The Box - Marc Levinson [139]
Businesses near ports ignored by container operators may have ended up with disproportionately higher shipping costs in the 1970s, because their goods now had to move much longer distances over land. Seventeen different ports had handled New Zealand’s international trade in breakbulk days, but containers were shipped through only four, leaving meat or wool processors to pay for getting their products to Auckland or Wellington. The same happened to industrial companies around Manchester; Britain’s fifth-largest port fell into disuse in the 1970s as containerships avoided the time-consuming trip up the thirty-six-mile canal from the sea, and local customers had to cover the land costs of trading through Liverpool or Felixstowe. Manufacturers in northern New England faced the added cost of trucking their exports to New York after their traditional port, Boston, ended up with only occasional visits from containerships.20
Many nonfreight costs undoubtedly fell with the growth of container shipping. Packing full containers at the factory eliminated the need for custom-made wooden crates to protect merchandise from theft or damage. The container itself served as a mobile warehouse, so the traditional costs of storage in transit warehouses fell away. Cargo theft dropped sharply, and claims of damage to goods in transit fell by up to 95 percent; after insurers were persuaded that container shipping in fact had fewer property losses, premiums fell by up to 30 percent. Faster ships and reductions in the time needed to load and unload vessels at ports resulted in lower costs for inventory in shipment.21
As Malcom McLean had understood back in 1955, it is the sum of these costs, not just the published rate of a ship line or railroad, that matters to shippers. Ideally, we would like to trace the door-to-door cost of the same shipment over time, so that we could measure the change as containerized transportation took hold. With similar information on a hundred different consumer products and industrial goods, we might be able to assemble a reasonable index of freight costs. This task, alas, is beyond even the most intrepid investigator. Data on door-to-door shipping costs were not compiled in 1965, and they do not exist today. Even a rough estimate of how the arrival of containerization in international trade affected the cost of trade is sheer guesswork.
What we do know is that the overall cost of shipping goods internationally remained relatively high through the mid-1970s, even with containerization. One 1976 shipment studied in detail by the Maritime Administration, involving $25,000 worth of wheel rims shipped from Lansing, Michigan, to Paris, France, incurred $5,637 of freight costs—22.6 percent of the value of the cargo. The bill included $3,600 for ocean freight from Detroit to Le Havre, more than $600 in trucking costs, and over $1,300 in fees and insurance costs. With the 7 percent French import tariff added on, the wheel rims cost one-third more in France than in Michigan.22
At some point in the late 1970s, the trend line seems to have begun to change. Although fuel costs continued to rise, the real cost of shipping goods internationally started to fall rapidly.23
What happened to make shipping cheaper? And why did it start to happen around 1977 rather than with the onset of international container shipping a decade earlier? The answers have to do with a group that has received little attention in these pages: shippers. Containerization required the buyers of transportation to learn a whole new way of thinking about managing their freight costs. As they became more knowledgeable, more sophisticated, and more organized, they began to drive down the cost of shipping.
Shippers were not a major force in the days of breakbulk freight. Many governments frowned upon rate competition, supporting rate fixing by the liner conferences and, on some routes, prohibiting low-rate