximity can be as harmful to innovation and collective action as too little proximity. Focusing on the geographic dimension, the authors differentiate between proximity within ports and between ports, so generating a typology of four ‘ports in proximity’. Each type faces particular challenges with regards to port innovation and upgrading. Given the importance of port infrastructure and hinterland connections, institutional proximity emerges as a key dimension. Chapter 4 by César Ducruet proposes clarifying the concept of ‘port region’ by synthesizing dispersed elements from various disciplines such as transport geography and regional science. He retains the idea that the port region is a regional area where economic structure is influenced by port activities and the port sector. One interesting finding from the data analysis on OECD port regions is that in general, specialization in the industrial sector has a negative influence on traffic size and growth compared with regions specialized in the tertiary sector or which concentrate economic wealth and unemployment. Such evidence provides useful insights on the impact of globalization (e.g. shift of manufacturing to lessdeveloped countries) on the role of ports in developed countries on a regional level. Chapter 5 by Theo Notteboom aims to unravel the factors contributing to the dynamic development of multi-port gateway regions and multi-port hub regions. Two questions lie at the heart of this contribution: what mechanisms drive port system development and why do distinctive port systems follow other development paths? The chapter provides a discussion on existing models on port system development and particularly analyses the role and sources of path dependency and contingency in port system dynamics. The author concludes that a certain degree of path dependence in the development of ports at a regional scale exists, but the sequence of events makes a difference for the outcome. Port development processes also show a certain degree of contingency. Strategies and actions of market players and other stakeholders may deviate from existing development paths. Part II of the book extends the discussion on ports in proximity to the level of port governance. The contribution by Brian Slack, Elisabeth Gouvernal and Jean Debrie deals with the relationship between proximity and port governance (Chapter 6). The authors consider some of the issues raised by port decentralization drawing upon the examples of two national cases, France and Canada, where different but parallel processes have taken place. It is demonstrated that in the case of France, regional governments play a larger role today in port administration which we suggest may lead to a greater degree of cooperation between the ports under each regional government. In contrast, Canadian ports have devolved to purely local agencies, without any regional and very limited national control. The chapter puts forward the hypothesis that governance proximity, defined as the relational distance separating the port authority from the government tier exercising jurisdiction over



Ports in Proximity

the port, can play a very important role in shaping port policy orientations. The authors conclude that proximity in port governance is an important factor shaping cooperation and competition, but may under certain circumstances give rise to very different results. Chapter 7 deals with regional integration and the concept of a maritime range. Arnaud Lemarchand and Olivier Joly argue that ranges are key elements in a new understanding of emerging interdependences through globalization processes and the new modalities of cooperation and competition. This calls for a new analysis of the insertion of port city economies within maritime ranges, based on existing port studies. One of the key research questions put forward relates to the way containerization and globalization influenced the emergence of maritime ranges. The contribution of Athanasios A. Pallis and Patrick Verhoeven (Chapter 8) scrutinizes the relevance of the concept of proximity in the European context. Based on a critical review of many EU official documents on port policy and of the literature on port development, they assess some key European policies such as the integration of transport systems, sustainable port development and level playing field. They underline important gaps between theory and practice, such as the preference given to bigger ports, the lack of investment in port infrastructure and intermodal solutions, and the lack of horizontal coordination among neighbouring seaports. Of course, the consciousness about such issues exists, but has appeared in EU official reports relatively recently. Therefore, the authors suggest referring to air transport policies, and to develop specific instruments fostering the advantages of proximity, such as guidance on the application of environmental legislation and state aid guidelines. The third part of the book contains the first set of case-studies: three chapters discuss contemporary issues in the North American gateways and corridors, which form key constituents of the ports in proximity discussion in the region. Robert J. McCalla in Chapter 9 proposes a thorough review of the concept of ‘gatewaycorridor’ in which he includes the political, jurisdictional, and private/public dimensions influencing port development. Using Canada as an ultimate example, the chapter demonstrates which factors make the Asia-Pacific gateway successful and the Atlantic gateway less successful. Besides classical factors such as spatial organization and legacy of the past, the work of Robert McCalla makes clear there is a lack of coordination among different parties in the Atlantic case. So far, the Asia-Pacific gateway has been more able to answer important challenges such as the growing Pacific trade while profiting from the prominent position of Vancouver as a naturally eligible gateway port for the region. He concludes that a successful gateway should be planned early by multiple actors beyond local boundaries while involving private players in a concrete way. After discussing recent changes inflicted by containerization on port competition and the organization of port hinterlands, Chapter 10 by Jean-Paul Rodrigue and Changqian Guan argues that a process of divergence is currently taking place at the Northeast American seaboard. Traffic distribution and growth is modified by new challenges for ports and new strategies of carriers. Their conceptual approach

Introduction



based on port site, shipping networks, port policy, hinterland and supply chain management provides a clear picture of the situation at Northeast American ports. Evidence is drawn upon recent traffic statistics by port and by range (i.e. St. Lawrence, Upper, Mid and Lower ranges). Changes in global services on the world map and in local policy directions in a context of port regionalization have led to a drastic redistribution of forces among concerned ports, showing the usefulness of the concept of divergence in port studies. Chapter 11 by Claude Comtois and Brian Slack provides a critical reflection about gateways in light of the economy/environment nexus. As it has become increasingly recognized that environmental concerns can also be beneficial to economic players themselves, the chapter proposes an application to the case of port gateways. Such approach provides a good complement to McCalla’s chapter because it widens the definition of the gateway to dimensions such as air and telecommunications networks passing through a given port or corridor, beside land and sea networks. Their new definition also embraces trade flows and specialized activities, calling for an integrated approach. Following a review of some cases of negative gateway impacts, the proposed solutions include internal efficiency, unimpeded accessibility, capacity expansion, and the emergence of new practices. Such reflection provides full support to the successful Asia-Pacific Gateway project led by the Canadian government. Part IV consists of five chapters elaborating on regional cases in Europe: Dunkirk in France, the Ligurian ports in Italy, a Danish-Swedish port combination and two cases for the UK port system. The case of Copenhagen Malmö Ports presented by Peter de Langen and Michiel Nijdam in Chapter 12 is both unique and offers an example of best practice. The authors offer a useful overview of existing multi-port organizations in the world, insisting on the fact that most of them have not emerged through bottom-up initiatives. Without any doubt, the CPM project has emerged from two geographically adjacent main partners, benefiting from historical relations and locating within a vast cross-border urban region. Therefore, sharing culture and knowledge has facilitated the implementation of this unique project, while common practice already existed before the merger of the two medium-sized ports Copenhagen and Malmö in 2001. Despite some legal and political difficulties, the project has successfully lowered costs through capacity sharing. In the end, the authors conclude that such integration of two port authorities is not likely to happen anywhere else due to the specificity of the case, such as low pre-existing competition and a common threat due to bridge construction. Embarking on geographical proximity and competition as prime factors, Chapter 13 by Antoine Frémont and Valérie Lavaud-Letilleul provides a critical assessment of the case of the French port Dunkirk. Ideally located in Northwest Europe, Dunkirk shows a remarkable example of a little-known port situated in a medium-sized industrial city strongly hit by changing economic cycles. Based on a review of port development processes worldwide, the authors propose a conceptual synthesis of the possible relations between a mega-port and a secondary port



Ports in Proximity

within a given area. Possible solutions to the domination of a huge gateway like Antwerp are highlighted without ignoring the specificities of Dunkirk as a staterun port, having little synergy with adjacent ports, and suffering from industrial crisis and isolation. Signs of change locally and regionally call for a rethinking of the position of Dunkirk, notably in light of pressures felt at competing ports such as Zeebrugge in Belgium. Chapter 14 presents a case study of Ligurian ports in Italy. Different ports are located in close proximity in Liguria: Genoa, La Spezia and Savona. The chapter demonstrates the current legal and institutional structure is not adequate for dealing with the challenges faced by the ports. Consequently, Claudia Caballini, Laura Carpaneto and Francesco Parola make a plea for a further decentralization of the Italian ports (that currently are managed rather centrally) as well as the establishment of a platform for cooperation in the Ligurian region. Chapter 15 provides a case from the UK. Anthony Beresford and Stephen Pettit discuss competition between ports in the UK. They show the relevance of inland transportation costs in port competition and also suggest that ports located outside metropolitan areas may benefit from congestion and high prices for road transport from ports in congested areas. Chapter 16 by John Mangan, Amy Proctor and David Gibbs discusses the influence of external factors on the role of ports. The contribution in particular focuses on the ports along the Humber Estuary, the largest concentration of port activity in the United Kingdom. The chapter considers the impact of various disparate external influences on the Humber ports (economic activity in the UK, changes in ports ownership, and developments in port-centric logistics) and how these might impact the ports into the future. As such, the chapter aims to give the reader an insight into some of the disparate issues currently impacting the ports sector generally in the UK. After these European cases, Part V of the book discusses cases from Asia. Masato Shinohara discusses port competition and Japanese port clusters. He describes a fundamental transition in Japan, away from a focus on competition of Japanese ports with gateways in China and Korea, and towards more attention for a balanced development of the port system, with more attention for regional ports. Sung-Woo Lee and Geun-Sub Kim discuss Korea’s two-hub port strategy in Chapter 18. They suggest that Korea’s policy of developing two hub ports has made Korea an important gateway in North-East Asia. They suggest further integration between the two ports would add to Korea’s competitiveness. In the short term, this may take the shape of joint projects to improve flows between the two ports, while in the longer run, a unified governance structure for both ports is suggested. In the last chapter, James J. Wang discusses the transition of Hong Kong from a hub port city to a global supply chain management centre. The case of Hong Kong shows that containers shift easily between ports. Thus, ports in metropolitan areas, that have to ensure that economic activity related to logistics activities remains in

Introduction



the hub-city while no longer aiming to maximize port throughput. This is certainly a relevant insight for the development of ports in large gateway regions. The contributors to this book and the case-studies presented in this book are from different parts of the world and different disciplinary backgrounds. We sincerely hope the book will provide our readers with multiple perspectives and fresh ideas on how to evaluate and solve current issues in multi-port regions around the world. We hope this book contributes to the ongoing policy discussion in many parts of the world on sustainable inter-port relations that not only add value to the port users, but also guarantee a development pattern respecting societal and environmental goals and objectives. Finally, we would like to express our acknowledgements to the Series Editors, Professors Richard Knowles and Brian Graham and the anonymous reviewers for their supportive and constructive comments.

This page has been left blank intentionally

PART I CONCEPTUALIZATION OF PORTS IN PROXIMITY

This page has been left blank intentionally

Chapter 2

Revisiting Inter-Port Relationships under the New Economic Geography Research Framework César Ducruet, Theo E. Notteboom and Peter W. de Langen

Introduction Port geographers and port economists all look basically at the way a port develops and performs. While this may seem rather trivial, the simple fact that 90 percent of world trade volumes are ensured by maritime transport is in itself a sufficient argument assessing the importance of ports in shaping the world economy. The core intention of port specialists is thus to explain why some ports grow while others stagnate or decline. The complexity of the answer stems from the intermingling of multiple historical, geographical, economical, and political factors on various scales. Throughout port studies, particular attention has been paid to the study of inter-port relationships. Just like cities became conceptually defined as elements in urban systems rather than isolated elements serving their dedicated region (Pumain 1982), ports have become identified as parts of port systems (Robinson 1976). This new way of thinking opened many research opportunities in the fields of competition, cooperation, and integration. It has improved our understanding about how different ports accommodate different traffic but also how port activities impact – and are influenced by – local and regional economic growth. However, port research has become too much industry-specific, as recent works point at the need to be better integrated within economic geography as a whole (Hall et al. 2006; Olivier and Slack 2006). In this chapter, the New Economic Geography (henceforth NEG) is seen as a possible bridge through which such integration may be envisaged. The NEG has distanced itself from traditional economic geography in the early 1990s by applying a modelling approach to the explanation of changing spatial structures, and by attempting to put economic geography in the economic mainstream (Krugman 1998). By bringing together international trade theories, micro-economic theories, and spatial analysis, it proposes a renewed framework explaining the uneven distribution of activities across geographical space, understood in terms of agglomeration, dispersion, and regional integration.

12

Ports in Proximity

Following a brief synthesis of NEG core ideas, notably about the development of transport nodes, this chapter confronts it with two important sets of port research: the changing concentration of traffic within a port system, and the uneven agglomeration of economic activities around port areas.

Agglomeration and Dispersion Forces: The NEG Approach General Framework: Scales, Accessibility, Costs The main purpose of economic geography is to explain the uneven distribution across places on various geographical scales (Anas et al. 1998). Agglomeration of firms or populations occurs due to unequal levels of accessibility to spatially dispersed markets (Fujita and Thisse 2002). This accessibility depends on trade costs – of which transaction costs, tariff and non-tariff costs, transport costs, and time costs – that are inherent to exchanges across locations (Behrens 2006; Spulber 2007). While the analysis of the consequences of decreased distance-related costs on the spatial economy have been made on a national level (Bairoch 1997), NEG is designed to operate on a sub-national or regional level, with special reference to interregional relationships. NEG focuses primarily on the trade-off between increasing returns in production and transport costs (Koopmans 1957; Krugman 1995). It also borrows from human geography the law of Tobler (1970) according to whom ‘everything is related to everything else, but near things are more related than distant things’. This principle has been given remarkable relevance with regard to the emergence of core-periphery patterns during the industrial revolution due to falling transport costs. Based on such principles, NEG proposes an alternative approach to the neoclassical model that neglects the interpretation of international (and interregional) discrepancies. It proposes a framework aiming at determining the nature and intensity of agglomeration and dispersion forces that push and pull both consumers and firms (Papageorgiou and Smith 1983), together with the interplay between such forces and transport costs (Krugman 1991). The difficulty is to ascertain whether regions with large markets will always attract more firms than regions with small markets. Indeed, the concentration of firms may result in intensified local competition and decreasing profits, causing a dispersion force from the core to the periphery. Dispersion may be challenged by the home market effect deriving from the size advantages of the core region (Helpman and Krugman 1985; Combes et al. 2008a). In a context of economic integration as in the European Union, firms are likely to exploit intensively scale economies while avoiding geographical isolation in the periphery, leading to increased agglomeration in the core region. This explains why improving transport infrastructure may exacerbate regional disparities and lead to over-agglomeration in the core region (Ottaviano and van Ypersele 2005). Complementarily, interregional flows are also composed of individuals (e.g. workers and consumers). According

Revisiting Inter-Port Relationships

13

to Krugman (1991), the increase in market size leads to a higher demand for manufactured goods, then to an over-agglomeration of firms, and to a push of nominal wages. As a result, the greater variety of local products leads to lower local prices, resulting in increased real wages and, in turn, in-migration of new workers, giving birth to a core-periphery pattern. The snowball meltdown occurs when wages decrease in the destination region, while new workers (who are also new consumers) increase the demand for manufactured goods and, thus, for labour, resulting in the spatial dispersion of firms and workers. One main principle to retain from NEG is that high transport costs create spatial equality by sustaining the dispersion of activities, while low transport costs foster core-periphery inequalities by fostering their agglomeration (Krugman 1991; Fujita et al. 1999; Combes et al. 2008b). It is assumed that individuals are less footloose than firms, because individuals need more complex networks of interaction that are available only in agglomerations. A very important aspect of NEG is that it considers the planner and the market as being equally concerned by the issue of agglomeration. For both public and private players, agglomeration may be socially efficient, notably if the inhabitants of the periphery are guaranteed a good access to firms’ products. Such issue has motivated the analysis of skills distribution across regions (Duranton and Monastiriotis 2002; Combes et al. 2008), notably showing that agglomeration leads to low prices and low wages due to the fact that the net effect is negative when transport costs take intermediate values. Another important aspect of NEG is the diachronic approach to the relationship between growth and location. The growth of the global economy depends on its spatial organization (Fujita and Thisse 2002). More precisely, the change from dispersion to agglomeration fosters innovation. Recent studies (Tabuchi and Thisse 2002a) demonstrate that the relation between agglomeration degree and transport costs results in a bell-shaped curve of spatial development, in which the second phase marks the re-dispersion of the manufacturing sector while noneconomic factors become dominant. In fact, these non-economic considerations tend to make residents stickier, especially in rich economies. However, given the fact that living costs (e.g. land rent, commuting and housing costs) increase in the city or region accommodating newcomers (Fujita 1989), dispersion occurs only if transport costs become lower than commuting costs (Tabuchi 1998; Ottaviano et al. 2002). Morphological changes in US cities that lead to polycentric urban areas are directly driven by the succession of agglomeration and dispersion (Anas et al. 1998; Henderson 1997; Cavailhès et al. 2007). The complementary forces of agglomeration and dispersion also affect intrafirm organization (Krugman and Venables 1995). Due to rising incomes in the core region resulting from agglomeration, firms may find it advantageous to relocate some activities to the periphery to benefit from lower wages, resulting in dispersion (Puga 1999). This fragmentation process can be possible only when transport costs and communication costs have reached a sufficiently low level (Feenstra 1998; Spulber 2007; Leamer and Storper 2001). Nevertheless, it results in a separation

14

Ports in Proximity

between firms’ strategic functions in the core, and firms’ production functions in the periphery (Fujita and Thisse 2006; Robert-Nicoud 2008; Faini 1999). Transport Nodes and Agglomeration Economies As stated by most NEG specialists, ports naturally gave birth to centres of economic activities. Fujita and Mori (1996) propose a new framework analyzing whether a given port may create endogenous urban and economic growth. In this framework, the competitive advantage of the industries located around the port, and the quality of the transport link between the port and the core region are key determinants of local growth. As a result of their model, a port in a peripheral region is likely to attract second-order activities (e.g. manufacturing) while higher-order activities remain concentrated in the core region. Two main research directions are investigated by the NEG: general theories on the agglomeration dynamics at transport nodes, and empirical verification of the effect of port efficiency on transport costs and trade. Intermediate locations and the development of hub cities The emergence of so-called ‘hub cities’, which can be port cities or non-port cities, is depicted by NEG as a fundamental result of the agglomeration power of transport nodes. This phenomenon is mostly due to shrinking transport costs and declining trade barriers within countries and across regions on various scales, resulting in the necessity of concentrating trade flows at intermediate locations (Glaeser and Kohlhase 2004). During the first stages of transport development, infrastructure tends to naturally select already existing and well established economic centres (Fujita and Mori 2005). In a later stage, technological improvements in the transport industry combined with the aforementioned factors provoke the emergence of intermediate locations called hubs. This is confirmed by Behrens (2007) for whom ‘transportation hubs are very likely locations for cities to emerge, even if they are not centrally located’. In the work of Konishi (2000), the hub city is an intermediate location that emerges due to economies of scale and technological improvements of transportation. Between an agricultural city ‘A’ and an industrial city ‘B’, the hub city ‘C’ is likely to be used as a third location to reroute transport flows. This location may develop into a new city due to the demand for transhipping and handling commodities, which in turn attracts workers and, therefore, stimulates population agglomeration: ‘as the volume of trade between hubs increases, more workers are needed in order to meet labour demand for shipping and handling commodities, resulting in population agglomeration at such hubs’. Tabuchi and Thisse (2002b) underline the limitations of the core-periphery model by arguing that agglomeration forces are commodity-specific and therefore depend on a certain degree of regional specialization. Notably, heavy industries and industries producing goods with high transport costs are more agglomerated than light industries and industries with lower transport costs.

Revisiting Inter-Port Relationships

15

For more convenience, Behrens et al. (2006) explore the opposing forces exerted on remote regions possessing a transportation gate. On the one hand, remoteness makes imports and exports more costly, thus reducing the locational appeal of the port and region to firms and workers. On the other hand, remoteness provides a shelter for local markets from foreign competition, thus increasing the locational appeal of the port or region. Therefore, a transportation gate does not always attract industries, because it can act as a channel threatening domestic firms through international competition. What makes their work innovative is that the authors take into consideration the level of economic and spatial integration of gateway regions. This provides a multi-scalar approach about how the specific properties of transportation gates modify the spatial structure of their adjacent region, depending on wider factors such as international trade barriers and intranational trade costs. Empirical investigations and policy relevance  In general, NEG specialists provide aggregated measures of general trends that should apply for a large set of locations that are not differentiated. Yet, their results shed important light on the dynamics in which ports operate. Behrens et al. (2006) show to what extent transportation gateways favour coastal economies versus landlocked countries by reducing distance to trade partners thus creating economic wealth in terms of GDP growth. They elaborate their results based on former studies on the role of coastal gateways in overall transport costs. For instance, the study of Limao and Venables (2001) on US imports and exports shows that in general, coastal countries enjoy 50 percent less transport costs than landlocked countries. This result may vary depending on the improvement of the infrastructure quality, thus making trade partners theoretically closer or more distant. In the same vein, Clark et al. (2004) evaluate the role of seaport efficiency in terms of infrastructure and cargo handling services quality, showing that shipping costs would reduce by 12 percent when port efficiency is improved from the 25th bottom percentile to the 25th top percentile. In their study of Brazilian shipments, Haddad et al. (2006) also show to what extent the level of port efficiency determines for an important part the relative distance (and cost) between trading regions and countries. Some studies also focus on the impact of port policies on maritime transport costs: Fink et al. (2002) demonstrate that liberalizing port services would be equivalent to decreasing maritime transport costs by 9 percent. Other studies such as the one of Overman and Winters (2005) on UK shipments show the impact of European integration on the traffic shifts to the Southeast of the UK from other UK regions. Finally, other studies that are not directly related to maritime transport or ports also provide useful evidence about the interplay between transport costs, agglomeration, and dispersion forces. Bosker et al. (2007) confirms that the spatial organization at the top of the bell-shaped curve corresponds to the ‘blue banana’ in Europe. For the French case, Combes and Lafourcade (2007) identify that a 30

Ports in Proximity

16

Table 2.1

Comparison of agglomeration outcomes in NEG and port studies NEG theories

Traffic distribution within port systems

Advantages of agglomeration

Innovation, importance of noneconomic factors

Traffic stability, commodity variety, added-value

Disadvantages of agglomeration

Regional disparities, lock-in effect of established core regions on the periphery Lower wages, available land, shelter for local markets Remoteness, higher transport costs

Congestion, lack of space

Over-agglomeration in the core, increased transport costs

Peripheral port challenge, diseconomies of scale in large load centres, port competition, technological revolution, carrier selection, hub strategies

Advantages of dispersion

Disadvantages of dispersion Factors of coreperiphery shift

Nautical accessibility, land for port expansion, niche market Lack of hinterland coverage

Ports as locations for economic activities Captive local market, economic diversity (tertiary), economies of scale Environmental nuisances

Extended gateway (logistics), specialization Greenfield development, haphazard urbanization Globalization, urban growth, portcity separation, waterfront redevelopment, free-zone or growth pole development, landuse conflicts

percent drop in generalized transport costs would spread employment more evenly across regions but this would result in rising agglomeration within regions. In the end, results of NEG applications are very consistent and relevant, notably with regard to policy making. For instance, a major outcome is that the development of more efficient transport infrastructure would exacerbate regional disparities, a result opposite to what transport authorities expect (Fujita et al. 1999). The European regional policies, for example, keep being based on the idea that developing corridors will help remote regions to develop (Midelfart-Knarvik and Overman 2002; Vickerman et al. 1999).

