CAFTA Meets Katrina

And more than the fiscal health of an American city hangs in the balance

Geography makes history, so they say, and Hurricane Katrina's inundation of the low-lying areas of New Orleans has driven that point home with brutal clarity. But to get the full picture, you also have to visit the undistinguished city of Gulfport, Mississippi, right next door. In Gulfport, after Katrina, the first word on everyone's lips is CAFTA, the recently signed free trade agreement whose passage ranks as one of George W. Bush's second-term legislative accomplishments. CAFTA was supposed to be another Gulf coast jackpot for Mississippi, like the state's famous riverboat casinos. But that vision of prosperity today is buried under rubble.

"I've seen a lot of storm damage, but this is absolutely incredible," says Cal Sweep, a tall, lanky facilities manager in charge of recovery efforts for a major shipper in Gulfport. "I've never seen anything like this."

Halfway down Gulfport's main pier a four-ton structural steel cargo roller lies twisted into abstraction; near the end a 42-ton treaded container-mover hangs precariously, upside down, corroding in the warm saltwater of the Gulf. The rest is wreckage. "It basically looks like a garbage dump, though the casino looks like it made it okay," Sweep observes with a wry chuckle, pointing to one of the riverboat casinos, a five-story structure that remained intact after ripping from its moorings and dropping more than a thousand feet inland, at the entrance to the port.

Salt water nibbles away at the U.S. economy.
photo: Erik Sass
Salt water nibbles away at the U.S. economy.

It's not hard to see the local economic implications of this massive destruction for the working classes of coastal Mississippi and Louisiana—but it takes a few steps back to see the global picture.

Casey, the chief mechanic at the pier—a short, powerfully built man who flashes a gold tooth when he laughs (as he does frequently)—turns somber when asked about the future.

"There's no question if the shipping companies pull out of Gulfport, that's just going to be a disaster for the working folks here," he says, brow furrowed with worry. "We were all getting ready for some more work from CAFTA, and now we're just hoping we can hang on to what we got."

Compared to other shipping centers on the Gulf coast, Gulfport is fairly average—a mid-sized entrepot previously moving 2.2 million tons or almost $4 billion a year in goods. In a very poor part of America, the port directly employs 5,000 people out of the city's total population of about 70,000, and is responsible for many more when related secondary occupations are counted (for example, service industry and administrative jobs centered on the port).

Meanwhile, a closer look at Gulfport's stats reveals just how dependent this mid-sized port is on foreign trade: according to the American Association of Port Authorities, only about three percent (70,000 tons) of Gulfport's traffic is "domestic."

By an overwhelming margin, Gulfport's stock-in-trade is fruit and vegetables from Latin America and foreign-bound produce and grain from America's midwest, so it clearly stands to benefit from the recent signing of CAFTA, which is meant to increase regional economic contact and spur competition. Even if President Bush breaks the promise of his September 14th address to the U.N. to eliminate subsidies to the American agricultural sector—as seems possible—Central America and Gulfport still stand to benefit from increased fruit imports, a shipping category where the city ranks second in the U.S.

Of course this is assuming the port stays in business. Casey's nightmare scenario of an endless work stoppage is all too plausible; though three major shippers (Chiquita, Crowley Maritime, and Dole) say they plan to return to Gulfport, it is too soon to tell whether any of them will carry through. After all, cargo companies can easily reroute cargo shipments to other major ports, taking advantage of land infrastructure to deliver the same goods at minimal extra expense. And once they've re-routed operations, after a relatively small window of time there is little incentive for them to return.

"I believe shipping will be diverted to other ports, for example with shipping to east coast ports then distributed via rail," says James L. Sweeney, a professor of management science and engineering and a senior fellow at Stanford's Hoover Institute. Spokesmen from Dole and Chiquita confirmed that this is indeed the plan for the near future.

Likewise, Roy MacKinnon, an expert on international trade also at Hoover, agrees, "The system is more flexible than it used to be. If you were back 100 years ago, you might have a problem, but we've now got a highly developed rail and truck transport system, so I think you're dealing with a fundamentally different situation."

In the same vein, free market advocates argue that government subsidies for port recovery only serve to distort the natural evolution of the system—suggesting, for example, that disasters like Katrina ought to be allowed to drive shipping operations away from hurricane-prone areas.

Veronique de Rugy, an expert on port security at the American Enterprise Institute, opposes government subsidies for reconstruction efforts on these grounds. "These companies must bear the responsibility for their decisions, whatever they may be. They must assess both risk and opportunity and then live with consequences."

But the view that Gulf shipping facilities are now somehow dispensable may prove short-sighted, based as it is on optimistic estimates of future threats, which foreclose those "fantastic" scenarios that nonetheless seem to be materializing with ever-greater frequency in recent years.

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