The Box - Marc Levinson [142]
Other independent lines proliferated, particularly in the Pacific. Taiwan’s Orient Overseas, owned by shipping magnate C. Y. Tung, became the first independent carrier to run containerships between Asia and New York in 1972, charging 10 to 15 percent less than the conference. Korea Shipping Corp., another nonconference operator, laid out $88 million for eight containerships in 1973. Far Eastern Shipping Company, a Russian independent, sent two containerships a month from Yokohama to Long Beach and Oakland. Conference tariff books turned into comic books as shippers deserted the conference carriers in droves. The shift to flat per-container rates in the late 1970s revealed the severe erosion of conference bargaining power in a way not possible when each commodity was charged a different rate. The conference rate for shipping a 20- foot container from Felixstowe to Hong Kong fell from $3,645 in 1980 to $2,136 just three years later, and was lower in 1988 than at the start of the decade. The cost of shipping a 40-foot box from Europe to New York, $2,000 in the middle of 1979, was below $1,000 by the summer of 1980. By January 1981, so many nonconference ships were competing to carry trade from Manila that the Philippines-North America conference collapsed.33
The second important result of shippers’ new power in the 1970s, along with their willingness to defy the shipping cartels, was their embrace of an idea that had been a heresy: the deregulation of transportation.
Trucking was tightly regulated almost everywhere in the early 1970s, with the notable exception of Australia. Most railroads were state-owned, damping any competitive instincts. So long as political power rested with the transportation companies and their unions, rather than their customers, the regulatory structure stood strong. If its collapse can be dated to a single event, it was the bankruptcy of the Penn Central, the largest railroad in the United States, in June 1970. The Penn Central’s failure, followed in short order by half a dozen other rail bankruptcies, drew attention to the regulations that kept the railroads from adapting to truck competition. The costly and controversial government rescue program altered the political equation, and Republicans and Democrats alike began calling for reductions in regulation. In November 1975, President Gerald Ford proposed eliminating much of the Interstate Commerce Commission’s authority over interstate trucking. The following year, Congress took the first steps to ease regulation of railroads.34
An intense national debate ensued. On one side, along with railroads wanting more flexibility to compete with truckers, were shippers and consumer advocates who argued that deregulation would reduce costs. Some trucking companies, especially those that handled smaller shipments, were eager to get rid of regulations. On the other side, many companies that handled full truckloads of freight were bitterly opposed to changes that would encourage partial truckloads, and the unions representing railroad workers and truck drivers fought changes that would weaken union power and eliminate union jobs. The regulators, who were easing regulations slowly and gradually, warned Congress against haste. “Certain shippers command substantial and sometimes overwhelmingly superior bargaining power,” the ICC’s chairman cautioned, asserting the need for the government to keep control in order to protect truckers and railroads from their customers.35
In the midst of this heated campaign, the container became a poster child for the inefficiency caused by outdated regulation.
The basic concept of the container was that cargo could move seamlessly among trains, trucks, and ships. Two decades after Malcom McLean’s first containership, though, container shipping was anything but seamless. In principle, a truck line or a railroad could offer an exporter a “through rate” between St. Louis and Spain, but the through rate was simply the published truck or rail rate for that product from St. Louis to a port,