Revisiting Inter-Port Relationships

17

Ports and Agglomeration Dynamics Seaports and NEG Theories The main difficulty in applying NEG theories to seaports is the difference in nature between the units of analysis: the region and the city are places for firms, workers, and residents to locate and prosper, while ports are basically intermodal connection points between different transport systems. However, it is possible to analyze ports through the NEG framework by considering the simple fact that large ports coexist with small ports. Because not every port can become a global hub or gateway, it is important for geographers to understand the factors fostering port growth – and decline. Table 2.1 provides a comparison of the implications of spatial agglomeration (and dispersion) within three main approaches: the NEG general approach, the distribution of traffic within a port system, and the location of economic activities around port areas. While this comparison indicates that NEG and port studies have much in common in terms of conceptual investigations and empirical evidence, NEG models have never been applied systematically, for example to address the issues below: • • • •

Bigger port cities are more likely to suffer from congestion and traffic decline than smaller port cities; Traffic growth stimulates value-added and regional development in the port area; Port-city separation and land-use conflicts harm port growth; New terminals on greenfield sites create economic development.

Far from applying NEG models to port studies, the remainder of this explorative chapter proposes a synthesis of the existing literature on the two aforementioned topics. Traffic Concentration in Port Systems One dominant issue of port geography and economics is the evolving concentration of traffic among sets of ports worldwide (Table 2.2). This issue is of particular relevance for the study of agglomeration and dispersion forces in NEG theories. Port traffic covers approximately 90 percent of world trade volumes, but such figures reach higher proportions in the case of export-led states (e.g. 99 percent for South Korean international trade). Based on Table 2.2, the main factors explaining the lack of NEG-like models in this study field may be explained as follows. The changing significance of performance factors over time In earlier studies, the size of the hinterland and the role of ports as natural gateways at the head

Ports in Proximity

18

Table 2.2

Selected studies on port system concentration, 1963–2008 Concentration factor(s) Inland transport corridors

Deconcentration factor(s)

Author(s)

Year

Area

Taaffe, Morrill and Gould

1963

Africa

Rimmer

1967a, 1967b

Australia, New Zealand

Inland transport corridors

Kenyon

1970

United States

Metropolitan dominance (New York)

Hinterlandforeland changes

Ogundana

1971

Nigeria

Sustained port dominance

Port diffusion, diseconomies of scale

Hilling

1977

Ghana

Spatial consolidation and rationalization

Hayuth

1981, 1988

United States

Development of large load centres, intermodalism

Peripheral port challenge

Slack

1985, 1990

United States

Level of intermodalism

Port selection by carriers

Barke

1986

General

Hoare

1986

United Kingdom

European integration, national connectivity

Charlier

1988

Belgium

Stable structure of port hierarchy

Airriess

1989

Indonesia

Exogenous development through hinterland penetration

Kidwai

1989

India

Kuby and Reid

1992

United States

Congestion, lack of space for further expansion

Traffic specialization

New port construction (bulk) Technological innovations, disappearance of smaller ports

Revisiting Inter-Port Relationships

19

Todd

1993

Taiwan

Export-led policy and growth poles

Starr

1994

United States

Hoyle and Charlier

1995

East Africa

Economies of scale in liner shipping, decreased port calls Concentration of investments

Charlier

1998

Benelux

Hinterland development (railway), port selection (Zeebrugge)

Notteboom

1997

Europe

Traffic shifts to medium-sized (new) ports

Wang

1998

Hong Kong, China

Technological advance of Hong Kong

Port competition, congestion, modal shift, high handling costs

Hoyle

1999

Kenya

Primate city polarization (Mombasa)

New port development

Brunt

2000

Ireland

Metropolitan dominance (Dublin)

National development plans

Balanced regional development

Wang and Slack 2000

Pearl River Delta

Carriers’ pressures, port policy

Slack and Wang 2003

Asia

Strategies of transnational operators

De and Park

2003

World

Port competition, new technologies

Notteboom and Rodrigue

2005

Developed countries

Development of ‘off-shore’ hubs and inland terminals

World

Urban growth, regional port competition

Ducruet and Lee 2006

Ports in Proximity

20

(Table 2.2 continued) Notteboom

2006a

Europe, North America

Stability of concentration

Notteboom

2006b

East Asia

Frémont and Soppé

2007

North European Range

Stable traffic concentration

Shipping line concentration

Ducruet

2008

Northeast Asia

Hub dependence

Military control, logistics barriers

Lee, Song and Ducruet

2008

Hong Kong, Singapore

Technological differentials, efficient planning policy

Congestion, lack of space, port competition

New port development

Source: Adapted from Ducruet et al. (2009).

of inland transport corridors were depicted as the main factors explaining traffic volumes. However, with the core-periphery shifting factors summarized in Table 2.1, traffic growth may occur regardless of hinterland size and accessibility. Regional integration and port competition give more importance to nautical accessibility and technological performance within the port. The location nearby core economic regions is far less important than in the past. Yet, there is an overlap between old and new factors of port performance. This is perfectly matching NEG theories for which performance is a trade-off between increasing returns to scale and transport costs. New terminals stemming from the peripheral port challenge are never really far from already established transport corridors, as seen in Zeebrugge and Felixstowe cases that are both close to core regions and traditional gateways (e.g. London, Antwerp). Seaports with good nautical accessibility and well located as prime loading/unloading gateways such as Le Havre may under-perform due to the lack of efficient hinterland access towards core economic regions. The exogenous character of port development  With the growing decisional power of shipping lines, forwarders, and intermodal operators on supply chain spatial design through horizontal and vertical integration, the fate of ports is increasingly dictated from outside. Indeed, Goss (1990) clearly indicated that the risk of port policies is to lean towards over-capacity while traffic may shift only due to the decision of some firms, as seen in many cases such as Maersk Line shifting from Singapore to Tanjung Pelepas (Malaysia). Albeit recent work has computed shipping lines’ decision-making processes (Yap and Lam 2006), no model has resulted from the empirical investigation yet that would be applicable anywhere in the world. In addition, the large literature on container terminal

Revisiting Inter-Port Relationships

Figure 2.1

21

Geographical overview of port spatial analysis

efficiency seems to totally ignore that such efficiency mostly depends on the quality of hinterland connections. Container terminals are often considered as isolated entities functioning with their own cargo handling equipment, regardless of their relation with other transport modes. Although this has been well addressed in a recent work based on the Rotterdam experience (Horst and De Langen 2008), it has not yet been studied systematically. Thus, the difficulty comparing ports is the necessity to include in the analysis the decisional and managerial dimensions that go far beyond the responsibility and the territory of the port itself. The interplay of multiple actors on various geographical scales  In complement to the aforementioned realities, the complexity of contemporary port development stems from the intervention of multiple actors such as transport companies, port authorities, and governments involved in port planning. One dominant school of

22

Ports in Proximity

thinking is led by scholars such as Slack (1993) for whom ports have become pawns in the game of such global transport players that insert ports in their networks according to firm-centred considerations (advantageous location, handling costs, and technical efficiency). As a result, there is a need to rethink ports as groups of terminals with their own individual logics, notably with the globalization of port terminal operations (Slack and Frémont 2005; Olivier and Slack 2006). Intra-port competition among terminals and operators in large load centres has become as important as inter-port competition (Pallis et al. 2008). Thus, terminal, port, port city, port region, country, hinterland, port system, and foreland interplay through a complex synchronization (Figure 2.1) while some port activities, such as logistics, shift to inland locations (Notteboom and Rodrigue 2005). As mentioned in the review of NEG theories, some spatial dynamics may be commodity-specific, as seen in the geography of automobile imports at US ports (Hall 2004). This makes it difficult for scholars to decide which player and which scale dominate in the development of a given port, and thus to generalize the results to every port in the world. The preference of NEG theories for the regional scale is thus difficult to apply directly to port studies since ports are intermediate locations between different territories and scales. The growing importance of political factors  Although such factors have always played a role in the decision-making process of port development, there is a growing recognition that sole economic factors are not sufficient to explain current port dynamics. Port selection by ocean carriers is better explained by subjective criteria rather than infrastructural characteristics (Ng 2006). Performance differentials between Los Angeles and Long Beach that are situated in the same urban agglomeration can only be explained by historical and political factors (Jacobs 2007a). In the case of Dubai, factors of centrality and intermediacy within the Middle Eastern port system have contributed to the success of the globalization policy of Dubai World Ports (Jacobs and Hall 2007). For Hong Kong, the transition from hub to gateway directly stems from more flexible relationships with China (Wang 1998), and strategies of terminal operators in mainland China such as Hutchinson (Airriess 2001) based on cultural and political relationships (Olivier 2006). In a constrained economy such as North Korea, port development occurs mostly through Chinese support due to war risk, while the country becomes increasingly hub-dependent on South Korean ports due to the good centrality and intermediacy of the latter for accessing the outside world (Ducruet 2008a). Although it remains impossible to infer direct causal relationship between governance structure and port performance worldwide (Goss 1990), the changing fortunes of ports are very much influenced by governance models (Brooks and Cullinane 2007).

Ports and the Location of Economic Activities Since NEG theories confer to transport nodes – of which ports – the property to generate economic growth and urbanization, it is very interesting to confront them

Revisiting Inter-Port Relationships

Table 2.3

23

Selected studies on economic agglomeration at seaports, 1958–2008

Author(s)

Year

Area

Agglomeration forces Central location

Weigend

1958

General

Bird

1963

United Kingdom

Taylor

1974

New Zealand

Containerization

Bird

1977

General

Vigarié

1979

General

Witherick

1981

Southampton

Vigarié

1981

Europe

Vallega

1983

General

Stern and Hayuth

1984

Middle East

Gateway functions Port-city interdependence Multiplier effects MIDAs, growth poles Indirect porturban growth Traffic growth at remote ports

Brocard

1988

General

Kidwai

1989

India

Hoyle

1989

Murphey

1989

Developed countries Asia

O’Connor

1989

Australia

Omiunu

1989

Nigeria

Slack

1989a

Canada

City size

Slack

1989b

Montreal, Hong Kong

Locational bound of port services in CBDs

Dispersion forces

Technological revolution, congestion of the urban core

Long-distance relationships through sea lanes (foreland)

Waterfront redevelopment Functional diversification of the urban economy City size

Central place functions

Lock-in effect of the inland core economic region Competition between port city and nonport city New port construction Port expansion, portcity spatial separation Loosening of port functions

Urban growth

Urban redevelopment, firm turnover

Ports in Proximity

24

(Table 2.3 continued) Warf and Cox

1989

New York

Metropolization

West

1989

Goss

1990

Developed countries General

Amenity of the waterfront Economies of scale

Campbell

1993

General

Gripaios and Gripaios Lever

1995

Plymouth

Regional diffusion of economic benefits Port-city separation

1995

Europe

Wealth differentials

Fujita and Mori

1996

General

Economies of scale

Pesquera and Ruiz Gleave

1996

Developed countries Africa

Gordon

1997

Developed countries

Tertiary development Spatial fix of CBDs Waterfront redevelopment

Van Klink

1998

Rotterdam

Port network

Gripaios

1999

Dekker et al.

2003

United Kingdom Rotterdam

Langen de

2003

Rozenblat et al.

2004

United States, South Africa, Netherlands Europe

Lugt van der and Langen de Notteboom and Rodrigue

2005

Asia

2005

Developed countries

Ducruet and Lee

2006

World

Jo and Ducruet

2007

Northeast Asia

1997

Direct and indirect benefits

Changing commodity mix High land rents

Lock-in effect of already existing centres Environmental impact New industrial districts Low accessibility and social diversity of old port areas Diseconomies of scale, subharborization Transport function decline Environmental impact and congestion

Ports as clusters of economic activities Relative accessibility Export-led logistics Corridors, extended gateways Tertiary sector development Transit trade, free-zone

Deindustrialization, unemployment Import-led logistics Depolarization, decentralization Urban growth, lack of space Remoteness, embargo

Revisiting Inter-Port Relationships Lee and Ducruet

2008

Hong Kong, Singapore Asia

Global urban functions Lee, Song and 2008 Efficient Ducruet planning policies Grobar 2008 United States National economic growth Source: Realized by authors based on various sources.

25 Cross-border integration High rental costs at the CBD Regional negative impacts

with the long-standing works of port scholars on this issue. Although the overview cannot be exhaustive, it shows some results of port studies about the direct impact of port activities on local and regional economies (Table 2.3). Some common trends and points where further collaboration between NEG and port specialists seems fruitful can be listed as follows. The fading spatial fix of port locations The attraction of economic activities by ports is nowadays questioned by a number of scholars (Hesse 2004). During the colonization period outside Europe, and during the current global shift of the manufacturing sector from developed to developing countries, ports seem to be prime locations for such activities. However in developed countries, most models of port-city evolution have shown the growing functional and spatial separation between ports and port cities. New terminals do not seem to create such urbanization and economic growth, as seen in the case of transhipment hubs, outports and gateways. Numerous case studies and spatial models show how economic activities related to seaports tend to shift from Central Business Districts and ‘sailortowns’ to outer locations such as inland distriparks, free-zones and multimodal platforms due to high land rents and lack of space within the traditional industrial port city. Without public intervention, the systematic developmental effects of new port development are highly questionable. Therefore, while NEG theories seem a-temporal, their applicability to any period of time is questionable due to the importance of specific contexts. In turn, port planners shall not ignore the simple realities of spatial organization when it comes to expect such developmental effects. Port policies should be accompanied by relevant regional development policies that also respond to the contemporary requirements of modern supply and logistics chains. The growing literature on port devolution clearly indicates the need for smaller ports to be embedded within their adjacent territories through public intervention (Debrie et al. 2007). One main problem is the quantification of port economic impacts on a large scale for international comparison, but this is limited due to discrepancies of methods, sources, and outcomes, mostly due to the lack of detailed datasets on port-related activities at urban and regional spatial units (McCalla et al. 2004; Ducruet 2008b). The regional variations of port-economic relations  Following the previous issue, it seems that port geographers neglect the practice of universal modelling

26

Ports in Proximity

due to the specific regional context in which ports operate. The regional models of hinterlands proposed by Lee et al. (2008) show that in Europe, the continental concentration of core economic regions limits the economic development of coastal gateways, while in the rest of the world, port and urban hierarchies tend to better overlap. Thus, the port-economic relationship differs greatly from one region to the other. In Europe, the core-periphery pattern exerts a lock-in effect on higher-order activities so that port locations are comparatively less attractive for businesses. In the rest of the world that is dominated by maritime nations, port and urban development are tied together. Nevertheless, common trends are observable such as the rise and decline of port functions within urban economies over time (Ducruet and Lee 2006). Traffic growth at efficient port nodes may not automatically result in economic benefits for the outlying territory in the same way from one region to another. In faster-growing economies such as emerging countries (e.g. Brazil, China and India), new port development is accompanied by new town policies and the development of adjacent industrial districts. In developed economies where population and economic growth is lower, new terminals have limited impact; the new generation of transhipment hubs in southern Europe developed on the ashes of former growth poles without solving existing social and economic problems such as unemployment and remoteness (e.g. Gioia Tauro, Sines, Fos and Taranto). This indicates the need to consider different developmental paths in the evolution of port cities, such as tertiarization in the developed world and industrialization in the developing world. The specificity of commodity chains  Some activities are more port-related than others. While some empirical studies in various countries indicate that basic daily freight-related activities locate in virtually every port, higher-order activities tend to follow the urban rather than the port hierarchy. For instance, activities with most added-value for local and regional economies, such as banking, insurance, brokering, consulting, also called Advanced Producer Services (APS) are not directly attracted by transport nodes because the logic of their spatial fix is more organizational than physical. In turn, port locations have attracted much heavy industry, notably in Europe during the 1960s before the oil crisis, at a time when economies of scale at coastal locations could provide increasing returns to scale for production while reducing transport costs to import raw materials and export manufactured goods. Some ports specialized in the development of petro-chemical complexes (e.g. Rotterdam) while others integrated the port function within their diversified urban economy (e.g. Hamburg). Nowadays, increased globalization has made such patterns more complex, resulting in footloose behaviour of multiple commodity and value chains in which ports remain elements amongst others (Robinson 2002). Therefore, there is a growing need to understand which ports may attract which commodity chains, and how.

Revisiting Inter-Port Relationships

27

Conclusions In this chapter we have demonstrated how the New Economic Geography (NEG) can act as a possible bridge for a better integration between economic geography literature and port studies. We have demonstrated that NEG has distanced itself from traditional economic geography in the early 1990s by applying a modelling approach to the explanation of changing spatial structures, and by attempting to put economic geography in the economic mainstream. By bringing together international trade theories, micro-economic theories, and spatial analysis, we proposed a renewed framework explaining the uneven distribution of activities across geographical space, understood in terms of agglomeration, dispersion, and regional integration. This chapter confronted NEG with two important sets of port research: the changing concentration of traffic within a port system, and the uneven agglomeration of economic activities around port areas.

This page has been left blank intentionally

Chapter 3

Ports in Proximity, Proximity in Ports: Towards a Typology Peter V. Hall and Wouter Jacobs

Introduction Over the past 50 years, the maritime transportation sector has been profoundly transformed through the processes of containerization and economic globalization. Indeed, it is hard to conceive of one without the other (Levinson 2006). These changes have been profoundly spatial, affecting the functional and strategic relationships between producers, consumers and the numerous transportation intermediaries that connect them. It is clear that these changed spatial arrangements have implicated ports in more spatially extensive yet increasingly integrated systems: what Robinson (2002) calls supply chain systems or what economic geographers call commodity chains or production networks (Gereffi et al. 2005; Henderson et al. 2002). This perspective on the forces influencing ports is proving useful in thinking about the decision-making processes and strategic choices of dominant port actors (see Wang et al. 2006). Recognition of the importance of global supply chain systems builds on scholarly work on consolidation in the container shipping industry and the rise of new global players, such as terminal operating firms (Slack et al. 2002; Olivier and Slack 2006; Jacobs and Hall 2007). It builds on work examining the regional hinterlands and regional co-operation of port authorities (Heaver 1995; Song 2003; Notteboom and Rodrigue 2005). And, it is informing work on supply chain strategies for ports seeking to capture added value (De Langen and Pallis 2006; Hall and Robbins 2007; Wang and Olivier 2006). Given this attention to the place of ports in global supply chains, one may get the idea that spatial proximity has ceased, or certainly is ceasing, to be an important factor in the port and maritime industry. In the past, proximity within ports was regarded as an asset in the close choreography that constituted the port cluster. This is a point that has been made by Martin and Thomas (2001) in reference the ports’ terminal operating community, and by de Langen (2003a) in his study on the role of leader firms and their suppliers in local port clusters. Yet, if proximity within ports has been seen as an asset promoting internal coherence and collective action, proximity between ports was viewed as a liability to the external competitive positioning of the port. Close proximity in the same port

Ports in Proximity

30

range resulted in regional contests between ports to attract container lines. These contests were especially intense during the middle decades of containerization, once the technology had become (relatively) standardized and economies of scale became the critical competitive asset. In this environment, ports found themselves as mere pawns in a great game (see Slack 1993; also Hayuth 1981; McCalla 1999a). The point is that spatial proximity assumed a salience in the conceptualization of ports before containerization, and in the period during which this technology diffused. Is it still the case that proximity is important, and if so, in what sense? We want to suggest that despite the recognition that ports are nodes in competing supply chain systems, it would be a mistake to assume that proximity has ceased to matter. This point is emphasized by economic geographers more generally who have come to realize the importance of external relationships to local clusters in the process of industrial innovation and upgrading (Coe et al. 2004; Bathelt et al. 2004; Lagendijk and Oinas 2005). In other words, ports cannot successfully insert themselves in global supply chains if they ignore the relationships that make innovation and collective action possible. The structure of our argument is as follows. First we tackle the concept of ‘proximity’ by making use of recent literature in economic geography. Proximity has not only a spatial connotation, but exhibits more dimensions. Further, more or less proximity is not necessarily positive for port development and competitiveness. This exploration will help us to understand the complex and changing relationships among port actors within and between ports. Based upon this, we develop a typology which seeks to identify the strategic challenges that ports face with respect to proximity. We end with some brief conclusions.

