On first impression

On first impression    I'm an ardent fan of the Los Angeles Lakers (and hopefully that doesn't affect how you think of me from now on).
   I grew up in L.A. during the halcyon days of Showtime, with Magic Johnson and Kareem Abdul-Jabbar and James Worthy running fast breaks and winning championships. As such, I subconsciously compare every subsequent Laker team to the ones I grew up idolizing.
   It's a natural tendency, I think, to take the first circumstance you're presented with and remember it the best, with the most clarity. This is going somewhere, I swear.
   I started covering the cargo transportation industry five short, or long, years ago, just months after the 2002 West Coast port lockout and only a couple years into the post-China-World-Trade-Organization-accession era. In other words, I joined on an upward curve.
   So 2008 seems all the more poignant in my mind. It's my first real down-cycle. Maybe that's why everything seems more cataclysmic, more paradigm-shifting. Then I get a dose of reality.
   I spoke with someone from a steamship line who said, 'this reminds me of year x when y happened and rates dropped z percent.' I read the words of other columnists who have been writing about the industry since I was in grade school. And I'm reminded that Elton John is probably right: it's the circle of life (sorry if you thought I was going to quote from 'Bennie and the Jets').
   In any case, nothing is as bad as it seems, especially when it's the first time. For one thing, we're already in 2009 so the rebound is coming this year, not next (hooray!). Unless it does actually come in 2010 (woo hoo!). Or 2011 (yay). Or 2012 ( ' crickets chirping ' ).
   All this is a rather dramatic lead-in to the subject I was planning on tackling – namely, the members of the Transpacific Stabilization Agreement looking to change the wording of its agreement on file with the U.S. Federal Maritime Commission.
   TSA wants to amend its discussion agreement to give it the right to jointly manage capacity. The amendment, if passed, would take effect Feb. 1.
   The idea is that through being able to coordinate its members' capacity plans – knowing about layups, dry docking, off-hiring of vessels, rationalization of vessels and vessel capacity operated by both TSA members or feeder ships employed by TSA members – the carriers will be able to better weather the downturn of 2008-2009 (or 2010 or 2011 or 2012).
   'TSA members are 'scrambling to find cost savings,' ' TSA spokesman Niels Erich told American Shipper, as reported in Shippers' NewsWire Dec. 30.
   Erich said there are no concrete plans as to how TSA would use the additional authority, but that TSA members 'need every tool in the kit to make sure their fleets are scaled properly.'
   To justify the need for such change, TSA said in an October forecast that full-year 2008 cargo demand would be off by as much as 8 percent compared to 2007, and that business might not see a turnaround until the second half of 2009.
   Now whether the FMC agrees to the idea is another story. As of the time of writing, the commissioners were waiting for FMC staff opinion on the matter and were due to discuss the matter Jan. 14. In 2003, TSA agreed to an FMC decision to remove from the discussion agreement the ability to jointly discuss capacity.
   But it seems to me going back to that scenario would be a case of rushing to a conclusion in desperation. Granting carriers such collaborative powers would make the TSA less of a discussion agreement and more of a conference, even if rates can't be collectively set. That would go against the grain of what's occurring in most parts of the world.
   Would the provision have a sunset clause? In robust times for liner carriers, would the TSA be willing to give up the added rights?
   In many ways, the situation reminds me of the $700 billion stimulus package for the United States that Henry Paulson proposed as global markets came crashing down. It may eventually turn out to be the right thing to do. But in the haste of desperation, sometimes short-term benefits don't make sense long-term.
   By the way, shipper groups aren't very enamored with the idea.

Gatti

   'These are decisions that can be made by the individual lines,' said Peter Gatti, executive vice president of the NIT League, as reported by American Shipper Jan. 8. 'We know cargo volumes are down and we understand the need of carriers to reduce overhead, and part of the overhead is the capacity that individual carriers have in the trade. But from our standpoint, we believe that is a decision best left to the members based on the marketplace that determines to what extent individual carriers need to take capacity out of the system in order to sustain themselves.
   'This industry is not inherently different from other industries that operate internationally. There really is no reason for carriers to have an ability to directly impact pricing by collectively setting guidelines on what each line would adhere to in taking out service in the transpacific trade.'
   As trade attorney Peter Friedmann, who represents the Agricultural Transportation Coalition, among other bodies, said, why would carriers in vessel sharing arrangements need antitrust immunity to reduce capacity?
   'Europe is eliminating antitrust immunity and here these guys are trying to expand the scope of their activities,' Friedmann said. 'We are going to make the point to the FMC that it is unreasonable and absolutely contrary to the direction that all our trading partners are going in. And it does not benefit U.S. exports.'
   U.S. exporters are rightly worried that expanding the scope of collaboration between carriers makes them more vulnerable. Theirs is lower revenue cargo for carriers than imports from Asia.
   At the beginning of this latest basketball season, I mistakenly believed that this year's Lakers might be up there with the greatest teams of the 1980s. Upon further reflection they'll be really good, but not great. In the case of the '80s Lakers, the first impression may last the longest, but they really were the best.
   This situation is not so different. The current downturn might be really bad, but when it's over, it will just have been another downturn. Maybe a particularly nasty one, but just a downturn. It's too quick to give TSA powers that weren't envisioned by the Ocean Shipping Reform Act of 1998. The hyperbole of today shouldn't overwhelm the weight of history.