Prospects for the Caribbean as a Gateway to North America Jean-Paul Rodrigue Associate Professor, Dept. of Global Studies & Geography, Hofstra University, New York, USA TIMEFRAME: 40 minutes

Academia: Don’t know much and don’t get no respect (At least we’re not economists…) Academia: Don’t know much and don’t get no respect

Words I Promise not to Utter… Bullshit Crap WTF Bitch Pot smoking Confused “Supercalifragilisticexpialidocious”

Pacific Asia / American East Coast Main Export-Oriented Regions and Shipping Routes Servicing North America Pacific Asia / American East Coast Intermodal (60%) Western Canada (5%) All Water (40%) Pacific Northwest (20%) Via Suez (5%) Pacific Southwest (75%) Via Panama (95%) Mexico (?%)

CRB Index (CCI), Monthly Close, 1970-2011 Paradigm shift in input costs… Reaping the consequences of monetary policy. Source: Commodity Research Bureau. http://www.crbtrader.com/crbindex/

West Texas Intermediate, Monthly Nominal Spot Oil Price (1970-2011) This is also going to propagate along supply chains. Steaming, slowly… Source: Federal Reserve Bank of St. Louis. http://research.stlouisfed.org/fred2/series/OILPRICE/downloaddata?cid=98

At the Crossroads… Which Value Proposition for the Caribbean? 1) Strong margins, but many not large enough to justify full dedicated services 3) East coast capacity issues 2) Interlining between the America’s coastal systems 4) Last segment in import-based supply chains - +

Southwestern Seaboard The North-American Container Port System and its Multi-Port Gateway Regions Puget Sound Northeatern Seaboard Gateway Entry Load change Clearance Source: Rodrigue, J-P and T. Notteboom (2010) "Comparative North American and European Gateway Logistics: The Regionalism of Freight Distribution", Journal of Transport Geography. Southwestern Seaboard San Pedro Bay Gulf Coast Southern FLorida The Caribbean Gateway? (RIMS) Pacific Mexican Coast

Conditions suitable to the formation of a “Caribbean Gateway System” Transshipment Logistics and foreign trade zones Information systems integration Safe and secure customs pre-clearance Harmonization of trade relations (e.g. Free Trade Agreements; Panama, Columbia)

The Transshipment System

The Insertion of Intermediate Hub Terminals Hub-and-Spoke Relay Interlining 85% of Transshipment Traffic 15% of Transshipment Traffic

Major ports and future terminal developments in non-EU Med ports: impact of a changing political landscape? Container throughput in million TEU, capacity extensions in million TEU Enfidha (Tunisia) Capacity: +1 (2011) +2.5 (period 2011-2015) +2 (period 2015-2030) Rades (Tunisia) Traffic: 0.3 (2007) Djendjen (Algeria) Capacity: +2 (DP World) Bejaia (Algeria) Traffic: 0.15 (2008) Capacity: +2.5 (>2010) Algiers (Algeria) Traffic: 0.5 (2007) Capacity: +0.8 (2010) Ambarli (Turkey) Traffic: 2.26 (2008) Mersin (Turkey) Beirut (Lebanon) Traffic: 0.95 (2008) Haifa (Israel) Traffic: 1.39 (2008) Transshipment Corridor Tanger Med II APMT/Akwa: + 3 mln TEU (2012) PSA: +2 mln TEU (2012) Tanger Med APMT: + 1.5 mln TEU Eurogate: +1.5 mln TEU Damietta (Egypt) Capacity: +4 (2012) Misurata (Libya) Initial plans cancelled? Port Said (Egypt) Traffic: 3.2 (2008) Capacity: +2.5 (2011) Source: Notteboom (2009)

Tanger Med: The Cartagena of the Mediterranean…

Conventional Direct Transshipment Circum-Equatorial North Atlantic Central Atlantic South Atlantic / Gulf Transshipment Circum-Equatorial North Atlantic North Atlantic Central Atlantic Central Atlantic South Atlantic / Gulf South Atlantic / Gulf Caribbean Transshipment Triangle

The Caribbean Transshipment Market: Triangle or Corridor? Location (+) Depth (=) Land (=) Costs (+) Hinterland (-) Ownership (+)