The Multiple Dimensions of Proximity Economic geographers have pointed out the great irony that globalization has actually made proximity even more important to economic development processes (Storper 1997). We find Boschma’s (2005) formulation of this position to be most useful. Boschma accepts that innovation and learning are vital components of successful economic development in the contemporary world, and he argues that proximity is a necessary condition for innovation and learning. However, he shows that spatial proximity is not the only or indeed the most important form of proximity for these learning processes; the only form of proximity that is a necessary precondition for learning is cognitive proximity (referring to the extent to which actors share a knowledge base), since this is what allows interactive learning to take place. However, other forms of proximity can help learning: • •

Organizational proximity: the way in which control is exercised between actors through command or contractual means; Institutional proximity: the rules, norms, conventions, regulations that

Ports in Proximity, Proximity in Ports

• •

31

govern relationships between agents; Social proximity: the extent of trust in the relationship between actors; Geographic proximity: the spatial distance between actors and their activities.

In Boschma’s perspective these four dimensions of proximity are mechanisms that may promote cognitive proximity, but they are not substitutes for it. Additionally, geographic proximity can promote organizational, institutional and social proximity, hence indirectly helping these mechanisms to promote cognitive proximity. Other forms of proximity can also be substitutes or complements for each other in the learning process (e.g. social proximity provides trust that may substitute for organizational distance; or institutional proximity defines clear rules that may complement shared cognitive structures). Finally, Boschma argues that all dimensions of proximity must be appropriately balanced to support innovation. For example, too much cognitive distance between actors means that they may not understand each other, but too little cognitive distance means that they may not be open to new ideas. In more general terms thus, too little proximity means that the co-ordination and trust necessary for the risk-taking involved in innovation is not present; instead there is likely to be opportunistic behaviour by agents that makes others wary. And, too much proximity means that the willingness and incentives to engage in environmental scanning and to create new relationships may not be present; in organizational terms this is commonly referred to as bureaucracy, in institutional terms, this is lock-in. We refer to this as the ‘too-little, too-much’ perspective on proximity because we view proximity as a set of dynamic relations that individual agents constantly monitor and seek to adjust. While individual actors may desire a particular degree of proximity to others, it makes no sense to speak of a single general optimal level of proximity in a world where things change continuously. In other words, proximate relationships are constantly in flux due to corporate strategies, new technologies and market developments. It is worth highlighting that the question of competition is intimately tied up with this too-little, too-much perspective on proximity. In principle, competition provides an incentive for agents to exchange information and experiment with new processes and products. Clearly, too much organizational proximity in the form of monopolization undermines the prospects for these potentially beneficial effects of competition. This problem has been recognized in the port industry where problems of spatial monopoly are compounded when a single tenant or user dominates a port (De Langen and Pallis 2006). In contrast, competition between agents that are socially, organizationally or institutionally isolated can lead to further deterioration in the relationships that do exist, thus undermining prospects for learning, innovation and upgrading. This is the problem of opportunism, and the race to the bottom. For example, it is arguably the case that the challenges of dispersing new technological (e.g. low emission engines) and organizational (e.g. gate booking) systems to reduce the environmental impact of the short-haul trucking industry

32

Ports in Proximity

in the Los Angeles basin have been confounded by the radically decentralized and competitive nature of the local industry. More hierarchy (organizational proximity) or regulation (institutional proximity) may in fact aid innovation here. In other words, competition can either support or undermine processes of learning and innovation depending on the nature of existing proximities.

Proximity and Ports How can we use these ideas to understand whether and how proximity may be influential in the maritime port sector in the current era? Our review has indicated that proximity between individuals and organizations (actors) is important because it supports processes of learning and innovation that are crucial to competitiveness in an economic environment of heightened global flow. However, proximity itself is not exclusively geographic, and other forms of proximity may be equally or more important. In order to explore what this general theoretical statement means in the ports context, we need to be clear on (1) who are the actors in the ports sector, (2) what innovation and learning mean to these actors, and (3) what proximities are most salient to the actors seeking innovation and learning. Actors in the port context include logistics chain actors (ocean carriers, terminal operators, surface transporters, and labour) and supply chain actors (shippers, freight forwarders and shipping agents). Most of the logistics chain actors are private operators, seeking to increase the amount of value created through port activity, and to increase their share of value added. It is important to understand that these private operators do not assume static or fixed roles; indeed, they have undergone rapid transformation through vertical consolidations and changing ownership relations. One source of power for dominant logistics chain actors is the ability to choose between ports; when they can, they are able to extract value from place-bound actors, in particular, labour, public or private terminal operators and some shippers. However, large shippers of containerized cargo have sought to strengthen their bargaining position by, for example, lobbying for the confidential contracts permitted by the United States Ocean Shipping Reform Act of 1998 (Shashikumar and Schatz 2000; FMC 2001). In addition, because of the ecologically sensitive territory ports share with other users, ports, especially those located in metropolitan regions of democratic societies, have become highly regulated spaces. Thus, we include in our list of actors, port authorities, infrastructure providers and regulators, and local polities, which include the local communities, and national and sub-national governments that have a stake in port development. For these public actors, value creation and capture from logistics activity is only one goal that must be balanced against other objectives. Second, the actors seek to create and capture value through innovation, but this concept has a particular meaning in the ports context. In the port context where the product is a transportation service, innovation includes new technologies and processes for handling and moving cargo, but it also includes mechanisms

Table 3.1

Proximity and ports Organizational Integration of port users, structure of global transport firms

Institutional Port governance, inter-port relations and higher-level institutional relations

Social Extent of trust in the relationships between actors

Capture/dominance by key actor

Lock-in, e.g. rules shaped to favour dominant tenants

Unwillingness to connect to global supply chains; overembeddedness

Entry barriers; opportunism, e.g. tenant switching

The problems of too little proximity

Lack of understanding

Transaction costs; spatial monopoly, e.g. high tariffs, port–city tension

R&D agenda Industry-wide platforms; inter-firm labour mobility; online port community systems

Variable or unclear rules fail to solve collective action problems in infrastructure provision Port mergers and regional co-operation agreements

Opportunism and short-term approaches to supply chains

Potential solutions

Supply chain integration and efficiency problems; risk of ‘hold up’ in adoption of innovations Loosely coupled systems with high technological integration

Port cluster strategies

Institutional checks and balances; co-siting within port; hinterland infrastructure

The problems of too much proximity

This page has been left blank intentionally

Cognitive Extent which supply chain actors share a knowledge base that is a basis for learning, innovation and upgrading Free riders, information overload

Key dimension

Geographic Intra-port capacity and congestion; inter-port distance and connections

34

Ports in Proximity

for planning, implementing, upgrading, managing and operating infrastructure systems. The concept of the critical asset, advanced by Cox (1997), and applied to the port context by Robinson (2002) is useful here, because it draws attention to the importance of control over logistics chain infrastructure. As such, the ability to secure infrastructure upgrading and investment, and then to exploit these enhancements, are key elements of value creation and capture in the ports context. Sometimes the assets are private (e.g. value adding processing services in the auto carrier industry, see Hall and Olivier 2005), but in the port sector they are often collective (for example, dredging, land distribution systems, environmental mitigation). The collective importance of infrastructure to port innovation is another reason why public sector actors have remained influential as regulators, planners and coordinators in most ports around the world (Brooks 2004; Slack 2007). We are now ready to consider which proximities are most salient to the actors that seek innovation and upgrading in their ports. We consider each dimension in turn, with a summary provided in Table 3.1. Cognitive Proximity Advanced economic interaction in the form of innovation and upgrading implies a certain degree of cognitive proximity. This type of proximity refers to a shared knowledge base among actors and the capacity of these actors to absorb new knowledge in such a way they can learn from each other. The integration of ports in global supply chains implies an increasingly global diffusion of knowledge and practices in the port industry. We can clearly observe this process in ports where global terminal operating firms (i.e. HPH, PSA and DP World) have entered local stevedore markets. The international offshoot of the local port authority of Dubai, DP World, has been aggressively exporting its knowledge about terminal management to underperforming ports such as Constanza in the Black Sea and, closer to home, the port of Abu Dhabi. Earlier, the Dubai-based terminal operator learned from the shipping line SeaLand which held the management contract at Dubai’s Jebel Ali port until the formation of the Dubai Ports Authority in 1991 (Jacobs and Hall 2007). There remain some important pitfalls that have to be recognized. First, too much cognitive proximity might lead to a lack of creativity and lack of appreciation of what potentially are complementary bodies of knowledge. On the other hand, too little proximity among actors will result in a lack of understanding of the possibilities of new technology or information. Second, too much proximity also increases the risk of involuntary knowledge spill-overs by which competitors can acquire valuable information without compensation. As such, too much proximity might result in the problem of free-riders. Third, too much proximity might lead to cognitive lock-in that will obscure the view of new technologies or new market possibilities. These problems might be overcome through organizational (e.g. setting up external relations through contractual relations) and geographic (e.g. co-location of related and unrelated industries) forms of proximity. However,

Ports in Proximity, Proximity in Ports

35

too strong external relations could also provoke segmentation among the local members of a cluster in which the global flagship companies start to dominate the local milieu (Bathelt et al. 2004: 48). Therefore, organizational proximity (e.g. more integrated global operating firms) may itself become a problem for cognitive proximity if local actors lose the ability to develop a shared system of knowledge acquisition. Creating cognitive proximity is difficult, but ITdriven port community systems that more easily and more efficiently transmit codified knowledge about transhipments, vessel movements, storage capacity, and the state of play at terminals might lay the foundation for tacit knowledge exchanges. Organizational Proximity Organizational proximity internal to the port can provide benefits as it creates contractual interdependencies, reduces uncertainty and lowers transaction costs. However, too much organizational proximity among actors within the port can result in bureaucratic structures or in (private) monopolies that dominate the port agenda. Examples of this can be found where port regulation and management are highly centralized within the state, as has been the case in South Africa where the National Port Authority and South African Port Operator still form part of the national transportation organization, Transnet. Another example where both port services and regulation remain in the hands of the port authority is Dubai. Too little organizational proximity results in opportunism among port actors or unclear responsibilities. For example, hinterland transport providers such as barge-operators, feeders or trucking companies repeatedly interact with the terminal operators when picking up or bringing in cargo. However, in many ports, the hinterland transporters are not contracted by the terminal operators; typically they are contracted by the shipping lines or shippers/forwarders. The shipping lines in turn are contracted by the shippers or freight forwarder. These contractual relationships might result in opportunism (Van der Horst and De Langen 2008). Shippers do not know the terms of the contract between the carrier and the operator and hence do not know the exact amount the shipping lines pay for the terminal handling services. A second issue is that the hinterland transporters are in a legally weak position with regards to the terminal operators whenever the latter makes mistakes or causes delays, since they do not interact on the terms of a contract. Organizational proximity furthermore affects the inter-port relationships where container operating firms have acquired strategic positions in several ports across a port region. For example, DP World holds lease concessions in Antwerp and Tilbury through its acquisition of P&O Ports. It has also recently acquired the concession for a terminal at Rotterdam’s Second Maasvlakte, and it holds strategic positions in the hinterland, namely the inland terminal depot of Germersheim, Germany. All these facilities enjoy more organizational proximity with each other than with other players within the same ports, which may eventually lead to a particular division of labour among these facilities in the regional distribution of goods and

36

Ports in Proximity

within the supply chains they facilitate. As such, organizational proximity in some cases provides a strong force of inter-port integration, increasingly displacing geographic and institutional forms of proximity. Institutional Proximity In this regard, institutional proximity assumes a special significance as a mediating variable for ports in close proximity to other ports. Institutional proximity is closest among ports that share the same funding, planning and regulatory regime; typically this occurs when ports are in the same national and local states. For example, although the ports of Los Angeles and Long Beach are still administrated separately by their respective cities, they are both regulated by the California State Tidelands Trust of 1911 and subject to the same funding and environmental legislation (Erie 2004). Evidence of how institutional proximity acts to foster cooperation there includes the ports’ joint action to reduce container free storage time at the terminals in order to create valuable space and reduce congestion (Jacobs 2007b), the development of the Alameda Corridor, and the two port authorities’ active support for the PierPass Program that was set up by the terminal operators in both ports and which aims to stimulate trucking in off-peak hours. In comparison, being located within two different countries, the ports of Rotterdam and Antwerp still remain subject to two different regulatory regimes. However, both are increasingly subjected to the rules of the game set up by the European Union. A lack of understanding of the different institutional regimes that exist at different places might also restrict trans-national investors or global flagships companies in their capacity to interact with local actors within the port cluster (internal), which in turn prevents the diffusion of universal operational standards or best practices (cf. Gertler 2001). Too much institutional proximity within a port expresses itself through too many rules, procedures and red tape. For example, in early 2001 shipping lines calling at Rotterdam complained about the time consuming customs procedures, prompting the port authority to coordinate improvements with the Dutch customs department. Ultimately, too much institutional proximity might lead to lock-in and where port actors lose their capacity to anticipate new developments and technology, as illustrated by the fate of the port of San Francisco (Levinson 2006: 193). Too little institutional proximity within a port might lead to opportunistic behaviour by port users in terms of the environment and the exploitation of labour, contributing to legal and other forms of conflict among users. Social Proximity A level of social proximity among actors within a port might be beneficial for learning, as it establishes trust, reduces transaction costs and facilitates cooperation. This is essential when investments in potential risky innovations are required by supply chain partners. However, too much social proximity can also be harmful

Ports in Proximity, Proximity in Ports

37

to the competitiveness if alternative sources of information are systematically excluded (Uzzi 1997). For example port regulators and dominant private service interests with social relationships that are too intimate may engage in a noncompetitive dance of protectionism, political favouritism and rent seeking – or even worse – nepotism and corruption. An example from Rotterdam is when the municipal council (prior to the corporatization) granted the director of the municipal port authority a far reaching mandate to make investment decisions. Without any formal checks and balances, the mandate was based upon the trust that the director would act in the best interests of the port. Under this mandate the director provided bank guarantees worth €150 million to financially troubled local company that eventually went bankrupt. Here, too much social proximity led to too little institutional proximity in terms of formalized checks and balances. Geographic Proximity It is important to draw a distinction between intra- and inter-port geographic proximity. The former refers to the relationship between actors that share the same port complex, while the latter refers to relationships between actors that share the same coastal range and hinterland. Being located within one and the same port implies by rule a high degree of geographical proximity in the form of co-location. Port actors experience the same physical conditions of the port in terms of accessibility and infrastructure such as sufficient depths of port channels or modal split, although within some ports conditions may vary, for example, due to the presence of locks or constrained channels. Co-location within a port implies an advantage in terms of positive, spatially related externalities. However, too much geographic proximity within a port might also result in negative side effects. Although it is hard to prove empirically, informal barriers to entry such as denial of access to technology, information and other ‘club goods’ ultimately results in closed circuits that are hard for new players and ideas to penetrate. Geographic proximity in the form of congestion costs or increased land prices might also result in firm relocations or might act as a barrier against new and small firms locating within the cluster (De Langen and Pallis 2007). On the other hand, too little geographic proximity within a port might result in the lack of positive externalities such as no returns to scale, limits to inter-firm labour transfer or increased transaction costs. A port authority, as the owner of land and allocator of sites, can facilitate and stimulate co-location of similar economic activity within the port and even press for co-siting. Co-location has the advantage that actors enjoy increasing returns to scale while at the same time more easily monitor competitor’s performance. Cositing is even more localized and creates benefits among complementary economic activity through sharing the costs of energy and utilities. Geographic proximity has clear significance with regards to inter-port relationships. Too little inter-port proximity is associated with spatial monopoly. In contrast, ports that are in close geographic proximity are effectively in competition

38

Ports in Proximity

with each other for cargo, clients and private investments. So, too much interport geographic proximity may result in opportunism, primarily in the form of major tenants switching (or threatening to switch) ports. For example, Maersk moved from Long Beach to Los Angeles in 2001 where it was granted the newly developed Pier400 Terminal (Jacobs 2007a). In the era of global supply chains, both remote ports and those in close proximity to others need to pay particular attention to hinterland access. A key question thus for ports in proximity is whether they can solve their collective problems with respect to landside infrastructure. If they can, geographic proximity may become an advantage.

Towards a Typology The various dimensions of proximity interact to shape the development trajectories of ports. Although geography is only one dimension of proximity, we do regard the distinction between inter- and intra-port geographic proximity as especially useful for providing advice to policy-makers. When combined with the multidimensional distinction between high and low proximity, a four-part typology of ‘ports in proximity’ emerges. Note that we shift our language here from ‘too muchtoo little’ to ‘high-low’ to reflect that we are now describing a multi-dimensional continuum composed of different dimensions of proximity that may substitute and complement each other. Table 3.2 reflects the two dualisms, namely (1) the geographic dimension of inter- versus intra-port proximity, and (2) the multidimensional notion of high versus low proximity. The typology identifies four possible outcomes for ports. Type 1 – Low intra-port proximity and low inter-port proximity: this type of port lacks sufficient internal coherence between actors to develop collective solutions to problems of infrastructure upgrading and innovation. With little inter-port proximity, while such a port may not be penalized by external competition, it is unclear where the incentives will come from to address internal structural problems. This has been the case in South Africa’s dominant container port, Durban, where the national government retains control over container terminal operations, and has not interacted well with private operators and local government (Hall and Robbins 2007). These ports may lack the knowledge, competitive incentives and capital for successful infrastructure upgrading. A Canadian port with some of these characteristics is Prince Rupert; isolated and only recently experiencing improved relationships between port operators and CN Rail. Type 2 – Low intra-port proximity and high inter-port proximity: this is the port that will be a victim of opportunism, with key players exploiting the lack of internal coherence and the threat of moving next door to extract concessions. We would expect to see lots of switching between these ports, resulting in a race to the bottom that benefits the more mobile actors at the expense the less mobile ones. We expect these ports to be competitive only on the basis of cost. Examples of

Ports in Proximity, Proximity in Ports

39

such ports can be found in the Caribbean basin competing for hub status. Another example comes from the ports of Algeciras and Tangiers on both sides of the Straits of Gibraltar that are both run by APM Terminals. While these two facilities could complement each other, apparently they maintain very few links with other actors in either port. Type 3 – High intra-port proximity and low inter-port proximity: this is the port that will run the risk of becoming locked into a single or small number of dominant players. The dominant players enjoy spatial monopoly protection from competition, and because of their close organizational and social proximity to other port actors, may be able to engage in a form of lock-out. Eventually, lockout leads to lock-in. An example of a port facing this challenge is Richards Bay in South Africa (Hall 2000). The port was developed in the 1970s for coal and other bulk exports. Recent efforts to capture more value in the regional economy and to increase containerized cargo movements have faced numerous challenges ranging from the reservation of large land parcels for processing industries, to the exclusive nature of port–city planning forums. Type 4 – High intra-port proximity and high inter-port proximity: we conclude that this is the least-worst scenario for ports in the age of global supply chains. There is a risk here of destructive competition, but with appropriate institutional arrangements, such ports can co-operate to address hinterland infrastructure issues while maintaining a degree of internal coherence and specialization. Examples of ports in this position are the adjacent San Pedro Bay ports of Los Angeles and Long Beach. We are aware that proposing a typology is an undertaking associated with some pitfalls. It is not our intention to provide an all-encompassing and static typology into which we can allocate every port in the world. Furthermore, the different types may not be mutually exclusive in all cases, and it is possible that some ports can be positioned in more than one type depending on the commodity mix or supply chain under consideration. However, this typology does draw attention to the need to critically and dynamically assess the dangers and opportunities that lie behind proximity and ports. Table 3.2

Typology of ports in proximity and proximity in ports

Low Intra-port proximity High

Inter-port proximity Low Type 1: Many disparate actors lacking common purpose, without mission clarity and coherence Type 2: Dominating player(s) have potential for spatial monopoly, lock-out

High Type 3: Problems of opportunism and switching of key players, race to the bottom Type 4: Risk of destructive competition; potential for mix of specialization and collaboration

40

Ports in Proximity

Conclusions Proximity within and between ports within this global age cannot be understood in geographic terms alone. The processes of horizontal and vertical integration in the maritime ports industry over the last fifteen years have changed the interrelationships between ports and ports users considerably. Global supply chains are systems that imply more tightly choreographed systems of flows. As a functional matter, this implies more organizational proximity. This increased organizational proximity through integration among (often geographically distant) actors is itself a solution to inefficiencies in supply chains that resulted, partly, from differentiated knowledge bases among actors. As such, integration has led to increased cognitive proximities among those same distant actors on how to develop and manage ports and their infra- and superstructures. While these processes yielded advantages in the transfer of technology and optimization of logistics operations in global supply chains, they have outpaced regional institutional mechanisms and displaced existing locally-embedded social relationships. In the short run this may not be problematic for ports as the advantages of increased organizational and cognitive proximities secure local access to increased cargo volumes, private investment and technology. In the long run, however, this can constrain the innovative capacity of ports and the willingness of competing actors to solve collective action problems. For these reasons, we conclude with the observation that port policy makers need to pay special attention to maintaining a balance between organizational integration and the other dimensions of proximity. Port authorities can foster cognitive and social proximity by stimulating information exchange and face-toface contact among port actors through the organization of trade fairs and industry meetings, and even pursuing their own Research and Development agenda. Since supply chains seek to serve more extensive and non-exclusive geographic areas, successful ports will be those that can co-operate with other geographically proximate ports to provide infrastructure that serves otherwise competing supply chain systems. Hence, institutional proximity, including shared governance, funding, legal and regulatory systems, that allow rapid resolution of hinterland infrastructure problems is becoming a more important point of competitive advantage.

