Prepared Remarks of

Sean T. Connaughton

Maritime Administrator

Pacific Merchant Shipping Association Lunch

San Pedro Double Tree Hotel

California

Monday, October 16, 2006

12:15 PM

I am delighted to meet with the members of the Pacific Merchant Shipping Association (PMSA). And I appreciate your warm welcome.

I cannot think of a more appropriate place to discuss maritime industry issues than the West Coast. Those of you living and working here know first-hand the important and significant role that marine transportation plays in maintaining and improving both the local and national economy.

Our economy is strong and growing. In fact, last year, the American economy outpaced that of every other major industrialized nation. And during the first half of this year, our national economy grew at an impressive rate of 4.2 percent. Furthermore, recently released job data indicates that unemployment has fallen to 4.6 percent and we have witnessed 37 consecutive months of job growth.

The marine transportation industry supports and contributes to this robust economy. Waterborne cargo and associated activities contributed more than $742 billion annually to the U.S. Gross Domestic Product. America’s network of waterways moves 2.2 billion tons of domestic and foreign commerce each year, and the top 50 ports in the U.S. account for about 84% of all waterborne domestic and international cargo tonnage.

The Ports of Los Angeles and Long Beach make significant contributions to strengthening the American free-enterprise system, contributions which have a far-reaching impact on the shipping system of our entire nation as well as the Pacific region.

For example, in 2005, $262 billion in international trade passed through the ports of Los Angeles and Long Beach, accounting for 23 percent of all U.S. waterborne trade.  The annual container volume at the Port of Los Angeles was 7.5 million TEU’s, making it the largest U.S. container port, and the eighth largest worldwide.  And, Long Beach wasn’t far behind with 6.9 million TEU’s, second among U.S. ports and 12th largest worldwide. 

Together these two ports generate hundreds of thousands of local jobs and billions of dollars in wages, salaries, and state and local taxes. No wonder they are at the forefront of America’s continuing economic prosperity.

It seems clear that throughout the coming years and into the distant future, our maritime infrastructure will continue to grow in importance. Conservative estimates project that U.S. trade and freight volumes at American ports will double by 2020. That’s less than 15 years from now!

Clearly, the marine transportation industries that support this trade are and will continue to be crucial to maintaining our fiscal health. Careful and strategic investment in our maritime infrastructure and assets, including personnel, will be essential if we are to keep our transportation network from becoming a chokepoint for our nation’s growth and development.

There is no doubt that America faces a vast transportation challenge--- actually that sounds too much like a buzz word, so let’s call it as it is; congestion—that threatens to overwhelm our ports and our distribution network and erase any efficiencies gained from improved vessel and cargo handling designs.

As a former elected official in one of our nation’s fastest-growing counties, I know all too well how congestion can adversely impact our quality of life and economic development. Congestion already costs America $200-billion a year in lost time, lost revenue, and wasted fuel. Congestion stalks and clogs our highways, our railroads, our airports, and our ports. It is a major threat to our economic prosperity.

We need a new approach and we need it now. That’s why this past May, the Bush Administration rolled out a comprehensive Congestion Relief Strategy. Our entire Department is focused on finding ways to reduce congestion on America’s transportation network. The Maritime Administration will play a large role within this far-reaching and comprehensive approach to ensure America’s economic prosperity.

And our nation’s new Secretary of Transportation, Mary Peters is focusing her energy on improving the safety and performance of our transportation systems and expanding options for investment that will allow them to keep pace with current and future demands on our network.

Secretary Peters is a proven problem solver who has spent her career working on transportation issues in the private and public sectors. She understands the price that we pay for congestion and is determined to keep America moving.

The $286 billion surface transportation bill President Bush signed into law in August 2005 contains many innovative financing provisions to improve freight movement through our gateway seaports and along major trade corridors. This includes several provisions that encourage private-sector involvement and make transportation investments inside seaports eligible for credit assistance.

That’s one reason why the Maritime Administration has been working with stakeholders at our biggest ports: Los Angeles, Long Beach, and the Port of New York & New Jersey, and we will expand our work in the months to come. We’ve taken the lead in exploring and developing more effective uses of our shoreside connections as well as coastal waters and inland waterways.

That’s why the Department of Transportation authorized an initiative in southern California to help address congestion issues at the ports of Los Angeles and Long Beach—the arrival destination for 43 percent of all the containers that come into this country.

Many of you here know Randy Rogers, the Maritime Administration’s liaison from the Intermodal Gateway Office in Long Beach. Randy assists industry as a one-stop shop, facilitating requests for information not only from my agency, but a number of other federal agencies and industry-government groups.

We’ve worked with the PierPass group, which provides an incentive for cargo owners to move cargo at night and on weekends. This helps reduce truck traffic and pollution during peak daytime traffic hours and alleviates port congestion. Our role was to offer our expertise in RF-ID technology as PierPass moved ahead with its implementation efforts in this important technology.

We believe that Public-Private Partnerships (PPPs) are important to the future of infrastructure financing and we are encouraging states like California to adopt laws that will allow them to take advantage of this option. It’s clear that major investments are going to be needed at the Ports of Los Angeles and Long Beach to keep up with growing demand. It is worth mentioning that in fact, Governor Schwarzenegger has included improvements to port accessibility and services as part of his Strategic Growth Plan, a step we recognize and appreciate as an important way to promote the development of PPPs.

