The Box - Marc Levinson [138]
Complicating matters even further is the fact that traditional breakbulk ships remained in service long after container shipping arrived. Breakbulk ships transported more of the United States’ general-cargo trade than did containerships until 1973. They remained important on routes to developing countries in Africa and Latin America well into the 1980s, because in many trades the flow of cargo was too small to justify the capital outlay for dedicated containerships and ports. Any measure of overall ocean freight costs during the first decade of international container shipping thus is capturing a large amount of breakbulk shipping. It is also capturing inflation. Consumer prices in every industrial country more than doubled during the 1970s, and it would be an extraordinary achievement indeed if containerization actually brought the nominal cost of shipping down.15
Trying to compute the extent to which containerization changed “average” maritime rates for shippers keeping their accounts in different currencies and moving a wide variety of goods under hundreds of conference rate structures is an exercise in futility. On balance, the evidence suggests strongly that the cost of shipping a ton of international freight began to decline as containerization became important around 1968 or 1969, and that it fell through 1972 or 1973. As fuel prices rose steeply, freight costs reversed direction, rising until 1976 or 1977. Rates on American-flag vessels other than tankers, overwhelmingly general-cargo ships, show a similar trend, with ship lines’ revenues falling relative to the value of their cargo until the oil crisis brought the rate cutting to a temporary end in 1975.16
And what if container shipping had not taken the transportation world by storm? Dockers’ pay soared during the 1970s. Productivity improvements in breakbulk shipping were minimal. The labor-intensive task of loading a breakbulk ship would have been far costlier in 1976 than it was a decade earlier. Even at the peak of oil prices in 1976, when fuel surcharges were pushing ocean freight rates sky-high, very few shippers seem to have entertained the thought of going back to breakbulk shipping.17
Ocean freight, of course, is not the only cost involved in transporting imports and exports. The total freight bill includes not just ship rates, but land transportation to and from the ports; packaging; storage and other port charges; damage and insurance; and the cost of money tied up in goods that are in transit. In the days of breakbulk shipping, the relative importance of these various costs depended heavily upon the details of the particular shipment. Moving a load of packaging material from the United States to Western Europe in 1968, for example, yielded $381 per ton for the ship line and only $34 for truckers or railroads. Moving a load of auto parts with long land shipments at both ends, by contrast, cost $152 per ton for land freight and only $20 for ocean freight. For the packaging materials, a change in ocean freight rates would have made a dramatic change in the total freight bill, but for the auto parts it would barely have mattered.18
The containerization of ocean shipping initially did not reduce the costs on land. In many countries, rates for truck lines and railroads were based upon the commodity and the distance, just like ocean freight rates. Regulations in the United States barred ship lines even from quoting a single through rate to an inland destination, much less negotiating special discounts for land transportation on behalf of their customers. Moving a container of televisions from Hiroshima to Chicago thus required the exporter to pay the standard Japanese truck rate for televisions, plus the appropriate ocean freight rate, plus the domestic U.S. truck or rail rate for electronic products, plus a payment to a freight forwarder to make all the arrangements. Land freight rates moved sharply higher during the 1970s, driven by increased fuel prices and higher wages. Shippers exporting to the United States increasingly favored routes