Chapter 4

Port Regions and Globalization César Ducruet

Introduction In an age of rapid coastal industrialization and urbanization, the general manager of the Port of Antwerp (Vleugels 1969) expressed an optimistic view: ‘port regions seem always to have been at an advantage when compared to those regions which not situated by the sea or on rivers’. Since then, increased globalization has revealed the fallacy of such deterministic arguments defining seaports as naturally growing areas. Neoclassical theories on growth poles and industrial location fell short explaining the decreasing regional benefits derived from seaports, notably when observing the limited local impacts of containerization (Vallega 1996). Although ports may still be seen as structuring elements within their surrounding urban region (Wakeman 1996), their economic ties with the outlying regional economy seem to diminish (Boyer and Vigarié 1982; Grobar 2008). However, we lack of a consistent definition of the port region (Guillaume 2001) that would help understanding the regional challenges of contemporary port development and provide a base for comparing various contexts. The first part of this chapter explores the existing definitions of the port region, both in terms of its geographical extent and of the underlying relational process between port and region. The second part reviews some possible methodologies for analyzing and comparing port regions of different countries, notably based on OECD’s territorial database. The third part proposes a comparison of port regions based on two distinct geographical levels. Finally, conclusive remarks open the discussion for further research. The Definition of Port Regions The Port Region, a Coherent Concept? The region: a relevant spatial unit for the study of ports?  Geographers have defined various types of regions except the port region. Throughout port studies, the relevant spatial unit outside the port area has varied over time, resulting in a variety of functional levels such as the Maritime Industrial Development Area (Vigarié 1981), the European estuary (Brocard et al. 1995), and the Extended Metropolitan Region (Rodrigue 1994). Such levels are often analyzed separately

42

Ports in Proximity

and successively from the local to the international, as seen for instance in the cases of Zeebrugge (Charlier 1988) and Marseilles (Borruey and Fabre 1992; Bonillo 1994) providing a critical assessment of national port policies, regional growth pole strategies and local planning constraints. Another distinct approach emphasizes the emergence of new territories of port governance and port development whose dimensions vary depending on the players involved and the projects at stake (Kreukels 1992; Hoyle 1996; Rodrigues-Malta 2001, LavaudLetilleul 2007). Finally, some scholars consider that port activities do not belong to a specific spatial level because they integrate transport chains and networks on various scales simultaneously (De Roo 1994; Frémont and Ducruet 2004; Ducruet 2005; Debrie et al. 2005). While such variety has considerably enriched our knowledge on port development, it has also prevented the emergence of a consensus about the definition of the port region concept. There is no definition of the port region in human geography dictionaries. Searching for this term on Internet provides limited results: only one work related to seaports (Fleming 1988) appears on the fifth page, and it describes a specific context (i.e. the role of Portland port as a planning entity for the entire port region) rather than defines the concept itself. The port region remains a broad term, and is rarely given central concern by scholars, as seen in the limited score of port region compared with other regions (e.g. administrative, urban, agricultural, economic, and industrial). While research is dominated by a hierarchical approach (e.g. city, metropolitan, central, core and capital regions), the port region is less explored than coastal, border, peripheral, remote, maritime and gateway regions. Only very specific regions such as political, trade and creative regions have fewer results than the port region. Throughout port studies, the port region has a better position, as it scores higher than port range, port district and port hinterland but it scores less than port city and port terminal. Overall, the port region seems to be a rather descriptive term with no clear content or operational explanative power, recalling other unidentified real objects (Brunet 1997) such as medium-sized cities. The perception of ports by scholars themselves is one possible explanation to this theoretical lack. The critique of the dominant central place theory constitutes the starting point of the works of James Bird (1977; 1983) for whom gateway functions make port regions and port cities different from other regions and cities. Indeed, ports were often excluded from regional classifications as in taxonomic geography (Vallega 1983), while most geographers consider functional regions to be structured and polarized by cities: ‘seaports in general have been under-examined in recent regional development literature’ (Hall 2003). Although Bird’s works have given ports a wider recognition throughout urban and regional geography, his efforts remained hindered by the absence of a thoroughly elaborated theory or model. Thus, the port region still remains a multifaceted concept embracing different realities such as the economic area around a port (i.e. the port region stricto sensu), the logistics area connecting the port (i.e. the hinterland), and the

Port Regions and Globalization

43

area in which inter-port relations take place (i.e. façade, range or system of ports): those are explored in the following sections. Port regions as port hinterlands  Port region and port hinterland may be confounded in the same simple definition of a piece of land immediately next to and inland from the coast, which geographical coverage may vary extensively: ‘it seems difficult in practice to give an exact definition of a port region (…) It can in some cases stretch beyond national borders’ (Vleugels 1969). The port region can be distinguished from the hinterland based on its specific economic structure: it is a ‘district in which the port is situated and the economic life of which is to a great extent determined by the activity carried on by the port and in the port area’ (Vleugels 1969). The hinterland, as part of the port triptych (Vigarié 1979), is only defined by a group of locations connected to the port through related goods flows. Distant locations may not be influenced by port activities directly and thus may not be considered part of the port region. Hinterland differs from city-region (i.e. daily commuting area polarized by an urban centre) because it comprises all connected locations, whereas port region and city-region are limited to an area within which the economic influence of the core (port or city) is predominant. However, the lack of precise data on inland freight movements often hampers a clear cartography of hinterlands (Charlier 1979; McCalla et al. 2004a). Hinterlands have reached beyond port regions mostly due to improvements in transport systems’ connectivity. The trend of port regionalization indicates an increasing complexity with the shift of logistics activities inland within a greater seaport region (Notteboom and Rodrigue 2005) and the haphazard development of satellite terminals in the vicinity of ports and inland cities (Slack 1999). Such changes have definitely eroded the ‘rule of thumb (…) which averred that the amount of cargo handled by the port was strictly proportional to the number of clients in the area surrounding it’ (Todd 1993). Numerous examples confirm this process, as seen in the United Kingdom (Hoare 1986) and ex-USSR (Thorez 1998), but it seems that less-open economies keep a close association between port traffic and regional economies (Ducruet and Jo 2008). Port regions as port systems  The port region may also be considered as a port system, or a system of two or more ports (and terminals), located in proximity within a given area. A review of three decades of port system analysis shows a growing stability or even a decreasing traffic concentration due to several factors such as carriers’ strategies and congestion in large load centres (Ducruet et al. 2009). One typical example of a port system is the port range as defined by Vigarié (1964) in his work on the North European range. The port range differs from the maritime façade since the latter is more descriptive (a coastal alignment of ports) while the first is more systemic (a coastal system of ports). Thus, a range assumes that the given ports enjoy not only geographical proximity but also functional interdependence through sharing sea and land services. The conditions of crystallization ‘of formerly disjointed ports into a ports system rests ultimately

44

Ports in Proximity

on the conditions of trade, conditions which wax and wane in correspondence with global business cycles’ (Todd 1993). Also crucial are local and regional characteristics but they are often ignored by port specialists who tend to consider the port as an isolated entity connected by cross-border networks. The following section will complement this overview with more specific works on the linkages between port activities and regional economies. Ports and Regional Development Ports as enablers of economic development The vast literature on ports and regional development can be classified in two categories. The optimistic approach sees the port as an engine for local and regional economic growth, while for the pessimistic approach, ports simply respond to demand through the physical transfer of freight flows. This echoes the lively debate about whether infrastructures foster or follow development (Rietveld 1989). The optimistic approach defines ports as growth poles and enablers of economies of scale for production and trade and, therefore, they provide comparative advantages to regions and cities where they are located (Fujita et al. 1999; Clark et al. 2004). This general statement based on location theories implies that port efficiency creates more economic benefits because it will allow more cargo throughput, while ‘inefficient ports (…) may place a country or region further away from sources of cheaper inputs or markets for good produced’ (Haddad et al. 2006). Earlier empirical studies have shown the importance of multiplier effects locally and regionally in developing countries (Omiunu 1989) and developed countries (Witherick 1981). The pessimistic approach puts in question local and regional benefits of port investments (Goss 1990) and the structuring effects of transport infrastructures (Offner 1993). This is particularly true in the case of ports located away from core economic regions (Stern and Hayuth 1984; Fujita and Mori 1996). Improved hinterland connectivity and handling efficiency may accentuate the tunnel effect defined by lower local benefits and higher throughput volumes destined to distant areas. Several scholars have observed the negative effects of traffic growth locally such as congestion and lack of attractiveness (Mc Calla 1999b; Rodrigue 2003; Rozenblat et al. 2004; Grobar 2008). Several cases indicate a large drop in port-related employment in recent decades, as seen in Liverpool, Plymouth and Hamburg city-regions, due to the weakening spatial fix of transport nodes for manufacturing activities, the reorganization of port traffics and hinterlands and the changing location patterns of port-based service economies (Damesick 1986; Gripaios 1999; Hesse and Rodrigue 2004). A moderate approach proposed by Vallega (1983) interprets port development and regional development as two distinct processes with episodic and indirect interactions. This approach has been much complemented by the works of De Langen (2004) about ports as clusters of economic activities. Far from drawing a direct line between port activity and industrial development, the concept of

Port Regions and Globalization

45

port cluster depends on institutional arrangements and on the presence of leader firms in particular economic activities. The remainder of this chapter opts for this moderate approach. Measuring port-region interdependence Several studies have attempted measurements of port-related benefits on local and regional levels, using a wide variety of methodologies, but while ‘the regional planner is interested in the benefits that a port brings to a city or region (…) the difficulty resides in quantifying the benefits’ (Bird 1971). Port impacts studies have flourished since the 1950s in the United States and elsewhere (Hall 2003) with many case studies measuring the multiplier effects of port activities on surrounding areas (Taylor 1974; Witherick 1981; Omiunu 1989). Regional development literature has extensively focused on performance (Porter 2003) but with few works related to transport infrastructure or port activities (Rietveld 1989). Due to the lack of comparable data internationally, such measures are often limited to national datasets on regional units, as seen in the study of De Langen (2007) on US port regions providing a statistical definition based on the dominance of port-related industries in a given county or state. The work of Vigarié (1968) on the maritime dependence of countries simply divided deadweight tonnage by population. A better option is to compare seaborne traffic with demographic or economic characteristics (Table 4.1). Based on 116 maritime countries, figures show significant correlations with trade and GDP. Correlation with population is lower but stable, while it decreases with trade volume. This may stem from traffic concentration at transit and hub ports in several countries (e.g. Italy, Spain, Malaysia and Jamaica) during the 1990s, causing imbalance between trade flows and transhipment flows. Also, the improvement of continental transport, through logistics systems, land bridges and intermodal solutions, cause a higher complexity in transport systems and contributes to increased dissociation between economic and transport patterns. For the local level, Figure 4.1 shows that port traffic and demographic size underwent two distinct periods: association (1975–1985) and dissociation (1990– 2005). This confirms the increased flexibility of transport systems and trade routes worldwide and the combined effects of urban constraints (e.g. lack of space for port Table 4.1

Correlation evolution between port traffic, population, trade and production at country level, 1990–2000

Population Trade GDP 1990 2000 1990 2000 1990 2000 Tonnage 0.654 0.669 0.867 0.758 0.856 0.802 Containers 0.579 0.589 0.840 0.767 0.782 0.830 Source: Author, calculated from United Nations (2000), International Road Transport Union (1996) and Containerisation International (various years). Traffic type

Ports in Proximity

46

 

























    Figure 4.1









Correlation between population and container traffic at port city level, 1975–2005

Source: Author, adapted from Ducruet and Lee (2006).

development), port planning initiatives (e.g. new port and terminal development) and shipping lines’ strategies (traffic concentration, port selection, and route rationalization). Although large urban concentrations continue concentrating the world’s major container flows worldwide, the rise of hub ports in the 1990s has dramatically altered the traditional and symbiotic port-city relationships (Ducruet and Lee 2006). While general trends can be highlighted using basic local or national attributes, more research is needed on the regional level based on the aforementioned definition of the port region.

An International Comparison of Port Regions Selecting Regions and Indicators The OECD Territorial Database The OECD Territorial Database (TDB) was created to assist the OECD Territorial Development Policy Committee and its Working Party on Territorial Indicators. Data collection is undertaken by the Territorial Statistics and Indicators Unit, in the OECD Directorate of Public Governance and Territorial Development. Statistics are collected through the National Statistical Offices of OECD member countries and Eurostat. Its main

Port Regions and Globalization

Table 4.2

47

Distribution of ports and regional units by country

Country

Number of small port regions

Number of large port regions

Number of container ports

Belgium Netherlands Greece Poland Portugal Ireland Denmark Germany Canada France New Zealand Turkey Mexico Australia South Korea Finland Sweden Italy Norway Spain United Kingdom Japan United States Total

2 2 3 2 3 4 5 5 5 6 7 7 10 11 10 9 8 16 9 17 23 26 28 218

1 1 3 2 3 2 2 4 5 6 2 7 8 7 6 3 6 12 5 8 9 9 20 131

2 2 3 3 3 4 5 5 6 7 8 8 11 13 13 14 15 16 18 22 27 31 42 278

Source: Author, calculated from OECD TDB and Containerisation International.

objective is ‘to provide an internationally comparable database for the analysis of economic, institutional and environmental issues at the sub-national level’. Data are drawn from censuses on population and housing, labour force surveys, household surveys, social security accounts and regional accounts. In the end, the main advantage of the database is to provide harmonized data covering about 2,200 regions within 30 OECD member countries. Available indicators exist on two geographical levels, T3 (small units) and T2 (large units), from 1980 to 2006. Port traffic is collected from two different sources: Lloyd’s Marine Intelligence Unit (sum of container vessel capacities), and Containerisation International (port container throughputs). Traffic is agglomerated by regional unit depending on the location of container ports (Table 4.2). Although other traffic such as general cargo or solid bulk would better relate with the size and dynamism of regional economies

48

Figure 4.2

Ports in Proximity

Gross Regional Product and port traffic by region size, 1996–2006

(Charlier, 1994), container traffic is more widely available internationally. In addition, container traffic in TEU is a good measure of port performance and competitiveness. Preliminary results: container traffics versus regional indicators  Figure 4.2 shows correlations between container traffics and gross regional product (GRP) in 1996 and 2006 for each spatial scale. Correlation is higher for larger regions in 1996 (0.49 and 0.36), probably due to better spatial homogeneity and wider hinterland coverage than smaller regions. Correlations decreased in 2006 for both spatial scales (0.20 and 0.21) for the same reasons than in Figure 4.1. The results are also distorted by imbalances between port traffic and economic weight. For instance, some regions generate more traffic than their economic size would predict, as seen with Upper Normandy (Le Havre), Gyeongnam province (Busan), Liguria (Genoa, La Spezia), Nova Scotia (Halifax) and Colima (Lazaro Cardenas). They are often large gateways connecting inland core regions with maritime networks (e.g. Paris, Seoul, Rome, Montreal and Mexico). Due to the lock-in effect of urban systems, these gateway regions remain poorly attractive despite their strategic situation. Conversely, the economic weight of some regions exceeds by far their port traffic. It is the case for several US states (e.g. Florida, California and Texas) but also of Asian regions such as Kanto (Tokyo-Yokohama), Seoul-Gyeonggi (Incheon), Stockholm, Istanbul, Roma and Noord-Holland. In such regions, the port function is very secondary compared with other functions in the tertiary sector, while many freight movements occur inland instead of by

Port Regions and Globalization

Figure 4.3

49

National importance of port regions by indicator, 2005 (Unit: %)

sea. This analysis confirms the reciprocity between regional economies and port activities, but this association has become more complex and less direct than in the past. Therefore, further analysis may focus on relative characteristics rather than absolute weights. One simple statement is that port regions differ by their relative demographic and economic weight nationally (Figure 4.3). In continental countries, the share of port regions remains low, such as in Poland, Germany, Mexico and France. The opposite case is composed of countries which main cities locate on their dominant

Ports in Proximity

50

Table 4.3

Regional specializations and traffic growth, 2000–2005

Unemployment concentration

Service specialization

GDP concentration Small regions

Industrial specialization

Small regions

Average growth of container traffics

Large regions

Large regions

Large regions

Small regions

Large regions

Small regions

Regions

All higher/ 0.89 0.64 0.87 1.16* 1.05 1.71 1.19* 0.89 all lower 10 higher/ 1.39* 0.49 1.59* 1.94* 1.32* 3.18 1.73* 1.10 10 lower 20 higher/ 1.16* 0.81 0.99 1.62* 0.78 2.02 1.89* 0.74 20 lower 30 higher/ 0.84 0.72 0.78 1.24* 1.00 1.49 1.41* 0.88 30 lower 40 higher/ 0.82 0.70 1.18* 1.32* 1.13* 1.71* 1.41* 1.17* 40 lower 50 higher/ 1.04 0.74 1.00 1.27* 0.97 1.62 1.37* 1.22* 50 lower Sources: Realized by author based on OECD TDB and Containerisation International. Note: Values higher than 1.1 are marked with an asterix*.

coastline (e.g. New Zealand, Ireland, Australia, Japan, United Kingdom, Norway, Denmark, Finland, Sweden, South Korea and Greece). The intermediate profile shows a balance between port regions and other regions (e.g. Italy, Portugal, Spain, Turkey, United States, Canada, Belgium and the Netherlands). Depending on such configurations, port regions embrace varying degrees of political priorities. In addition, economies which concentrate at port regions do not necessarily possess big ports (e.g. Scandinavia), while continental countries may have developed large gateways (e.g. Germany). The Analysis of Port–Region Linkages Traffic growth and regional specialization  This analysis wishes to highlight some possible correspondence between traffic growth and regional characteristics. Regional data is changed to location quotients as a means to accentuate the specificity of port regions compared with the national trend in four indicators: employment in the industrial sector, employment in the service sector, unemployment and gross regional product. In Table 4.3, results correspond to the ratio between average traffic growth rates in port regions with high location quotient and average traffic growth rates in port regions with low location quotient. Values higher than one indicate a higher growth when

Port Regions and Globalization

Table 4.4

Regional specialization and port performance, 2005 RCI Labour force

Regional areas

Oceania Northwest Europe Southwest Europe Northeast America US Gulf coast Northwest America Scandinavia and Baltic Southeast Europe Northeast Asia British Isles

All regions

51

Smaller regions Larger regions Smaller regions Larger regions Smaller regions Larger regions Smaller regions Larger regions Smaller regions Larger regions Smaller regions Larger regions Smaller regions Larger regions Smaller regions Larger regions Smaller regions Larger regions Smaller regions Larger regions Smaller regions Larger regions

RCI Population

Unem.

GDP

Indus.

Serv.

Unem. GDP

0.11*

-

-

-

0.74*

-

Indus.

Serv.

-

-

0.72* 0.16*

-0.68 † 0.77*

0.05 -0.20 †

-0.36 0.50*

0.69* 0.17*

-0.68 † 0.06 0.79* -0.23 †

-0.36 † 0.52*

0.45* 0.17*

0.85* -0.19 †

-0.57 † -0.47 †

0.72* 0.24*

0.43* 0.14*

0.88* -0.60 † -0.16 † -0.45 †

0.75* 0.24*

0.09 -0.03

-0.15 † -

-0.35 † -

0.15* -

0.03 0.20*

-0.10 † -0.30 † -

0.15* -

0.18* -0.21†

-0.10† -

-0.11† -

0.16* -

0.17* -0.10

-0.10 † -0.12 † -

0.17* -

0.47* -0.53†

0.11* -

-0.17 † -

-0.03 -

0.55* 0.23* -0.51 † -

-0.07 -

-0.13 † -

-0.19† -0.07

0.11* 0.11*

-0.46 † 0.04

0.57* -0.06

-0.17 † 0.12* -0.06 0.10*

-0.46 † 0.04

0.57* -0.07

-0.33† 0.41*

0.13* -0.22†

0.40 -0.24 †

-0.21 0.02

0.38 -0.37 † 0.09 0.35* -0.21 † -0.29 †

0.41* 0.17*

0.10* -0.02

-0.34 † -0.12 †

0.74* 0.17*

0.29* 0.16*

0.06 -0.11†

0.29* -0.08

0.02

0.04

-0.42† -0.01

0.61* -0.05

-0.29 † -0.17 †

0.11*

0.15*

-0.28 †

-0.24 † 0.12*

-0.30 † -0.12 †

0.80* 0.18*

0.30* 0.05 -0.13 † -0.09

0.04

0.03

0.33* 0.04

-0.43 † 0.62* 0.01 -0.03

-0.31 † -0.15 †

0.35* 0.04

0.28*

0.08

-0.27

0.28*

0.11* -0.01

0.18*

Note: Coefficients higher than 0.1 are marked with an asterix, and coefficients lower than -0.1 are marked with a †. Source: Author, calculated from OECD TDB and Containerisation International.

port regions are more concentrated or specialized than the rest of their country, while values lower than one indicate lower port performance. Although this methodology faces the ‘risk of attributing to port-related differences what are in fact differences in regional economic structure’ (Hall 2003), it avoids the

Ports in Proximity

52

problems comparing directly regions having distinct economic structures. One clear result is the lower port performance in regions with a specialization in the industrial sector. Conversely, regions with higher unemployment and which concentrate gross product and services enjoy higher traffic growth in general. Those results confirm the general trends faced by port regions in developed countries: •





Globalization: the weakened role of industrial areas stemming from global shifts of factories to less-developed countries due to cheap labour, shrinking transport costs and deregulation. Western traditional coastal regions for export are facing economic crisis resulting in less demand for international transport; Containerization: the negative effects of technological improvements (e.g. containerization), port competition, and selection (e.g. hub and spoke strategies, traffic concentration and service rationalization) with dramatic drops in port-related benefits; Tertiarization: the polarization of advanced regional economies, notably those concentrating economic wealth (GRP) and for which the availability of higher-level and knowledge-based activities has become more important than manufacturing or heavy industries. Higher purchasing power and consumption levels tend to foster traffic growth, of which the import of manufactured goods from emerging economies.