We are working with the EPA and industry on improving the emissions of trucks within the harbor, working with CARB on their new regulations on low sulfur fuels for ships steaming off the coast, and acknowledge reducing emissions from goods movement in the Los Angeles/Long Beach region is a priority. In fact, MARAD recently provided a $180-thousand grant to the Port of Los Angeles to share environmental technology with the Shanghai Port Authority.

And in July of last year, our Southern California Gateway Office held an innovative finance workshop so senior finance and business executives can learn more about the tools DOT has at its disposal. As a result of the positive response to this workshop, others have been held in New York, New Jersey, and Seattle and we are looking at the possibility of holding more of these type workshops to spread the word about the tools we have in our DOT toolbox.

One of my foremost priorities is to conform the Maritime Administration’s organization and priorities to changes in the industry and the challenges it faces. We want to position our agency to be a partner in the overall mission of the Department of Transportation and an advocate for rational responses to modern challenges. This is an issue we will be focused on in the coming months and I look forward to working with each one of you in this endeavor. I learned from local governance that there is an ever-present danger of losing the big picture in the welter of details that always attend the management of complex programs. I won’t let that happen to your Maritime Administration.

As currently envisioned, the Maritime Administration will be organized to address four areas: national and international transportation facilitation; compliance; domestic industry development; and national security.

Transportation facilitation is obviously linked to the challenges posed by congestion, but also about developing better approaches to moving cargo and people by and through seaports. As all of you know all too well, the maritime industry is complicated. It involves ports, carriers, and shippers, different modes of transportation, as well as numerous levels and subdivisions of government. It also involves passengers and different commodities that either can be carried in containers or considered break bulk, liquid bulk, dry bulk, and roll on-roll off cargoes. It involves individuals and companies with operations that span from the Alaska North Slope to the Great Lakes and inland waterways to the offshore energy industry and coastwise and international deep sea carriers. It is international in scope in every imaginable way. We can’t ignore that this is the most international of all industries and that we must excel not only by domestic measurements, but also in a competitive global environment.

This inherent complexity has made it difficult to advance projects and programs to improve transportation infrastructure in a timely fashion. We believe that the Maritime Administration can bring knowledge, experience, and other capabilities to bear for more effective coordination and cooperation and for the development of best practices and solutions to address the challenges we are facing from congestion. Better utilization of the shoreside and waterborne transportation infrastructure will move freight and passengers in a cost-effective, environmentally friendly, and efficient way, while helping relieve the tie-ups in our ports and on our roads and railways.

A second area of focus is compliance. This industry, whether ashore or afloat, is facing an ever burgeoning set of requirements regarding the protection of the environment, safety and security. The international, federal, state and local programs that are developed must be harmonized, effective, and implemented properly . As both a vessel and facility owner and operator, the Maritime Administration is in a unique position to address best practices and ensure implementation of appropriate methodologies to satisfy current and proposed marine safety, security and environmental protection standards. We expect to have a voice in the councils of every level of government -- federal, state and local – to ensure rational, meaningful, and effective regulation of maritime activity.

Third, we must systematically encourage investment in U.S. marine transportation infrastructure, including our personnel. The continued growth in trade and transportation requires growing investment in the infrastructure that supports it. We must secure additional investment to make congestion mitigation a reality.

We must also find ways to increase American presence within the global maritime and transportation marketplace. This role involves more than simply the strength and size of U.S.-flag fleet. For us to maintain a position of power and economic leadership, American presence in the worldwide industry, whether in the financing, operations, staffing and management, of shipping lines, ports, and related industries, must grow. There may have been a time when a purely domestic perspective outlook on maritime events and conditions was sufficient to protect the vital national interests of the United States. That time has ended and is inadequate to the present world trading environment. Strong U.S. involvement in the international marine transportation system will increase business growth and employment opportunities for U.S. seafarers and workers, and all Americans benefit. In fact, we have the key foundation for that growth represented in the audience today – each one of you.

Finally, there is national security. Throughout the world attitudes and concepts toward security are changing. The Maritime Administration has always had a leading role in America’s security: our country cannot address conflicts or emergencies overseas without sealift.

More than 90% of the materiel in combat theaters since 2001 has been carried to the Middle East by water. Ships of the Maritime Administration’s own Ready Reserve Force—as well as commercial U.S. flagged ships under MARAD’s initiative—are transporting food, machinery and equipment to Iraq, all vital elements to aid our troops. We will continue to be the lead agency in preparing our commercial industry and ports to deal with whatever emergencies, whether natural or man-made, confront us in the future.

This is my first visit to California, but I feel that we know each other well already. That’s why I feel comfortable asking you for something that is important to the Nation: your active and enthusiastic efforts to ensure that America’s ports, terminals, vessels, and landside transport chain are the best in the world in terms of efficiency, safety, security, and environmental protection. To the extent we achieve that goal, we benefit every citizen of the United States and we make our Nation stronger. I will do my part to advance that goal, but I need your help to advance the security and economic interests of every American. If we all pull together to inform and to advocate the necessity of strong ports and a strong maritime industry, we can pull the rest of the country with us.

Many thanks for allowing me to share these thoughts with you today.

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