Possible Options in the Development of a Transshipment Hub Location and costs advantages Dependent on shipping companies and global terminal operators Pure Transshipment Hub Logistic zones and inland load centers Hinterland Gateway Port-centric logistics zones Gateway to a regional freight system Foreland Gateway

S “Sovereign” Class (8,000 TEU) The Big Port Squeeze: Largest Available Containership, 1970-2011 (in TEUs) E “Emma” Class (12,500 TEU) S “Sovereign” Class (8,000 TEU) R “Regina” Class (6,000 TEU) E “Emma” Class (2006) S “Sovereign” Class (1997) R “Regina” Class (1996) L “Lica” Class (1981) L “Lica” Class (3,400 TEU)

Hinterland-Based Regionalization Foreland-Based Regionalization Pushing Atomization in the Hinterland and Massification in the Foreland Capacity Frequency Atomization Hinterland-Based Regionalization Different momentums Economies of scale Functional Integration PORT HINTERLAND Capacity Gap Frequency Mitigation PORT FORELAND Massification Economies of scale Foreland-Based Regionalization

The Insertion of an Intermediate Hub as a Gateway Inland Terminal HINTERLAND GATEWAY FORELAND Main Shipping Lane INTERMEDIATE HUB (Caribbean)

A Taxonomy of Logistic Zones Port B Port-Centric Freight Village Corridor Intermodal Industrial Park Inland Port A Industrial Park A) Inland terminal B) Freight services

Port Centric Logistics Zones: The Search for Added Value Port Terminal On-Dock / Near Dock Rail FTZ / Manufacturing Container Depots Consolidation / deconsolidation Transloading Postponement

The “Terminalization” of Logistics Terminal as a constraint Rational use of facilities to maintain operational conditions Storage space, port call frequency, gate access Volume, frequency and scheduling changes Bottleneck-Derived Terminal as a buffer Incorporating the terminal as a storage unit “Inventory in transit” with “inventory at terminal” Reduce warehousing requirements at distribution centers Warehousing-Derived Terminalization: Growing influence of transport terminals in the setting and operation of supply chains in terms of location, capacity and reliability.

Panama Canal Expansion and Supply Chain Differentiation: Pick Your Preference Costs (38%) Stability of the cost structure. Relation with the cargo being carried. Lower costs expectations by the Panama Canal expansion. Time (12%) Influence inventory carrying costs and inventory cycle time. Routing options in relation to value / perishability. No/limited time changes with the expansion. Reliability (43%) Stability of the distribution schedule. Reliability can mitigate time. AWR has a reliability advantage.

Comparative Advantages in Supply Chain Preferences: A Complex Balancing Act Shipping Rate from Shanghai for a 40 Foot Container, Mid 2010 Vancouver Montreal $2,300 $2,110 $4,040 $3,950 Time New York $3,700 $1,830 Los Angeles Costs $2,620 $1,400 $3,510 $2,560 Houston Inbound rates: function of distance Outbound rates: function of trade imbalances Reliability (?) $1,300 $2,100 Inbound Outbound

RIMS as an IT Triangle: Key Information Technology Drivers in Freight Distribution Freight Visibility (tracking) Improve the reliability of supply chain management. Status and locations of shipments (vehicles, rail cars, containers and individual loads). Mobile communications and Global positioning systems (GPS). Radio-frequency identification (RFID) tags and bar codes. Asset Management Maximize equipment utilization. Equipment location (tractors, trailers, rail cars, containers, ships). Real Time Locating Systems (RTLS; GPS and RFID tags). Status monitoring of vehicle and cargo conditions. Efficiency Improvements Improve productivity and reduce errors in data transmission. Verification and exchange of shipment information. Non-intrusive inspection and information technologies such as optical character readers (OCR), RFID tags and bio-metrics (to identify drivers). Freight Information Exchange Information exchange using web-based technologies and electronic data interchange (EDI). Real-time terminal information systems. Regulatory Compliance Pre-screen loads and direct low-risk freight to quick clearance. Enhance security at international borders. Electronic pre-notification of shipment information.

Conclusion: The Caribbean Looking Beyond Transshipment 1 Gateway function an option for the Caribbean transshipment triangle 2 Economies of scale both changing the hinterland and the foreland 3 Convergence of suitable conditions (Transshipment, logistics, IT, customs, trade)