Towards a transcalar analysis of port regions Making use of the relative concentration index (RCI) is a fruitful method when comparing ports in terms of specialization and performance rather than volume or weight (Ducruet and Lee 2006). For the two distinct datasets of smaller and larger port regions, it divides the percentage of container traffics of a port region by its share of population or labour force within its belonged macro-region. This index is interpreted in this study as a revelatory of the performance of ports in relation to their macro and micro regional environments. For every port region, the higher its relative concentration index, the more concentrated are container traffics compared to its demographic or economic concentration. This RCI is compared through correlation coefficients to the different specializations of the port regions within their country as in previous section (Table 4.4). For both regional scales, there is a confirmation that industrial specialization goes with lower port performance. For smaller port regions, most European port regions, except Scandinavia and Baltic, show a negative correlation with industrial specialization, notably in the Southwest. Specialization in the service sector has significant correlation with port performance in Western Europe and, to a lesser extent, in Northeast Asia. An interesting difference within Europe is the different role of GDP in port performance, negative in the South and positive in the North. One possible explanation is that port performance in southern European port regions is more recent and has taken place within more deprived or peripheral areas

Port Regions and Globalization

53

due to traditional urban site congestion. Notably, Southeast Europe (e.g. Eastern Italy, Greece, and Turkey) has a stronger relation between port performance and unemployment surplus. For larger port regions, trends are often similar to those of smaller port regions, but the better data availability brings out more evidence of port-region interaction. For instance, although the British Isles share the similar negative relation with industrial specialization with other macro areas in Europe, port performance is more likely to happen within areas where unemployment is lower, i.e. Southeast England, as opposed to other port regions where de-industrialization and social crisis go together. It confirms indirectly the increased polarization of London within this large port region of GRP and service concentration. This is also the case for Northwest America and Scandinavia and the Baltic, where the relation with unemployment is negative and for the latter, unlike other macro areas, where the relation with industrial specialization is positive. Perhaps, the very scarcity of industrial activities outside port regions may explain this different trend. In other macro areas, port performance may have more easily shifted from traditional industrial regions to more sophisticated and accessible service port regions.

Conclusion The regional environment in which container ports operate greatly matters. Ports are not isolated entities connecting to virtual value chains. They are part of a regional economy and the evolution of the regional economy strongly affects the performance of the port. In particular, industrial specialization constitutes a weakness for port performance in an age of globalization. Conversely, service specialization and the concentration of economic wealth foster traffic. This confirms recent studies about the shift to post-fordist economies, defined by flexibility and the importance of knowledge-based activities such as education (De Langen 2007). Whether the relationship between port activities and regional environments is direct or indirect obviously needs further research and better analytical tools. Intense globalization that provokes industrial shifts across macro regions and, in turn, rising unemployment – notably in OECD countries, also affects port activities and the way ports get inserted in trade and transport networks. This research could have paved the way towards a critique of a large literature that considers transport players and networks as increasingly disconnected from the characteristics of the territories in which they are embedded. Indeed, regional (and also local) milieus do influence, at least partially, the competitiveness of ports in a global environment. In turn, weaker economic rents of regions (Kaplinsky 2004) tend also to weaken the performance and competitiveness of container ports.

This page has been left blank intentionally

Chapter 5

Path Dependency and Contingency in the Development of Multi-port Gateway Regions and Multi-port Hub Regions Theo E. Notteboom

Introduction Many port terminals around the world act as gateways to extensive inland logistics networks. A gateway is a network point that acts as an entrance to another network. Hayuth and Fleming (1994) and Van Klink et al. (1998) defined gateways as nodal points where intercontinental transport flows are being transshipped onto continental areas and vice versa. Often there is more than one gateway giving access to a specific region. In some cases there is no coordination between the ports concerned, the hinterland is highly contestable as several neighbouring gateways are vying for the same cargo flows. A multi-port gateway region is defined as a port system with an outspoken gateway function. Other port terminals mainly rely on their role as turntables or hubs in extensive maritime hub-and-spoke/relay/interlining networks. Using the terminology of Hayuth and Fleming (1994), these hubs rely heavily, sometimes completely, on traffic flows that are distantly generated by the interaction of widely separated places and stimulated by the port’s en route location or intermediacy. A multi-port hub region is defined as a port system with an outspokenly hub function. In many studies on the analysis of seaports located in the same region, authors have attempted to group ports together to form larger functional or spatial units. Fleming (1997) presented an alternative world container port ranking by making some selective and imaginative combinations to define regional load centres such as Tacoma/Seattle and Los Angeles/Long Beach. The locational relationship to nearby identical traffic hinterlands was one of the criteria used to cluster adjacent load centres. In our terminology both Seattle/Tacoma and Los Angeles/Long Beach could be considered as multi-port gateways regions. The often complex linkages in the governance and management of port areas and terminals within the same multi-port gateway or hub region received quite some attention in academic literature. Wang and Slack (2000) analyzed the complex port interactions in the fast growing Pearl River Delta. Cullinane et al. (2005) discussed competition between Shanghai and Ningbo in the Yangtze Delta. Several chapters in Cullinane and Song (2007) are dedicated to competition, cooperation and governance issues in the Yangtze Delta, the Pearl River Delta, Singapore and

Table 5.1

Ranking of major container handling regions in the world (in million TEU)

Cluster

Container ports

Distance (*)

1985

R

1990 R

1995

R

2000

R

2002

R

2004

R

2005

R

2006

R

2007

R

Pearl River Delta

Hong Kong, Shenzhen, Guangzhou, Zhongzhan, Jiuzhou

130 km

2.34

3

5.37

3

13.74

1

24.26

1

29.83

1

40.16 1

44.85

1

49.95

1

55.98

1

Malacca Straits

Singapore, Port Klang, Tanjung Pelepas

340 km

1.70

6

5.56

2

12.98

2

20.66

2

24.00

2

30.41 2

32.78

2

35.88

2

40.27

2

Yangtze River Delta

Shanghai, Ningbo

180 km

0.20

8

0.47

9

1.69

8

6.51

7

10.47

7

18.56 3

23.27

3

28.78

3

35.50

3

RhineScheldt Delta

Rotterdam, Antwerp, Zeebrugge, Amsterdam

105 km

4.20

1

5.62

1

7.74

3

11.38

3

12.34

3

15.59 4

17.36

4

18.67

4

21.37

4

Bohai Bay

Dalian, Qingdao, Tianjin

350 km

0.20

9

0.55

8

1.68

9

4.84

9

7.17

9

11.16

13.76

6

16.86

5

20.37

5

7

San Pedro Bay

Los Angeles, Long Beach

10 km

2.25

4

3.71

4

5.40

4

9.48

4

10.63

5

13.10 5

14.19

5

15.76

6

15.67

6

Korean Twin Hub

Busan, Gwangyang

135 km

1.16

7

2.35

7

4.50

6

8.22

5

10.53

6

12.81 6

13.28

7

13.79

7

14.93

7

Helgoland Bay

Hamburg, Bremerhaven, Wilhelmshaven

95 km

2.15

5

3.13

6

4.41

7

7.03

6

8.49

8

10.52 8

11.86

9

13.31

8

14.80

8

Tokyo Bay

Tokyo, Yokohama, Shimizu

50 km

2.46

2

3.37

5

5.16

5

5.63

8

5.52

10

6.59

N.A.

10

N.A.

9

N.A.

9

Note: *Farthest distance between competing ports in the cluster.

9

Ports in Proximity

58

Tanjung Pelepas and the South-Korean twin hub Busan and Gwangyang. The port governance book edited by Brooks and Cullinane (2007) also discusses the situation in many European gateways. Charlier (1996) and Notteboom (2007a) paid special attention to the Benelux seaport system. Marti (1988) zoomed in on the Pacific load centres on the North American west coast, while Starr (1994) and Shashikumar (1999) discussed port dynamics in North American gateways along the east coast. This chapter aims to unravel the factors contributing to the dynamic development of multi-port gateway regions and multi-port hub regions. Two questions lie at the heart of this contribution: what mechanisms drive port system development and why do distinctive port systems follow other development paths? The first section briefly presents the main multi-port regions in the world. The second part provides a theoretical discussion on existing models on port system development, while the next section contains a conceptual discussion on path dependency and contingency in port system dynamics. The last heading analyzes sources of path dependency and path disruption in multi-port regions.

Multi-port Gateway Regions and Multi-port Hub Regions Table 5.1 provides a list of the main multi-port gateway and hub regions in the world with regard to container handling. The share of gateway traffic in total container throughput tends to differ quite significantly between the gateway regions. The Singapore region primarily acts as a sea–sea transhipment platform (i.e. mainly hub function not gateway function), whereas for instance the seaport system in the Yangtze Delta is a true multi-port gateway region giving access to vast service areas in the Delta and along the Yangtze river. Moreover, some multi-port gateway regions feature a high density of port terminals in a small geographical space, while other regions cover larger areas with inter-port distances of up to 350 km. Typical containerized multi-port regions not listed in Table 5.1 include: •







The multi-port gateway region at the Southeast coast of the UK where Felixstowe, Southampton, Thamesport, Tilbury and in the near future also London Gateway serve London and the surrounding economic heartland of the United Kingdom. Containerized volumes reached around 7.2 million TEU in 2007 compared to 4.8 million TEU in 2000; The central Mediterranean region with transhipment hubs such as Gioia Tauro, Cagliari, Malta and Taranto (6.65 million TEU in 2007, 3.72 million TEU in 2000); The northwestern Italian port system (Genova, Savona, La Spezia and Livorno) serving north Italian economic centres such as Milan and Turin (4.03 million TEU in 2007, 2.95 million TEU in 2000); Le Havre-Rouen giving access to the Seine basin and beyond, but also with some transhipment activity (2.8 million TEU in 2007, 1.6 million TEU in 2000);

Path Dependency and Contingency



• •





59

The Straits of Gibraltar with established transhipment and interlining hub Algeciras and newcomer Tanger Med. Algeciras recorded a container throughput of 3.41 million TEU in 2007 compared to 2 million TEU in 2000; The East med combined gateway/hub ports of Port Said, Damietta and Alessandria; The estuary of the Rio de la Plata in South America with main ports Buenos Aires and Montevideo gives access to the extensive hinterlands in Uruguay and Argentina (2.31 million TEU in 2007, 1.41 million TEU in 2000); The Panama Canal ports of Colon, Balboa and Cristobal mainly serving as hubs on either the Atlantic or the Pacific side of the Canal (3.85 million TEU in 2007, 1.36 million TEU in 2000); The northwestern port system in North America comprising ports such as Vancouver, Fraser, Seattle and Tacoma (6.66 million TEU in 2007, 4.38 million TEU in 2000).

These multi-port gateway and multi-port hub regions all have gone through a distinctive historical development pattern. These regions share the notion of having more than one port involved in containerized cargo. The next section elaborates on existing spatial models with respect to the mechanisms driving the development of such port systems.

Existing Models on Port System Development A wide-ranging and long-standing literature in port geography exists on the spatial development of seaport systems in relation to maritime and hinterland networks. One of the classic works is Ogundana (1970) on seaport evolution in Nigeria. Another classic is Taaffe et al. (1963) which suggests an increasing level of port concentration as certain hinterland routes develop to a greater extent than others in association with the increased importance of particular urban centres. The geographical system would evolve from an initial pattern of scattered, poorly connected ports along the coastline to a main network consisting of corridors between gateway ports and major hinterland centres. The resulting port concentration can cause degradation of minor ports in the network. The models of Barke (1986) and Hayuth (1981) are quite similar, though they introduced a process of port system de-concentration caused by the growth of former non-hub ports and the emergence of new ports. A distinction should be made between de-concentration within a port (situation B in Figure 5.1) and de-concentration within a port system (situation C and D in Figure 5.1). The first type basically refers to the infrastructural extension of port areas away from the historical core to less urban downstream sites conform to the initial ideas of the Anyport model as described in Bird (1970). Scale expansion in shipping and the

Ports in Proximity

60 $ ,QLWLDOVLWXDWLRQ

6($

% 1HZWHUPLQDO GHYHORSPHQW LQH[LVWLQJSRUWV

& 1HZWHUPLQDOVDORQJ WKHZLGHUFRDVWOLQH

' 1HZWHUPLQDOVSRUWV QHDUH[LVWLQJSRUWV

/$1'

&RUULGRU

&RQJHVWLRQ OHYHO +LJK

/RZ

Figure 5.1

Terminal development options in a port system

use of new transhipment technologies are some of the factors that have resulted in the abandoning of older port sites. The second type, i.e. deconcentration within a port system, occurs when some of the existing cargo is shifted from large ports to smaller or new ports, or when the large load centres only absorb a small portion of the container growth in the port system. This phenomenon of the peripheral port challenge has received quite some attention in literature (Hayuth 1981, Slack and Wang 2002, Notteboom 2005 and Frémont and Soppé 2007). The peripheral port challenge concept thus implies that those ports which existed before the container revolution and invested early in the new technology are gradually losing market share to new or upgraded ports which try to gain load centre status. The challenge of the periphery thus supports the transition of a single-port gateway region to a multi-port gateway region. Notteboom and Rodrigue (2005) made two extensions to the models discussed above. The first extension relates to the integration of offshore hubs: Freeport (Bahamas), Salalah (Oman), Tanjung Pelepas (Malaysia), as well as Gioia Tauro, Algeciras, Malta, Taranto and Cagliari in the Mediterranean to name but a few. These hubs tend to have an excellent nautical accessibility and often have land for future expansion. Terminals are typically owned, in whole or in part, by carriers which are efficiently using these facilities. In the framework of this chapter, it is necessary to underline that the creation of offshore hubs does not occur in all port systems. Some port systems seem to offer the right conditions for the emergence of a multi-port hub region with more than one transhipment hub (e.g. the central Med).

Path Dependency and Contingency

61

Other port systems do not feature any offshore hub development. In the US, many impediments in American shipping regulations gravitating around the Jones Act have favoured a process of port system development with limited (feeder) services between US ports and the absence of US-based transhipment hubs (Freeport in the Caribbean to a limited extent takes up this role). Also Northern Europe up to now does not count any real transhipment hub, let alone an ‘offshore’ hub. Hamburg, the North European leader in terms of sea-sea flows, has a transhipment incidence of merely 40 percent, far below the elevated transshipment shares in the main south European hubs (85 percent to 95 percent). It is generally expected that the transhipment shares in newcomer ports Flushing and Wilhelmshaven might slightly exceed 40 percent. The only concrete plan for a real North European offshore hub relates to a proposed transhipment facility at the natural deep-water harbour at Scapa Flow in the Orkney Islands. Baird (2006) argued that alternative port sites such as Scapa Flow could provide a superior and more competitive location from which to support the fast expanding transhipment markets of northern Europe. Notwithstanding such a plea, market players have not adopted the idea of bringing a north offshore hub into reality. The second extension relates to port-hinterland dynamics. The formation of a multi-port gateway region might also involve inland centres. Notteboom and Rodrigue (2005) introduced a regionalization phase, thereby referring to the expansion of the hinterland reach of the port through a number of strategies linking it more closely to inland freight distribution centres. The phase of regionalization brings the perspective of port development to a higher geographical scale, i.e. beyond the port perimeter. The port regionalization phase is characterized by a strong functional interdependency and even joint development of a specific load centre and (selected) multimodal logistics platforms in its hinterland, ultimately leading to the formation of a regional load centre network. Another point that needs to be raised relates to the perspective used in the spatial models. The models outlined above focus on cargo concentration at the level of a container port system. This is clearly something other than concentration of cargo at the level of the liner networks of individual carriers (Cullinane et al. 1999) or global terminal operators. From a shipping line’s perspective, the economies of scale in all parts of the port triptych (shipping, port and inland operations) would favour a very limited number of load centres in a region. The advantages of concentrating cargo in only one or a few ports of call would be stronger at the level of a shipping line than at the port level, simply because not all carriers will choose the same load centres in their liner service networks. Along the same lines, Frémont and Soppé (2007) argue that port concentration has taken a new form which is that of shipping line concentration characterized by the setting up of dedicated load centres. The above demonstrates that the development of a port system and the emergence of multi-port gateway and hub regions are far more complex than mere cargo concentration patterns as suggested by the earliest models.

62

Ports in Proximity

Mechanisms of Path Dependency and Contingency in Port System Development The models on port system development portray a high degree of path dependency in the development of ports at a regional scale. Port systems would follow a similar evolutionary development path. Future events are not independent from past events and the sequence of events makes a difference for the outcome. It can be argued, however, that port development processes also show a certain degree of contingency. Strategies and actions of market players and other stakeholders may deviate from existing development paths. Both path dependency and contingency explain why port systems around the world do not develop along the same lines or follow the same sequence of stages as suggested in the models on port system development. Ports are subject to open economic systems based on market-based principles in which economic actions not necessarily follow universal laws. The result is some level of disparity among port system developments around the world. Every new terminal produces change in the existing port system and has an impact on the formation of the next terminal. But sometimes, this can lead to path disruption and a seemingly random development. If we argue that the outcome of port system development is dependent on a mix of path dependency and contingency, then it is highly interesting to identify those mechanisms that lead to path dependency and those that lead to path disruption or even path destruction. Three basic principles drive evolutionary port systems: selection, retention and variation (see also Nelson and Winter 2002 and Glückler 2007 for the terminology used). Selection Selection relates to the competitive process that selects winners and losers in port systems and to the formation of competitive and or cooperative linkages between the actors in a port system. The outcome of selection processes is not only depending on the external selective environment (exogenous), but also on the strategic intentions and actions of the actors involved (endogenous). Exogenous developments affecting ports are well documented in literature (see Notteboom 2006a for an overview): globalization and trade patterns, supply chain dynamics and logistics integration and transport deregulation to name but a few. Endogenous factors can relate to, for example, concession procedures and decisions, internal market competition or the strategies of port players. To give an example: a shipping line might set up a joint venture with an incumbent terminal operator in a specific port because of exogenous change (e.g. customers’ demand for freight integration) but also because of endogenous changes (e.g. the terminal operator has become attractive for the shipping line because of its success in securing a long-term concession for a prime terminal location in the port). Selection processes can occur among incumbent actors in the port system (e.g. established terminal operators)

Path Dependency and Contingency

63

but also in relation to new entrants with no previous links to the port system (e.g. a financial holding acquiring a terminal facility). Retention Retention refers to the structural mechanisms that cause new developments to reinforce the existing port hierarchy in a port system. Past choices have a structural effect on the natural inclination for new tie selection to reproduce and reinforce an existing system. Path dependency in the development of gateways and hubs might be increased by some behavioural mechanisms influencing the interaction among actors in the port system. One of these mechanisms is preferential attachment. The actors in a specific port system with many ties are more likely to receive new ties in the future. For example, a terminal operator with a strong track record in serving the hinterland regions of a gateway port has a good position to establish new customer relationships or relationships with other actors in the market. Embedding is another mechanism strengthening path dependency. The mechanism of embedding assumes that future ties form around existing strong ties by processes of trust. Preferential attachment and embedding can lead to selfreinforcing effects whereby established load centres become even more dominant in a port system. Other human behavioural aspects that have an impact on the interactions between relevant actors and the development of a port system include inertia, bounded rationality and opportunism. These aspects can emerge at all levels of interactions between all actors involved (between port authorities and terminal operators, between shipping lines and terminal operators, between shippers and shipping lines and so on.). Some examples: shippers sometimes impose bounded rational behaviour on transport operators, for example in case the shipper asks to call at a specific port or to use a specific land transport mode. Opportunistic behaviour of economic actors or informal commitments to individuals or companies might lead to non-cost minimizing decisions. Carriers might stick to a specific port as they assume that the mental efforts (inertia) and transactions costs linked to changes in network design will not outweigh the extra costs of the current nonoptimal solution. The three above-mentioned behavioural factors thus contribute to sub-optimal decisions. They often trigger retention mechanisms and thus potentially reinforce existing port hierarchy patterns in a gateway or hub region. Variation Variation refers to a set of endogenous mechanisms that enables novelty and path disruption in the development of a port system. Variation is strongly linked with contingency as it counterveils against existing trajectories and against the retention mechanisms outlined above. Variation can lead almost overnight to a new hierarchy in a port system or to a new competitive setting among terminal facilities.

64

Ports in Proximity

The concept of variation refers to endogenous mechanisms, so unravelling path disruption in port system development demands an analysis of those changes that come from within the maritime and port setting.

Sources of Path Dependency and Path Disruption in Multi-port Regions Selection, retention and variation mechanisms steer all levels of port system development. In view of keeping the discussion tangible, the following sections zoom in on some key issues in the development of multi-port gateway and hub regions: (1) the search for accessibility, (2) strategic actions of market players and (3) proximity issues. Path Dependency and Path Disruption in the Search for Accessibility The location of ports and terminals is driven by the accessibility to spatially dispersed markets. Accessibility has generally been defined as the ease with which activities may be reached from a given location using a particular transportation system (Morris et al. 1979). It is a measure for the quality of access of a certain location to a number of other locations. Exogenous and endogenous factors can lead to changes in the requirements for accessibility in the triptych forelandport-hinterland (i.e. maritime access, terminal access and hinterland access). Endogenous changes can trigger a variation mechanism and as such constitute potential sources for path disruption or even path destruction in the development of a port system. Port terminals compete for accessibility. The success of established ports in the competitive process is determined by their performance and accessibility in terms of productivity, cost factors, time factors, reliability issues and capacity issues not only in the port, but throughout the port triptych (Huybrechts et al. 1999). When accessibility needs in the market change at the infrastructural level, the transport level or the logistical level, some port terminals might be pushed out of the market and new port terminals or previously non-containerized ports might enter the market. Accessibility problems in established ports are often at the core of the peripheral port challenge phase in port system development and can as such contribute to path disruption and formation of multi-gateway port regions (see also Figure 5.1 earlier in this chapter). A wide range of local constraints can impair the growth and efficiency of the established load centres. The lack of available land for expansion is among one of the most acute problems, an issue exacerbated by the deepwater requirements for handling larger ships and the accessibility needs imposed by new types of liner service networks. Increased port traffic may also lead to diseconomies as local road and rail systems are heavily burdened. Environmental constraints and local opposition to port development are also of significance.

Path Dependency and Contingency

65

There are however some retention mechanisms that might prevent a decay of established ports and give the large load centres a good position in view of further consolidating their function in the spatial hierarchy within a port system. Newcomers and accessibility  Accessibility issues also affect newcomers which try to establish themselves on the market. Hence, the hinterland connections of smaller ports and new load centres in a start-up phase remain rather precarious. Smaller ports and new terminals find themselves confronted with a vicious circle in the organization of hinterland transportation. The small-scale container volumes do not allow to install frequent block and shuttle trains to the more distant hinterlands. Because of the inability to serve a substantial hinterland, the major shipping lines do not include these ports in their liner services. One way for smaller container ports to escape this vicious circle is by seeking connection to the extensive hinterland networks of the large load centres through the installation of shuttle services either to rail platforms in the big container ports or to master rail hubs in the hinterland. Reputation and the market power of large incumbent load centres  The push for new infrastructures in established seaports and the connecting maritime and land corridors is often supported by processes of preferential attachment and embedding among market players. In some parts of the world this has led to a select group of ‘must’ ports of call with a strong reputation (e.g. Singapore and Rotterdam). These ports benefit a lot from self-reinforcing processes of cargo consolidation via a high interconnectivity and a high sailing frequency to all parts of the world. The belief of market players in the future potential of such ports is typically high, and this trust in the market in itself gives a strong incentive to port authorities and government agencies to keep on guaranteeing a favourable accessibility profile. Newcomers and smaller ports generally lack such an enviable market status. The power exerted from these sorts of mechanisms can not be underestimated. It could be argued that preferential attachment and embedding processes can seriously affect the entry of newcomer ports in the market and slow down changes in the port hierarchy in multi-port gateway regions. For example, everybody seems to agree on the fact that new ports will only stand a chance in the highly competitive Le Havre–Hamburg range when they are developed at coastal deepwater locations (cf. Flushing or Wilhelmshaven projects). Nobody seems to embrace the idea of adding a new upstream load centre (Baird 1996). Still, major European upstream ports Antwerp and Hamburg remain highly successful and have even gained market share from their downstream/coastal counterparts. These two upstream ports represent about 46 percent of the terminal capacity that will be added in the Havre–Hamburg range in the period 2005–2015 (Notteboom 2007a). We argue that part of the success of Hamburg and Antwerp emanates from decades of preferential attachment and embedding processes both at the level of market players, and at the level of political and public support. These mechanisms support a strong believe in their future growth potential and attract

66

Ports in Proximity

massive investments from public authorities (dredging programs, dock and quay construction) and private port players (container terminals and logistics solutions). It is highly doubtful whether any initiative to create a new upstream port in the range would get similar support. Stakeholder relations management  Securing terminal capacity and land infrastructure within a reasonable timeframe has become a major competitive factor in port systems. The time needed to develop port and inland infrastructure has increased considerably in the last decades because of painstaking legal procedures and the broad involvement of stakeholders in the planning process. This is most apparent in Europe and North America. Larger load centres have built up a richer experience in dealing with port planning issues. Newcomers in the container market or smaller ports might have less experience, which might show to cause serious delays or even a halt to any large terminal development. The ongoing (long) debate on the Westerscheldt Container Terminal in Flushing (the Netherlands) serves as an example. The experience level in terms of stakeholder relations management can serve as a retention mechanism supporting the role of established incumbent ports. Port-inland (re)configuration  Port regionalization as outlined earlier in this chapter can be considered as a variation mechanism leading to a new form of node partnering within a multi-port gateway region: the regional load centre network. The transition towards the port regionalization phase is a marketdriven process that mirrors the increased focus of market players on logistics integration (Notteboom and Rodrigue 2005). Port regionalization leads to path disruption at the level of the ties between nodes and brings port development beyond the port perimeter. Established ports in a multi-port gateway system can partially circumscribe local constraints and accessibility problems by externalizing them by linking up more closely to inland centres. For example, all ports in the Le Havre–Hamburg range have to some extent embraced the idea of port regionalization. However, some ports like Antwerp for a long time stayed at the sideline when it came to inland terminal developments and the creation of logistics zones along hinterland corridors, while other ports such as Rotterdam were more active in this field. In practice, mainly private market players are involved in setting up these types of cooperative networks. Port authorities have created room for forms of indirect co-operation, for example through joint marketing and promotion, which are less binding and require less financial means. The path disruption potential of a port regionalization process is primarily dependent on the way the partnering between ports and inland ports unfolds. Heavily-burdened large load centres which successfully build a regional load centre network around the port might be able to stop or even reverse peripheral port challenge processes.

Path Dependency and Contingency

67

Path Dependency, Path Disruption and Strategic Actions of Market Players The development of a port system is highly dependent on the strategic decisions of market players. It was stated before that the interactions between market players can be strongly affected by preferential attachment and embedding mechanisms. Preferential attachment and embedding mechanisms can to some extent be weakened by the search of many actors for diversity of relations (not all eggs in the same basket). For example, shipping lines might want to spread the risk by making sure that their liner services do not all call at the same base port. The tension between preferential attachment and embeddedness on the one hand and diversity of relations on the other hand also plays when shipping lines and terminal operators join forces to develop and operate new container terminals. Global terminal operators are increasingly hedging the risks associated with the footloose transshipment business by setting up dedicated terminal joint ventures. The relation between PSA and MSC provides a good example. The recent linkages include the MSC Home Terminal in the Belgian port of Antwerp (50/50 jointventure), a BOT-arrangement in the Portuguese port of Sines and the MSC PSA Asia Terminal in the Pasir Panjang area in Singapore (50/50 JV). Notwithstanding the existence of a certain degree of multi-connectivity between shipping lines and global terminal operators (e.g. case MSC above), shipping lines can and often do make a totally different choice for the next node, even within the same multi-port gateway region. An example from the Rhine-Scheldt Delta: carrier CMA CGM has a shareholding of 35 percent in the CHZ terminal in Zeebrugge, part of PSA’s terminal network. At the same time, CMA CGM teamed up with PSA’s rival DP World in the Antwerp Gateway terminal (10 percent shareholding) and in the future Rotterdam World Gateway (DP World/ New World Alliance/CMA-CGM) at phase 2 of Maasvlakte 2. Business relationships in general remain rather footloose and opportunistic in nature and this diversity of relations impacts on the evolutionary development of a port system. For the remainder of this section, we elaborate on the strategic actions of terminal operators. In the last ten years, the container handling industry has been characterized by massive consolidation, vertical integration and the formation of terminal networks operated by international stevedoring groups such as DP World, Hutchison Port Holding, PSA and APM Terminals (Notteboom 2002a and Drewry Shipping Consultants 2003a). The emergence of global terminal operators has created path disruption in the sense that the focus of port competition started to shift from port authorities to private terminal operators who are trying to establish terminal networks. Slack (2007) rightly referred to the terminalization of port competition in this respect. The impact of this variation mechanism on the spatial and functional dynamics in multi-port gateway and hub regions is significant. Instead of port competition between clearly-defined port areas with spatial boundaries (nodes), competitive forces are shifted to groups of spatiallydispersed but functionally-integrated terminals in different ports (networks).

68

Ports in Proximity

On top of this, the large terminal operators are becoming more footloose in spatial terms as their network approach loosens the former strong ties with one particular seaport. We have moved away from a situation where each individual terminal in a multi-port gateway region had another terminal operator, to multiple presence of a handful of operators throughout the port system. Multi-port gateway regions now often feature commercial linkages and cooperation between port terminals, complemented by intra-port competition. In many cases, global terminal operators in upstream ports have extended their operations to medium-sized or new coastal container ports in the same multi-port gateway region in order to offer the customers a more differentiated product range. This process opened the way to an operator-induced specialization among the terminals operated by the same group. In many cases, major terminal operators in established load centres became chief instigators of competing peripheral port developments in the same multi-port gateway region. The extent to which global terminal operators are able to generate path disruption, by spreading their terminal activities over more than one port in the same multi-port gateway region, is depending on their success rate in entering the respective local terminal markets. In many ports around the world, concession agreements between landlord port authorities and terminal operators constitute a key legal entry mode in seaports (De Langen and Pallis 2007). National and supranational legislation, port privatization schemes and legal disputes with regard to irregularities in concession policy have made competitive bidding the most common procedure used in concession granting today (Notteboom 2007b). This implies that local terminal operators in principle can no longer rely on any form of shelter-based policy of a local or national authority. As a result, some local players who used to rely on ‘protection’ by local authorities are now exposed to competition from experienced global players who seek to secure capacity all over the world. In the best case the local players could engage in a joint-venture to operate the concession. In other cases, local players were take-over by global players or were forced to reorient their focus to niche markets or other types of terminal operations. The final decisions of port authorities in the awarding of key terminal concessions can have an unanticipated effect on the development path in and between multi-port gateway regions. Some examples in the Rhine–Scheldt Delta illustrate this complex process of action-reaction. Case 1: Seaport Terminals  In the late 1980s, Seaport Terminals was one of the main container terminal operators in Antwerp next to Hessenatie and Noordnatie. In 1989, Furness sold Seaport Terminals to Katoen Natie. Seaport Terminals wanted to secure its future development potential by aiming for the concession of one of the two new Scheldt terminals in Antwerp. However, the Europe Terminal (opened in 1990) was granted to Hessenatie and the Noordzeeterminal (opened in 1997) to Noordnatie. After a series of unsuccessful legal actions against both decisions of the Antwerp Port Authority, Seaport Terminals moved its attention

Path Dependency and Contingency

69

to the coastal port of Zeebrugge in the 1990s. Mother company Katoen Natie obtained a concession to operate the new Flanders Container Terminal (FCT). Many saw the move to Zeebrugge as a way for Seaport Terminals to hit back on Antwerp. The Antwerp container activities of Seaport Terminals were sold to P&O Ports in 2000. While everybody expected an intense competitive battle between Zeebrugge and Antwerp, Katoen Natie/Seaport Terminals never succeeded in reaching a reasonable utilization rate at FCT (at certain moments occupation at the stacking area was less than 10 percent of the design capacity). However, Katoen Natie had a watertight concession contract that enabled the company to keep the terminal underutilized for several years. After a long legal battle, Katoen Natie finally pulled out of container terminal activities in Zeebrugge. Case 2: Maersk/APM Terminals  When Maersk acquired the container operations of Sea-Land in 1999, the company also took possession of the Delta Sea-Land Terminal in Rotterdam. The fully automated and dedicated Delta Sea-Land terminal opened its doors on the Maasvlakte in 1993 and later became DDN – Delta Dedicated North. Maersk reached an agreement with ECT in the beginning of 1999 to dedicate a part of the Delta Multi User terminal (DMU) to Maersk vessels. The dedicated Maersk Delta terminal opened its doors in 2000. The whole DMU terminal was later transferred to Maersk Delta b.v., a 66/33 joint venture between Maersk Sealand and ECT. The gradual acquisition of ECT by Hong Kong based Hutchison Port Holding led to an intervention of the Merger Task Force of the European Commission. This intervention resulted in Maersk Delta to become a fully-owned dedicated terminal for Maersk. A few years later, this terminal at the northern side of the container peninsula at Maasvlakte was taken up in the portfolio of the group’s new subsidiary APM Terminals. Following a DG Competition decision on the joint exploitation of the new Euromax terminal in the port of Rotterdam by ECT and P&O Nedlloyd (case M.3576 of 2004) and following the later acquisition of P&O Nedlloyd by Maersk Line, the exploitation of the Euromax terminal was awarded to ECT (opened in 2008), while the AP Moller group was awarded the first concession on Maasvlakte 2. Today, APM Terminals is facing some serious capacity issues in Rotterdam. The existing facility is reaching full capacity and the new 3.5 million TEU terminal at Maasvlakte 2 will only be available in 2014 at the earliest. Maersk made an attempt to enter the Antwerp container business as a candidate for one of the phases of the Deurganckdock. The eventual winners were PSA HNN (west side of the dock) and the Antwerp Gateway consortium (east side). However, the Antwerp Port Authority initially left the door somewhat open for the Danish group. Should Maersk Line meet with the proposed conditions for further volume growth in Antwerp, then Maersk Line would be able to dispose exclusively of a to be defined terminal site at the Deurganck Dock. The AP Moller group was more successful in Zeebrugge. In October 2004, MBZ announced that APM Terminals has been named the preferred bidder for the concession to manage and operate the former Flanders Container Terminal. The decision was partly

70

Ports in Proximity

based on investment commitments and the related opportunities for increasing the volume in the port. The terminal with a design capacity of 2 million TEU resumed operations in 2006 and gives Maersk Line some room for growth in the Rhine–Scheldt Delta. The cases of Seaport Terminals and Maersk/APM Terminals demonstrate that the competitive development in the multi-port gateway region of the RhineScheldt Delta is highly depending on a complex of missed and successful bids for terminal concessions in combination with a set of merger and acquisition moves in the terminal operations industry and liner shipping. Each outcome of selection, retention and variation mechanisms has had a clear impact on the possible outcomes in the next step of port system development. Path Dependency, Path Disruption and Proximity Proximity can be defined as the expression of agents’ potential for interacting (Baranesa and Tropeano 2002). Actors’ mobility and ICT-based mediations are giving reason to reflect upon the new forms of proximity, and specifically on its temporary forms. Geographic proximity is only one particular form of coordination, often complementary with other organized forms of proximity. The development path of multi-port gateway regions is affected by geographic proximity, organizational proximity and cultural proximity. A low time and cost distance between ports of the same port system valorizes geographic proximity and leads to stronger interactions between the nodes, even up to point where a multi-port gateway region starts to act as if it is one large port area. The container volumes exchanged over land between the load centres can serve as an indicator of functional integration. Containerized cargo might receive a bill of lading for one load centre, although the physical handling from deepsea vessel to land takes place in another load centre in the same region. At the heart of this process lies the tension between ‘the ship follows the cargo’ argument and ‘the cargo follows the ship’ argument. Such a tension is typical for multi-port gateway regions. Shipping lines are now further stimulating cargo to come to the ship by installing port equalization systems. In other words, shippers are compensated for possible cost disadvantages in hinterland transportation towards neighbouring ports. Organizational proximity and cultural proximity are conditions for actors/ market players to interact, to cooperate or to integrate. This brings us partly back to the strategic actions of market players as discussed in the previous section. Market players and stakeholders shape the development pattern of multi-port gateway regions through their actions. When these actors have conflicting interests and objectives (the objectives’ struggle), organizational proximity can create some sense of collective responsibility for the sustainability and competitiveness of the port system as a whole and each of the individual load centres. De Langen and Visser (2005) referred in this framework to collective action regimes in seaport clusters.

Path Dependency and Contingency

71

Territorial borders between states, provinces and even municipalities/cities can have a large impact on the spatial and functional interactions among the ports in a multi-port gateway region. In most cases, territorial borders lead to less mental proximity between ports in terms of the pursuit of a common goal, such as the competitiveness of the whole port system. At the same time, borders can increase the cost distance among load centres due to administrative and transaction costs. The disappearance of border-induced impediments to functional proximity among ports in the same multi-port gateway region range is a major source for variation and path disruption. Such impediments can relate to trade barriers (the more economic and trade integration among neighbouring states, the more the way is paved for fierce competition in serving large and contestable hinterlands), custom formalities, economic and environmental regulation, labour mobility or transfer modalities for innovation. Administrative borders can also raise issues with respect to coordination and specialization of the terminals concerned. The port of Ningbo in the Yangtze Delta serves as an example: it competes with Shanghai in attracting containers from the Yangtze River Delta because of the close proximity to Shanghai (Cullinane et al. 2005). Shanghai used to negotiate with Ningbo for supporting the Yanshan port construction and to switch its main focus on bulk instead of container. Eventually, the competitive situation intensified rather than weakened. A clear task division among load centres within a multi-port gateway region is hard to accomplish and often not desirable due to potential negative impacts on competitive forces in the region. A similar terminal operator base in the ports concerned or a joint port authority (e.g. Vancouver/Fraser or Malmö/Copenhagen) can avoid a path of destructive port competition and duplication of terminal facilities. The specialization debate in a multi-port gateway region can sometimes emanate in the desirability of a deliberate port decline. The Pearl River Delta serves a good example. Civic Exchange, a Hong Kong public policy think tank, urged the Hong Kong’s government to abandon plans to build the tenth container terminal (CT10) because of massive capacity expansion in nearby Shenzhen ports (Chiwan, Shekou and Yantian). Hong Kong terminal operators Hutchison Port Holding and Modern Terminals have invested heavily in Shenzhen. The think tank not only called for a stop to the building of CT10, but also argued Hong Kong should consider gradually shrinking the existing Kwai Chung container terminals to free harbour front land for higher value uses. The think tank underlines the city should focus more on high-end services such as ship management, registration, financing, insurance and broking (see Chapter 19 for a further discussion on Hong Kong). Deliberate port decline constitutes a variation mechanism leading to path disruption.

Conclusions The formation of container port regions around the world, that either function as a collection of hubs or gateways, is subject to a complex set of mechanisms. Existing

72

Ports in Proximity

models on port system development portray a standard evolutionary development path. In reality, a large diversity exists in how gateway and hub regions are dealing with the cargo flows that move through their ports. A certain degree of path dependency in the co-evolution of ports at a regional scale exists, but the sequence of events makes a difference for the outcome. Port development processes also show a certain degree of contingency. Strategies and actions of market players and other stakeholders may deviate from existing development paths. We identified selection, retention and variation mechanisms as instrumental to the mix of path dependency and contingency in the development of multi-port gateway and hub regions. These mechanisms play at the level of accessibility, strategic actions among market players and proximity. Accessibility problems in established ports are often at the core of the peripheral port challenge phase in port system development and can as such contribute to path disruption and the formation of multi-gateway port regions. Retention mechanisms might prevent a decay of established ports and give the large load centres a good position in view of further consolidating their function in the spatial hierarchy within a port system. The interactions between market players can be strongly affected by preferential attachment and embedding mechanisms. These mechanisms can to some extent be weakened by the search of many actors for diversity of relations. The development path of multi-port gateway regions is further affected by geographic proximity, organizational proximity and cultural proximity. Further research on this issue should focus on path dependency and contingency in specific multi-port gateway regions and multi-port hub regions. It is highly interesting to dive deeper in how the mechanisms of selection, retention and variation materialize in specific individual multi-port regions.

PART II THE GOVERNANCE OF PORTS IN PROXIMITY

This page has been left blank intentionally

Chapter 6

Proximity and Port Governance Brian Slack, Elisabeth Gouvernal and Jean Debrie

Introduction Proximity has long been recognized as a factor in port and shipping studies. Access to a hinterland has always been seen as an asset for ports (Frémont and Soppé 2007; Notteboom and Rodrigue 2007). With the development of transhipment hubs in container shipping, it has been demonstrated that distance deviation from the main shipping lanes is a critical location determinant (Zohil and Prijon 1999; McCalla 2008). These and other examples in the literature are based on Euclidean geometry, where any two points can be joined by a straight line, and distance is measured by an absolute measure such as miles, kilometres or time (Lowe and Moryadas 1984). Proximity in Euclidean space is therefore an indication of physical closeness. There are other geometries, however, that dispense with these physical rigidities, and which describe relationships between points. One such geometry is topology, where proximity may indicate a relational closeness that may not reflect geographical distance. Thus, businesses may be closely linked through their financial relationships, without necessarily being physically neighbours. In this context, proximity is taken as a measure of organizational connectedness. Governance relationships may also be measured topologically. Different levels of government present different degrees of proximity to the institutions being governed. Public ports may be administered by different levels public administration. In the past, for example, most ports around the world were governed by state-controlled agencies that had little or no relationships with regional and local governments. Over the last 20 years there has been a general trend to give greater jurisdictional control to lower tier bodies, and in some cases to individual port authorities. We may consider this trend an attempt to bring port administration closer to the ports themselves. We relate this process to the political theory of subsidiarity, where governance is seen to be best carried out by the level most appropriate for the administration of that public agency. In this chapter we consider some of the issues raised by port decentralization drawing upon the examples of two national cases, France and Canada, where different but parallel processes have taken place. In one case (France), regional governments play a larger role today in port administration which we suggest may lead to a greater degree of cooperation between the ports under each regional government, since those bodies have an interest in their own port systems as a means of promoting regional development. In contrast, Canadian ports have

76

Ports in Proximity

devolved to purely local agencies, without any regional and very limited national control. Here, competitive pressures are evident. We hypothesise, therefore, that governance proximity, that we define as the relational distance separating the port authority from the government tier exercising jurisdiction over the port, can play a very important role in shaping port policy orientations.

Divestiture and Port Governance Over the last 15 years, a global process of reform in the ports industry has taken place. As Brooks and Cullinane (2007) have noted, this occurred because of the growing interest in alternative forms of delivery of public services, and because ports were requiring ever greater funds to meet the challenges of global competition. While the character and effectiveness of the reforms have been varied, one of the recurrent features is the retreat of central governments from direct port control. An important element of this process is that of divestiture. It is a term that refers to the transfer of responsibility for the delivery of services from a higher tier of government to a lower level, and could be also taken to include the transfer to a private entity. In most cases it is a central or federal government that decides to ‘download’ or transfer responsibility to a lower tier public body, since historically in most countries port governance has been a national responsibility (World Bank n.d.). Notable exceptions include the US and countries of Northern Europe, where port authorities have largely been under municipal or city-state control. Elsewhere the form and degree of divestiture varies greatly. In some countries, such as China, the State retains overall authority, but has devolved a great deal of independence to regional governments, that in turn have given increasing amounts of operational control to foreign private operators through concessions (Wang et al. 2004; Cullinane and Wang 2007). In others, such as Argentina, there has been a policy of transfer of responsibilities from the central government to the states (Serebrinsky and Trujillo 2005). Divestiture, therefore, may be seen as a means of achieving greater administrative proximity, by bringing governance closer to those governed. As such the process has much in common with the concept of subsidiarity. This is a concept that was derived from Christian theology. It is based on the notion that a higher level of authority should be called upon to carry out certain tasks only when an individual or lower order is incapable of carrying them out more effectively. It holds that all forms of society, from the family to the state and the international order, should be in the service of the individual person. This principle has been adopted by the political discourse in the European Union and individual countries, such as France. It appears in article 3B of the Treaty of Maastricht of 1992. It also was mentioned in article 5 of the proposed Constitution of the European Union, a treaty that was not ratified because of the failures to approve the referenda held in France and the Netherlands. This article announced that:

Proximity and Port Governance

77

The Community shall act within the limits of the powers conferred upon it by this Treaty and of the objectives assigned to it therein. In areas which do not fall within its exclusive competence, the Community shall take action, in accordance with the principle of subsidiarity, only if and in so far as the objectives of the proposed action cannot be sufficiently achieved by the Member States and can therefore, by reason of the scale or effects of the proposed action, be better achieved by the Community.

Subsidiarity, defined as the selection of the level best able to exercise a political responsibility, is thus used in Europe to justify and delimit the field of competence of the European Union and the member States. It is also used to determine the competence of different public authorities such as local and regional governments to take responsibility for the administration of public programmes. In practical terms the concept allows the EU to act only in the areas specified for its exclusive jurisdiction, and only when its actions can be shown to be more efficient than those taken by a national, regional or local authority. The principle of subsidiarity is not just a factor at the supra-national level of the EU, but has become an important element in French planning (Le Galès 2006). It is closely linked with policies of decentralization since it is employed to establish at which level of public administration local issues should be dealt with (descending subsidiarity). It is also employed to determine that the upper levels of governance (EU, and State) should assume control when it is evident that the lower tiers of government do not have the means to carry out their responsibilities (ascending subsidiarity). Port divestiture (or decentralization as it is called in France) is thus an example of descending subsidiarity. The transferred ports serve purely local and regional hinterlands and consequently the question of subsidiarity was an argument used by those who urged the State to decentralize governance. It may be noted however, that in both France and Canada the decision to divest local and regional ports was not based solely on the principle of subsidiarity but also on the need to reduce State expenditures because of growing national deficits. In Canada and France different policies, with different solutions have been implemented to transfer responsibility for the small and medium size ports (Debrie, Gouvernal and Slack 2007). In Canada a very large number of ports (434) have been divested by the federal Ministry of Transport. Forty have been transferred to other federal departments, 65 have been devolved to the provinces, 118 have been ceded to local public and private entities, and 211 have been abandoned. The 118 ports transferred to local bodies are discussed in this chapter. In France, 16 ports of national interest have been transferred by the State to lower tiers of government. Because the Canadian process was completed earlier than the French case, we are better able to observe and measure some of the effects of divestiture in Canada. We draw evidence from ports in the Maritime Provinces where the transfers were completed earliest. We visited five of the ports for detailed study in 2004, and met with federal and provincial bureaucrats directly involved in the transfer process and

Ports in Proximity

78

obtained further information from an analysis of the Annual Reports of Transport Canada (Transport Canada). In France, where the new governance structure came into effect only on January 1 2007, the results are not yet evident. We draw our interpretations from interviews in all the regions involved, including contacts with the local port operators, and most of the parties that had expressed an interest in securing control of the local port (municipalités, départments and Régions). A measure of the proximity of the new port authorities to the ports they administer may be obtained by counting the numbers of levels of administration that separate them. In France there are four levels of governance – State, Région, départment, and at the most local level, the municipalité. A port administered by the State is thus four levels of public administration separated from the port community. We can take this value as a measure of topological distance separating the port from the body having authority over it. It is comparable to the α index used in graph theory to measure accessibility of vertices (Lowe and Moryadas 1984). Prior to 2007, therefore, the 16 French ports had a combined distance of 64 (16x4). The result of the decentralization process, in which authority was shifted from the State to different lower tiers of government (see Table 6.1), has resulted in a combined governance distance of 39. In Canada there are only three major levels of public administration: federal government, province Table 6.1

Governance of ports in France and Canada

French Ports

New Administration

Canadian Ports

New Administration

Ajaccio

Région

Annapolis Royal

community group

Bastia

Région

Bayside

local business/towns

Bayonne

Région

Bridgewater

community NGO

Boulogne

Région

Charlottetown

local business/city

Brest

Région

County Harbour

local industry

Caen

Société mixte

Dalhousie

local port industry

Calais

Région

Hantsport

local industry

Cherbourg

Société mixte

Mulgrave

local business/towns

Concarneau

Département

Newcastle

local communities

Dieppe

Société mixte

Parsboro

municipality/tourism

Lorient

Région

Pictou

local user

Nice

Département

Pugwash

local industry

Port la Nouvelle

Région

Sheet Harbour

local interests

Saint Malo

Région

Souris

users/town/tourism

Sete

Région

Sydney

municipality

Toulon

Département

Yarmouth

industrial commission

Proximity and Port Governance

Figure 6.1

79

Pre-reform and post-reform status in France and Canada

and municipality. A sample of 16 ports in the Maritime Provinces prior to the divestiture programme would have provided a governance proximity score of 48 (3x16). Because all the divested ports are now administered by local authorities made up of municipalities and/or local private interests the governance distance is 16, a reduction of 67 percent. In both countries, therefore, port governance involving small and medium size ports has moved closer to the individual ports. The difference is that in France, a number of regional governments now have jurisdiction over the ports in their territory, in which the governance distance from the ports is shortened, but is still further than in the case of Canada where the ports are entirely under local control (see Figure 6.1). It should be noted, however, that the State in both countries retains powers over marine security, environmental compliance, customs etc.

80

Ports in Proximity

Governance, Proximity, and Economic Relationships It has been demonstrated that port governance has moved closer to the ports themselves in many countries. A fundamental question is: has this change in the provision of a public service led to an improvement in economic performance? This question has drawn the attention of a large number of academic researchers. In Australia, for example, researchers have questioned the commercial effectiveness of port reform, citing continued political interference (Gentle 1996; Everett and Robinson 2007). Despite the large number of case studies in a recent research collection (Brooks and Cullinane 2007), few clear conclusions can be drawn. This uncertainty is also reflected in the difficulty of measuring the effectiveness of reform (Bichou and Gray 2004). We take a different approach, and rather than assessing the commercial performance of the port operators who may be merely holders of a concession, we consider how the economic perspectives of the institutions now possessing administrative authority over the ports differ from earlier State control. We hypothesize that where jurisdiction has passed to a public or private local entity that exerts control over one port only, that authority is more likely to be bound by commercial considerations even if, as is the case in many Canadian divested ports, the new port authorities are not-for-profit bodies. Their objective is to valorize that port facility because the new port authority has responsibility for one port facility alone, and it has to consider also competitive pressures from other ports. On the other hand, where a regional authority has jurisdiction over several ports, competitive pressures may be suppressed by a different goal of promoting cooperation between the ports. A regional authority may see the ports as one of many assets, such as airports, industrial parks etc under its jurisdiction that may be deployed to pursue regional development objectives. Thus, we suggest that a more commercial orientation is a more probable outcome of governance placed closest to the ports, whereas cooperation is a more likely outcome of a regionally-based port governance. We test these assumptions by considering recent port devolution in Canada and France where it has been demonstrated that different results have arisen from divestiture (Debrie et al. 2007). France As mentioned above, the French policy came into effect on January 1, 2007, which resulted in the transfer of the ‘ports d’intérêt national’. The transfer gave ownership and planning powers over the ports to regional and local authorities. This was significant, because in earlier marine facilities transfers, such as those involving pleasure craft harbours in 1984, the State retained ownership of the sites. Here the new regional port authorities can effect real changes in land use and planning. This is considered a major opportunity to improve port operations and the possible reallocation of sites to other uses that may better complement local urban needs. For

Proximity and Port Governance

81

example, the new authority in charge of the port of Nice has already signalled its intention of exploiting more of the port site for parking. As mentioned previously, it is somewhat premature to measure the effects of a policy so recently implemented on January 1 2007. In most cases, the lower tier governments now responsible for the ports have been administering them for less than a year. However, it must be noted that they have been aware of the process since August 2004, and the new actors have had time to consider how they wish to position the ports under the new governance regime. They had to prepare plans, and all the actors, including those that were not successful in their bids, were forced to consider how they wish to see the ports develop. For many, this has represented a major challenge, since their comprehension of the needs and scope of maritime transport was limited. In other cases, such as Bretagne, where the maritime tradition is strong, the Région announced its intention from the very beginning to acquire the ports and to utilize them to promote regional development and planning. The French State had been neglecting the funding of ports for some considerable time, and as the national auditor has indicated, there has not been a national ports policy. The decision to decentralize control to a lower tier government is seen as an opportunity to provide the local governments (that have the most direct interest in local planning) with the means to integrate ports more effectively in urban and regional development. The transferred ports in France are for the most part small, the exception being Calais which handled 40 million tons of cargo and 11 million passengers in 2006. The others serve local customers, and therefore are a service to the municipality and region. The State is far removed from the needs of the localities, and its actions may not be sensitive to impacts of its policies and actions, even if in the past the State-Regional contracts allowed for the recognition of local demands. The budgetary implications for the divested French ports are important and are quite different from the Canadian case. Port budgets are significantly smaller than many other items in the financial dossiers of the Régions, which control health and education, and départments, which control the road budgets. This suggests that if the new owners of the ports are serious in their goals of integrating ports in regional planning, they will have the financial means to carry out such objectives. The regional development orientation of the new port authorities may be best seen where the Régions have acquired responsibility for several ports. We focus on Brittany, where the Région now controls Brest, Saint Malo and Lorient, and Nord Pas de Calais which administers Calais and Boulogne. The history of the process of divesting Calais and Boulogne reveals the intention of the Région of harmonizing port and regional development. In January 2006 the Calais Urban Agglomeration announced its candidacy for the port of Calais, and the same was announced by the Agglomeration of Boulogne for its port. However, the Région of Nord Pas de Calais indicated its intention of taking over both ports in June. Where several candidacies occurred elsewhere the solution was a syndicat mixte, a joint-sharing governance, but this was not possible here

82

Ports in Proximity

because of the opposition of Boulogne. In a lengthy interview the President of the Nord Pas de Calais outlined the Région’s ambitions regarding the two ports and indicated it would provide the means to carry through these goals (La Voix Echo 26 July 2007). The President of the Région saw Boulogne as France’s biggest fishing port and Calais, as France’s biggest ferry port, along with Dunkirk (a port still under State control) as development poles in the context of Northwest Europe in conjunction with the Lille metropolitan region. He saw the development of a ‘port conference’, comprising the jointly administered Boulogne and Calais along with Dunkirk, as a means of achieving coherent regional management. This conference would establish rules to permit the best coherence and integration of ports in the regional economy. Each port should specialize to prevent wasteful regional competition. A similar, though less forcefully expressed, policy has been developed in Bretagne. The Région sees the ports as complementary, each serving their own customers and performing different functions. It also has expressed the need to promote the ports as regional development tools, to further exploit the local maritime tradition of the region and its industries. In the other regions of France the picture is not quite as clear. In Normandie and Languedoc-Roussillon there were competing bidders for the ports of Cherbourg and Caen, and Sète and Port La Nouvelle (respectively). In the case of the former a joint body (Société Mixte) was established comprising the Région and départment. In the case of the latter, the ports were obtained by the Région, much against the opposition of the town of Sète. In both cases no clear port development strategy has emerged yet. Canada In Canada, devolution of the small and medium sized ports has resulted in the appearance of a large number of types of port authority. Many are made up of permutations of public and private interests, including local municipalities and local private companies, such as forwarders, industrial and terminal handling firms. In some cases a private company is the sole authority, in others a municipal government is the recipient. In nearly all cases the new port authority involves interests that are purely local. In the past these ports had been maintained by Transport Canada as a public service. Since devolution the economic orientation of the ports has had to change, since the new authorities have to operate the port in a more commercial manner. Many new authorities have explicit commercial objectives and operate as profit generators. This applies inevitably to the ports made up entirely of private interests, such as Pictou NS, but others that include some participation of local public authorities are equally profit-based, such as Bayside NB. Port authorities with a larger presence of public bodies in their administrations operate as nonprofit bodies, but given the absence of federal financial support, are still bound by commercial concerns, such as Mulgrave NS. They have to secure traffic and provide infrastructure. Unlike France where the Régions and départments are

Proximity and Port Governance

83

relatively revenue-rich, the municipalities in Canada that have acquired the ports have limited capacity to sustain large port deficits. They have small populations, and in the Maritime Provinces, for example, only three of the ports divested are located in municipalities with populations greater than 50,000. Thus, ports are expected to cover expenses out of operations. Most of the ports that Transport Canada abandoned were those which were incapable of generating sufficient traffic to interest a local entity in coming forward to obtain a transfer, and those that served large markets and were capable of generating large revenues became Canada Port Authorities (Brooks 2007). It can be seen therefore that the divested ports in Canada operate as separate entities, and are shaped largely by commercial orientations. This would seem to support our working hypothesis that bringing governance closer to the ports produces policy orientations that are commercial, and because each authority is independent this introduces an element of competition between the ports for regional traffic. It may be noted that increasing the commercialization of the ports was one of the policy goals of Transport Canada’s divestiture policy, and thus in this respect may be construed as a success.

Realities As much as this comparative survey provides support for a port policy distinction based on governance proximity, several issues stand out that lead us to qualify the relationship between governance and proximity. France Despite the rhetoric about avoiding competition and promoting regional development, it is evident that ports are bound by commercial imperatives. Boulogne may be a major fishing port and the processing industry generates a great deal of employment, but the fact remains that the commercial port of Boulogne loses money, while Calais the other port now administered by the Nord Pas de Calais Région is financially self-sufficient. As much as the President of the Région may suggest that the goal is to re-establish a cross-Channel ferry service at Boulogne without taking away anything from Calais, any new investment in infrastructure at Boulogne or subsidies to the cross-Channel Ferry company SeaFrance would take away potential traffic from Calais. It would also bring about a financial imbalance between the ports of the Région. A similar predicament confronts other regions where investment decisions will have to be prioritized. The ports of Brittany may complement each other in traffic, but will be competing with each other to secure investments for new infrastructure and the decisions may affect the commercial future of some of the ports. We have indicated earlier that the regional bodies now controlling the decentralized ports have the financial means to invest in ports if they wish to

84

Ports in Proximity

pursue a new port strategy. There is a danger in this, because our interviews clearly demonstrated that most of these regional bodies lack expertise in maritime affairs. For the most part the Régions and départments have little experience in maritime transport. This lack of knowledge exposes them to the possibility of over-investing in port infrastructures. An example is the port of Saint Brieuc in Brittany (a port earlier divested to the department of Finisterre) which has embarked on a large expansion project with no commercial logic. A further paradox is the unique status of the actual port operators, the local Chambers of Commerce. In France, the commercial ports are operated by the Chambers of Commerce under concession. So far, the new port authorities have maintained these concessions. The Chambers of Commerce wear two hats. On the one hand they seek to operate the ports as commercial entities, but at the same time they represent local business interests and wish to exploit the port as a service for these interests. Thus, in the case of Saint Malo there are intense pressures to develop parts of the commercial port for urban and tourist-oriented uses. So far the Chamber has resisted these pressures and maintains the docks for port commercial activities. Perhaps the ambivalence was best expressed in an interview with the Director of the Calais Chamber of Commerce. He defended the Chamber’s concession against any change to include a private operator because he claimed the local Chamber embraces the best interests of the local community. He later went on to stress economic efficiency, and that the decentralization policy was not helpful in this regard because the new governance had a ‘territorial’ rather than a ‘maritime’ and commercial perspective. In his view the policy dealt more with transfer of authority over port land and less on promoting efficiency and maritime traffic. In so far as the local Chambers of Commerce continue to operate the ports it may be argued that French ports were already managed locally, since the French State left them largely alone. It is for this reason that our initial hypothesis focused on governance rather than operational proximity, since the French State always had the power to act if it so wished. There is evidence to suggest that the new governance regime is changing the relationship between the Chambers of Commerce and the new governing bodies. In Corsica, where the decentralization process was completed in 2004 as a special case, the regional government which has control over Ajaccio and Bastia, has renegotiated the leases with the Chambers of Commerce and has exerted more oversight over port operations, stipulating for example periodic reviews of performance and requiring the Chambers to integrate public regional policies in their operational activities. In 2008 it was announced that the operating concession for the port of Cherbourg had been awarded to a joint management body comprising the Chamber of Commerce and a private investment company. Canada In Canada, despite the creation of separate port authorities for each small and medium size port, competition is not as pronounced as could be expected. We

Proximity and Port Governance

85

consider three issues. First, the products handled by the small and medium size ports are overwhelmingly in bulk form. Typical products include ores, salt, aggregates, petroleum products, and forest products. These are produced or consumed locally and cannot easily diverted to other ports. Consequently the degree of inter-port competition is not great. Second, consideration of the operating and maintenance costs is giving rise to a degree of cooperation between some of the ports. Winter ice, storm damage and general wear and tear necessitate annual repairs and occasional reconstruction. While many of these charges have been taken into account in the financial transfers negotiated with Transport Canada, ports are discovering that these costs are higher than anticipated because there is little competition in the specialized marine construction industry, especially in regions far from the major ports. Dredging is another requirement at many ports, and represents an important expenditure. As a result, some ports are voluntarily coming together to negotiate contracts for maintenance and repair work. They believe that by acting together they can secure more favourable rates from the marine construction companies and share the work and resultant costs. In a similar vein, there are some cases where ports are sharing dock labour. Many new authorities have sought to control labour costs, but by reducing the hours of work have found it difficult to retain staff. A solution being pursued at a few ports that are relatively close to each other, such as Pictou and Mulgrave, is to enable stevedores to work at the different ports on different days, depending on demand patterns. In this way labour can be utilized more effectively between the ports and the workers benefit by receiving more hours of employment. The third example is more general. There is a move in the Canadian Maritime Provinces for the divested ports to come together to form an Association. It is believed that the Association will enable the port authorities to learn from each other, to provide a common voice in public debates, and in particular to benefit from savings that could be negotiated by arranging items such as group insurance. The transfers in that region took place largely before 11 September, 2001. The financial assessments made by Transport Canada could not have predicted the explosion in the costs of insurance premiums, which are now up to ten times higher than before and represent a critical item on the balance sheets of the ports.

Conclusions These contrary examples in France and Canada highlight the difficulties of drawing conclusions about the inferred and explicit actions of port authorities. The actors may be operating within particular operational and economic environments that are set by different governance structures, a more cooperative approach in some, a more competitive one in others. However, whichever context the port authority finds itself, it has to confront commercial choices even if it has chosen to administer its ports in a more cooperative fashion, while a port authority that operates in a commercial environment may have to pursue cooperative strategies in some

86

Ports in Proximity

instances. Independent administration does not rule out cooperation, and regional governance does not preclude competition. Rather, we argue that proximity in port governance is an important factor shaping cooperation and competition, but may under certain circumstances give rise to very different results. The question of proximity and port governance is much larger than the particular issues addressed in this chapter. The concept of subsidiarity assumes that governance should be placed at the most appropriate level. For ports what is the ‘best’ level? It is not simply a question of economic performance, such as explored in recent literature, because governance may have changed but the operators (holders of concessions) may stay the same, and vice versa. Should level of governance reflect the scale and scope of the port’s status? Should a port serving a national function be managed by a national body? Are all ports better served by local governance? These are important questions. In this chapter we have answered these questions only partially and in a preliminary fashion. We have demonstrated that a change in governance can produce a change in policy orientation among smaller ports. There is a need, however, to go further and provide better measures of ‘proximity’ and ‘effectiveness’.

Chapter 7

Regional Integration and Maritime Range Arnaud Lemarchand and Olivier Joly

Introduction For over fifteen years, several studies have focused on the similarities between ‘Marshallian districts’ and the economics of port cities (Le Marchand 2000; 2006). These approaches take into account several aspects such as the specificity of institutions, the mobilization of key actors, and the governance of cities, in order to understand their local dynamics. Beyond the Marshallian approach, another important dimension of such research is the analysis of regional integration using the concept of maritime range. This chapter proposes to widen the definition of the maritime range based on a comparison of selected European, American and Asian port systems. The concept of range describes the networking of port cities. Common markets resulting in mixed hinterlands constitute a frame for action and organization. Therefore, ranges are key elements in a new understanding of emerging interdependences through globalization processes and the new modalities of cooperation and competition. This calls for a new analysis on the insertion of port city economies within maritime ranges, based on existing port studies. During the 1970s, the French maritime transport geographer, André Vigarié, developed the notion of range, or maritime front. An explicit relationship was made with the American term ‘region’ that supposes a process of integration on various geographical levels. The concept of maritime range is used in this chapter as a fully integrated maritime front, as proposed by Vigarié (1979) by contrast with a maritime front that is simply a collection of scarcely linked port cities with weak interdependencies. In this way, spatial proximity is not sufficient to establish a range. Vigarié (1979) proposes that a front becomes a range when ‘a bundle of common causalities give the direction of their local development’. The first causality is the overlapping of ports’ hinterlands, i.e. the mix of their markets. This results from economic regional integration and is simultaneously spontaneous and political. One canonical example is the Northern Range between Hamburg and Le Havre. The removal of trade barriers, intra-European trade growth, the harmonization of European norms and the liberalization of services all created new patterns of port competition. Seaborne exchanges benefited from a favourable conjuncture, and have, in turn, made European trade growth easier. The monetary union induced greater integration among European ports, due to lower discrepancies in terms

Ports in Proximity

88

of growth regimes. Variations remain due to local traffic variations of specific commodities. The finalization of such a process also needed an integration of commercial activities. From an economic point of view, growth in intra-sector trade among European countries would be sufficient creating shared hinterlands and making ports interdependent within the same region. From a geographers’ point of view, regional integration is the key condition, notwithstanding a complementary bundle of causalities such as history and port governance. Long-term historical impacts or ‘memory effects’ giving birth to a maritime range were identified by Braudel (1982) as a combination of non-trade factors such as politics, cultural affinities and a matter of shared memory. Such principles make it doubtful whether this phenomenon can apply to other seaport ranges. Political, religious and cultural divisions make this integration unlikely on the Mediterranean shores. Only the ports of the US and Japanese megalopolises were included in the work of Vigarié (1979) on port ranges. However, it seems crucial to rethink these issues in an era of globalization and regionalization. The following questions in relation to economic geography help us to establish the theory for this study: • • •

How do we analyze the process and the patterns studied thirty years ago by Vigarié? Which mechanisms explain these stylized facts? How did containerization and globalization influence the emergence of maritime ranges?

Range and Archipelago Economy The issues explored in this chapter seem to have been ignored by many shipping economists. Bauchet (1977) for instance proposed in a very symptomatic way to focus on varying trade patterns between national and transnational spaces created by multinational shipping firms. Among other transnational realities, the maritime range did not constitute an object of interest in Bauchet’s work because such object was not constructed by such economic players across continued and seamless spaces. It is only since the theory of networks of firms and territories has emerged that a re-conceptualization and empirical verification of the maritime range became possible. Based on container traffic statistics, this chapter proposes using the more recent work of the economist Veltz (1996) who defined the so-called ‘archipelago economy’. Although this work does not explicitly mention containerization and ports, it suggests that ‘horizontal, frequently transnational relations increasingly outmatch traditional vertical relations with the [port] hinterland’. Such an impression can obviously apply to ports involved in a maritime range. This chapter also wishes to bypass the actual paradox that port cities play a central

Regional Integration and Maritime Range

89

role in globalization, but they tend to be ignored by the economical theory of globalization. More formally, four important dimensions are underlined by Veltz (1996) constitutive of a new economic paradigm linking globalization, cities and territories: •







Scale economies: scale economies played a fundamental role both in the theory and empirical evolution of economic geography. They can be conceptualized as unbundled from one single place, like a site or a factory, and developed through network externalities, hence bypassing their local dimension. On the other hand, they must be combined with scope economies, in order to qualitatively adapt to a more differentiated and heterogeneous demand. However, a strong limit to the study of scale economies is the increased difficulty measuring local dynamics; A relative de-hierarchy: the classical hierarchy among cities, theorized by Christaller (1966), should be reconsidered through the paradigm of networks. The polarization of various products or services seems more mixed and nested than in classical models. This means that a location though dominated by a bigger one, can become in some sectors the dominant node for specific goods or services. Polarization has limits and the so-called locked-in positions can also be, at least partially, reconsidered; Coordination patterns: coordination does not any more follow linear and hierarchical ways. A direct result of this evolution is the increased importance of social and political modes of coordination or governance. Such view aims at tackling a growing unpredictability of interactions, due to retroactions, which include the network effects and the decline of the classical scale economies. In a context of uncertainty and considering the complexity of networks, flexibility becomes a matter of variety of choices in the modes of coordination. This flexibility assumes the active role of relational resources to manage sites, equipment, and labour that are geographically more distant; The search for new insurance devices: the strategy of flexibility has developed in a multi-polar environment, combining with intricate hierarchies and the search for new insurance devices. Such terms refer to the demand for guarantees against risks, not necessarily implying formal contracts. This need of insurance explains locations at certain nodes, especially at the ones offering multiple options. The increased importance of insurance favours bigger size, and gives to that factor a positive effect on growth. However, this growth is not due to a direct effect on costs, but by the advantages of an options portfolio (Catin and Ghio 2000) of opportunities associated with the number of links and the variety induced by the central locations in an archipelago economy.

90

Ports in Proximity

Based on such insights, the hypothesis of this chapter is that in a globalized economy, the maritime range is a network of ports benefiting from scale economies from different locations, and resulting in an intertwined port hierarchy. To emerge and stay, co-operation relying upon cultures and common rules are necessary. Such a construction rests upon the stabilization of the advantages enjoyed by concerned facilities, which develop in return a multiplicity of links and a variety of alternative options. However, a bundle of causalities produces great unpredictability in the system’s possible evolutions. In addition, such observations are coherent with the property of maritime networks that are often scale-free, i.e. non-linear networks. Throughout such networks, there are always bypasses, shortcuts and new links created, while the activity of each node admits fluctuations sometimes very important. In such a situation, the range is a ‘small world’ (Watts 1999; Stocker et al. 2002). Simultaneously, one can observe permanent change in the hierarchy of ports, especially at medium-sized ports (Terrassier 1997; Lemarchand 2000). Yet, very few ports lie at the top of the distribution, and traffic concentration has remained very stable at Northern European Range ports between 1994 and 2002, confirming previous observations (Frémont and Soppé 2005). This uncertainty, explained by complexity, leads us to use the theory of the self-organizing economy (Krugman 1996). The maritime range can be understood as an emerging regulation from the noises of international trade, international shipping, singular contexts of each port city and wider political contexts. The traditional conception of port cities enjoying comparative advantages was based on inter-sector trade, respective national economies, with very few links to their neighbours, compared to the transcontinental and colonial lines as suggested by Fujita and Mori (1996). The authors developed a model of self-agglomeration at port cities that stands far from the neo-classical view. The current period witnesses another kind of trade in an age of intra-sector trade within an economically, if not politically, integrated region. If many seaports are now seen as de-linked from their surrounding hinterland, it does not mean that they are totally footloose. The small world of the regional network is a good level to analyze their activity and interdependency.

The Range: From Random Walk and Self-organization to the Memory Effect in a Political Frame From Gibrat Law to Deterministic Deviation: Evidence from the North European Range There are very few economical models on port activity. Most postulate a linear relationship between investments in infrastructure and traffic growth, which implies that the dynamics of a port are determined by the accumulation of capital dedicated to transportation. Competitive advantage goes to firms choosing the ports through extending their market areas, what supposes the possibility of endogenous

Regional Integration and Maritime Range

91

ORJVWDQGDUGGHYLDWLRQRIJURZWKUDWHV





 6HULHV 



 

















ORJDYHUDJHVL]H

Figure 7.1

The North European maritime range, 1997–2001

growth. By using these results, it was possible to create plans at both regional and macroeconomic levels. Two main reasons put in question the predictability of the effect of infrastructure investment: negative externalities, which restrain the interests of investments, and complex retro-effects on industrial location. Transport infrastructure does lead to agglomeration, but it also leads to splintered space and territories. Therefore, transport reduces some market imperfections and creates others (Quinet 1992). In addition, endogenous growth does not perfectly fit traffic evolution despite concentration trends, as seen in the aforementioned study of Frémont and Soppé (2005). Among the world’s ports, the distribution and evolution of container traffic seems to follow a random walk instead of logic of scale: this is an application of the Gibrat law (Richiardi 2004). Traffic growth rate is not explained by traffic size or by previous traffic growth rates, but by other factors such as the influence of local and global contexts, the evolution of production localization, social relations, and the efficiency of port and urban governance. Main results of the empirical analysis are shown in Figure 7.1. Northern range ports show a deviation from the Gibrat law: growth variability decreases with the size of ports, measured in TEU traffic. More precisely, the standard deviation of the growth rate of port traffic decreases when the average size of the traffic on five or ten years increases. The range seems to be the best sub-system to appreciate this phenomenon. A bigger sized port does not always have extensive growth, but its activity is not dependent on few markets

Ports in Proximity

92

or few customers. With more links, the activity is less unstable, as there is compensation from gains and losses. The scale of activity plays an indirect role by securing the market share via diversification. The agglomeration effect is a portfolio effect. In this range, the decreasing of growth variability with the size of traffic may follow a common trend. Such results can be interpreted in terms of a self-organization effect of the maritime network. It shows interdependences between the ports of the region. But these interdependences must be understood in the context of European integration and as a result of the development of intra-sector trade in the region. This traffic distribution and variability is compatible with hierarchy change, because, in a certain way, the variability is an incomplete lock-in of the market share. The range, as a level of regulation, depends on the anticipations of ocean carriers in the regional context, which leads us to another factor to ponder: the memory effect. We suggest that memory plays a key role in the process of ports’ regional integration. Liner shipping companies often express that bad experiments at port terminals, such as the blockage of a vessel due to labour strikes, have lasting effects. Each negative historical port accident results in a decrease of traffic. As a consequence, the place where problems have occurred will have fewer links and see their portfolio getting thinner. Therefore, fewer options will be available at this point in the network. This was one example of a memory effect, but there are others, such as safer investments to finance with a quiet growth regime. If memory plays a role, we turn away from the pure stochastic model. In that perspective, the growth regime is not comparable to a perfect hazardous drawing, where each draft will be independent from the previous. This is explained by the finite numbers of actors at certain parts (segments) of the logistical chains. Within these networks, there are global actors who cannot be taken as negligible. That is why past interactions matter. In parallel, local innovation capacities and governance must not be neglected. In fact, shipping and port activities are very far from emanating perfect competition and efficient markets; so the part for hazard is reduced. Even if the strategies do not abolish the unpredictability of some traffic fluctuations, path-dependent history matters.

Table 7.1

Factors of port range emergence

Stochastic Hinterlands evolve Numerous factors influence traffic in a random walk Port network is a ‘scale-free’ network Ports may be unlinked to their neighbourhoods

Deterministic Shipping and handling actors are global and not in an infinite number Actors have memory There is a need for insurance via the portfolio of links Path-dependency

Regional Integration and Maritime Range

93

6WDQGDUGGHYLDWLRQRIJURZWKUDWHV

   

6HULHV 3RZHU 6HULHV

 

\ [ 5 

  









DYHUDJHVL]HRIWUDIILF 7(8V

Figure 7.2

The South European maritime front, 1997–2002

The memory effect leads to a ‘reputation effect’ which can be highly self-fulfilling. From observed accidents, actors go to self-fulfilling anticipations, translated into decisions and the further institutionalization of a central or marginal position. An informal map of anticipated performances leads the choices of previously uncertain investors and other stakeholders. Along a longer time frame, interactions occur among memories, what confirms the role of history as suggested by Vigarié (1979). This is compatible with the ‘archipelago economic’ assumptions described by Veltz (1996). Such remarks are synthesized in Table 7.1, putting together elements of stochastic approaches and elements of a deterministic approach. In such perspective, the range emerges more from shipping companies than from ports themselves. The interdependence between port cities is organized by these actors. The latter face an unpredicted fluctuation on a service within which they may cut one ply without bargaining with the concerned port. In this game, the situation of each seaport is globally linked to the others, so it is important to understand how shipping firms favour or do not favour regional port integration. At the same time, each harbour community plays its own cards to keep or conquest new traffic, as seen in other regions of the world. Traffic Patterns at Other Maritime Fronts Since this deviation does not occur at every group of ports around the world, it can be considered to be a good indicator of the regional integration level of maritime activity, and of economic integration in general. Nevertheless, this deviation does not fit the South Europe case (Figure 7.2). In this case, this group of ports remains a front: it is not a real integrated range. More specifically, the following issues relate directly to the Southern European Front:

Ports in Proximity

94

VWDQGDUGGHYLDWLRQRIJURZWKUDWHV

   6HULHV



3RZHU 6HULHV

 \ [ 5 

  











DYHUDJHVL]H 7(8V

Figure 7.3 • • • •

The Asian maritime front, 1999–2002

There is no observable range effect within this part of Europe; Port traffic follows a random walk; Mediterranean integration is not a reality; There are great disparities of wealth among the territories.

In this analysis, the port of Gioia Tauro has been intentionally removed because the explosive growth of this hub exceeds all comparisons. The standard deviation of its growth rate is over 64 and is the biggest average traffic of the line. Such a huge fluctuation hints that we may need fractal tools to understand port statistics. Therefore, it is not surprising if fractal fluctuations (Mandelbrot 2005) occur within a network of complex interactions as in the case of port business. Based on the idea that the range is an economic and political construction, a comparison with American and Asian situations shows that spatial proximity is not sufficient for the emergence of a range as an integrated maritime front. To produce a range, arbitrage and substitutability among concerned ports is necessary, resulting in various links between places and between hinterlands. On the other hand, when a region is economically ‘hot’, like in Asia, each port may find some opportunities for growth, making each port independent from the other. The following trends summarize the Asian situation based on Figure 7.3: • • •

There is no deviation of the Gibrat law: standard deviations of growth rates are independent from size on the 1998–2002 period; Integration is not yet achieved; Or there is a need for another indicator better fit with this case.

Based on the same data, a deviation becomes observable on a national level for Japanese and Korean ports (Figure 7.4). Intra-sector trade has grown faster in

Regional Integration and Maritime Range

95

-DSDQ5DQJH

VWDQGDUGGHYLDWLRQRIJURZWKUDWHV

    6HULHV



/LQHDU 6HULHV

  \ [ 5 

  















$YHUDJH6L]H 7(8V

VWDQGDUGGHYLDWLRQRIJURZWKUDWHV

.RUHDQ5DQJH    

6HULHV /LQHDU 6HULHV

 

\ [ 5 

  













$YHUDJH6L]HRI7(8WUDIILFV 7(8V

Figure 7.4

Korean and Japanese maritime ranges, 2001–2005

Asia as a whole, but there are still no free-trade agreements among most of these countries and especially between Japan and Korea. This may explain, according to the approach of Vigarié (1979), the absence of common trends among Asian ports. However, since Korea’s main free-trade agreement exists with Chile, spatial proximity is not synonym of integration. Yet, one can observe a regular deviation of the Gibrat law within Korea and within Japan, as suggested by Vigarié (1979).

Ports in Proximity

96

1$)7$

6WDQGVDUGGHYLDWLRQRIJURZWKUDWHV

   6HULHV



3RZHU 6HULHV

 

\ [ 5 

 

















$YHUDJH6L]H 7(8V

6WDQGDUGGHYLDWLRQRI*URZWK 5DWHV

:(67865$1*(    

6HULHV



3RZHU 6HULHV

 

\ [ 5 

 











$YHUDJHVL]H 7(8V

($67865$1*(

6WDQGDUGGHYLDWLRQRIJURZWK5DWHV

   6HULHV    















$YHUDJH6L]H 7(8V

Figure 7.5

North American maritime ranges, 1992–2002

Regional Integration and Maritime Range

97

Such facts highlight that fast industrial growth in Asia gives opportunities to each port independently from the others on a regional scale. In fact, many Chinese ports are both logistical and production places. These ports are linked to a very nearby hinterland, or industrial enclosure, which can explain why the range effect is not visible in the figure. Turning to North American ports, a deviation is observable, but it is less strong than in Northern Europe (Figure 7.5). However, the number of ports within North American ranges seems to have increased during the last three decades, which is believed to be an effect of the North American Free-Trade Agreement (NAFTA). Integration is more perceptible by looking separately at the two main US ranges. One possible factor explaining lower deviation than in Europe is that the American economic geography is less intricate and mixed than in Europe. Therefore, US hinterlands are less co-dependent, albeit they belong to the same nation.

The Range as a Managerial Construction Many models have suggested a self-organization of cities, such as urban population under the Zipf law, among others (Portugali 1997). These models can be associated with the type of deviation seen above, via stochastic evolution or memory effects. Is such association sufficient explaining the emergence of a maritime range? By considering the concept of range and describing the economic geography of port activities, one must acknowledge that the range is the first quotation system of shipping companies. Is it a nomenclature, a socio-economic and managerial construction? The networks of seaports depend upon this classification before being a result of regional integration. Just like every nomenclature, it can be contested and modified. Such statements allows creating bridges with other theoretical fields, including the role of rules and conventions in economic coordination, not only prices. What becomes clear from the results is that nomenclature effects are not sufficient creating a maritime front, i.e. turning a system of quotations into a real maritime range. The latter needs to be self-fulfilling but also to support freetrade agreements and the political rules of regional integration, as seen in Northern Europe or in the US. Regional integration may not be the only sufficient condition required for observing self-organization, specifically if it contradicts the globalization of the maritime network. Transcontinental competition and linkages may oppose the emergence of a regional range to a certain extent. Furthermore, according to the importance of rules, security acts may contribute to the organization at this level. The set of performance criteria on supply chain management has recently been enlarged to security issues, following the development of trade globalization, activity outsourcing, and lean manufacturing strategies. Security risk management appears to be a well surmised and sought-after global performance factor of logistics chains (Carluer et al. 2008). In the same vein, a maritime range may emerge for specific sectors such as the cruise market, as seen in Southern Europe where a tourism range is about to

Ports in Proximity

98

emerge. The cruise market considers a network of ports connected through regular services, resulting in common links and interests among concerned ports. Another factor for range construction as a self-organization process is related with data procedures. Again, one good example is the North European range where two ICT distinct approaches have been observed within the four ports over the last ten to fifteen years. Initially in Hamburg and Le Havre, a port community approach integrates all local players together, i.e. port handling companies, maritime agencies, customs and forwarders. Secondly in Antwerp and Rotterdam, an in-between approach mixing, on the one hand, shipping lines’ private/integrated approach and, on the other hand, local players’ networking (Joly and Thorez 2006).

Thus the unstoppable expansion of ICT tools at majors Northern range ports seems to move gradually from port community network (linking all local players) to single integrated and private players’ e-management solutions. Following this trend, one can observe the early steps of the break-up of some ports (as single communities) into the juxtaposition of numerous interconnected terminals, small private ports, and overseas operators, less and less interdependent with each other within every seaport, in their decision making strategies and due to the influence of external economic newcomers (Joly and Thorez 2006).

The standard rules are organized at this transnational level, where resources and trade practices are shared. The data flow, which accompanies the goods flow, becomes a vector of this organization. Port security follows the same logics and, as a result of the US policy for customs and security, might lead to an increasing integration of some foreign maritime fronts (Carluer et al. 2008).

Conclusion: Implications for Public Policy The emergence of a range creates public policy issues. It also creates new interdependencies into the sphere of ports and cities, which tend to escape from national regulations in a regional market environment. This is reinforced by the action of various and new global players that are now managing container terminal networks and the global supply chain. Few intermodal players achieve this integration. Perhaps port policy is about to become an international goal and an international public good?

Chapter 8

Does the EU Port Policy Strategy Encompass ‘Proximity’? Athanasios A. Pallis and Patrick Verhoeven

Introduction Europe is among the most dense port regions worldwide. Yet European ports historically developed in their own diverse ways, even when located in the same country. The diversity of the sector has generally been assessed as a strength rather than a weakness. In the first decades of European integration the dominant view was that, unlike other industries, ports could develop without being subject to a sector-specific supranational policy that would set common rules, or advance similar practices. Economic and political integration however, in particular the setting up of a single European market in the 1990s, increased the proximity of European ports. Port proximity had started to intensify due to other factors as well. These factors include economic globalization, containerization, the expansion of transhipment, logistics and value added facilities, technological advancements, and the integration of maritime trade in supply chains. The scale and scope of these developments gradually pushed the national boundaries of port policy making. Policy actors embarked on a discussion to develop a European Port Policy (EPP). Since the early 1990s an expanding agenda signifies a search for a long-term strategy. This search has been marked by both successes and failures, with the port services directive saga being the best known failure. It has also been marked by the emerging associability of port community stakeholders seeking to influence the complex EU policy-making process. This chapter examines the extent and the ways that this intensive and systematic search tackles, or aims to tackle, the economic, spatial, and political proximity of European ports. With reference to various policy areas and the essential adjustments of the sector to the emerging conditions of different kinds of proximity, the chapter provides an analysis of the implications of what has been done, discusses the relevant tensions, and explores the potential of future EU ‘proximity related’ policy initiatives. The second section explains analytically the various reasons why European ports are today more proximate than ever. The third section presents the progress towards an EPP and analyses the ways that this policy advances, restricts, or

Ports in Proximity

100

imposes the potential of ports to develop strategies and practices addressing ‘proximity’. The final section summarizes the findings of this analysis.

European Ports: More Proximate than Ever Diverse Development Traditions Over 1,200 seaports operate along some 70,000 kilometres of European coasts, handling in total 3.7 billion tonnes of cargo and 350 million passengers per year. Located in close geographical distances, they transform Europe to one of the most dense port regions worldwide. Yet, the heterogeneous traditions within which European port management and organization strategies evolved cannot be ignored. In its own-initiative report, the European Parliament (1999) concluded that heterogeneity goes well beyond the catchphrase ‘each port is unique’ and endorsed Figure 8.1 as representative of the reasons of the observed diversity. One might be inclined to think that today, in the EU of 27 Member States, the port sector is more diverse than ever. One might also consider that the influence of European policy and market-driven developments could have an indirect harmonizing influence on European seaports, in particular where it concerns governance systems (Verhoeven 2006; 2008). In this context, emulative factors may play an important role as well (Cheon et al. 2007), especially among ports in close proximity (De Monie 2004). The specific influence of the EPP on port governance is explored further in the

',9(56,7