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A Dirty Shame


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Last week’s ruling by the U.S. 9th Circuit Court of Appeals led to the dismissal of part of the Clean Truck Program put into place by the Port of Los Angeles in 2008.  The court eliminated a provision that would have required trucking companies to own the trucks and hire the drivers who haul goods in and out of the Port. This decision is bad news for the residents of Southern California, as it will hamper efforts to clean up the very polluting system of hauling goods away from the Port and leave surrounding roadways crowded with over-loaded, under-maintained trucks.

The Ports of Los Angeles and Long Beach are enormous—together they account for more inbound products for American consumers and businesses than any other maritime facility in the United States. As important as they are for the U.S. economy, they extract an ugly price on residents of Southern California: Nasty air pollution from the ships and trucks that move the products in and out of the facilities, and increased traffic congestion on the main arterial roadways that surround the Ports. Moreover, the danger of old, overloaded trucks that have not had proper maintenance on critical parts like brakes and tires has been well documented in recent years.

These problems have been made worse by the system that is used to move goods to various rail or other facilities in the area. Currently, the vast majority of goods are moved by thousands of independent truckers, who own their own trucks and work on a per-load basis for ‘trucking’ companies who own few if any trucks.

The pollution and danger these trucks bring to Southern California are quintessential examples of economic externalities. The Ports, shipping companies, and truckers don’t absorb the cost of these problems—the general population does. Externalities related to vehicles have been long understood—hence rules and regulations on everything from seat belts to emissions to auto insurance.

The Clean Truck Program is an acknowledgement that the current rules are not good enough, and more must be done to tackle the problem. But there is a deeper issue—even the existing rules are often flouted by the trucking fleets that move products in and out of the Ports.  The reason for this has much to do with the system under which the trucks currently operate.

There is no shortage of low skilled workers to operate these trucks in California—particularly now with unemployment in the double digits. This very competitive system pushes down the fees that independent drivers can charge for their services. This is good for consumers and the trucking companies, but bad for local residents since these low wages imply that many of these truckers have to constantly cut corners to make ends meet. They don’t earn enough to do proper maintenance on their existing vehicles much less invest in newer, cleaner versions.

One solution has been to try and enforce quality standards on trucks entering the Ports. This is difficult to enforce, given the sheer number of independent truckers. Doing a complete safety check on every truck, on every trip, would have a severe impact on the Ports’ ability to operate efficiently. Moreover, trying to monitor truckers who failed inspections and prevent them from making future trips until problems were fixed, would be a logistical nightmare. And frankly the Ports and trucking firms have little incentive to try and enforce such codes. After all, neither are bearing the cost of dirty, unsafe trucks.

Cheating on pollution and safety standards is not only encouraged by the current system—it almost makes it mandatory. After all if an independent trucker was to begin charging a trucking firm more so they could maintain their truck or buy a cleaner one, they would quickly find themselves without any work.

The political pressures have been building on both the Ports of Los Angeles and Long Beach to fix these problems for years. Recent studies on the side effects of pollution and negative media finally generated enough buzz that the Ports began to address the issue in force through clean truck programs. Finding a way of actually doing it has been a struggle, particularly given the system that exists in which the truck owners have little ability or incentive to participate.

The logical answer is to shift from a system of independent truckers to an agglomerated system—where fleets of trucks under common ownership move products. There are two advantages. Larger firms, in the absence of smaller independent operators, would be able to pass costs of safer, cleaner trucks on to shippers and middlemen. Additionally, if there were just a number of larger trucking firms working the ports, they might be able to take advantage of economies of scale, allowing them to better maintain their trucks.**

Second, regulating a fleet of trucks is easier than regulating many independent ones. This is because the Ports would have the ability to punish a company for breaking the rules on one truck by prohibiting all their trucks from entering the facility for a set period of time after a transgression. This raises the potential cost of being caught, and sharply curtails the economic value of trying to cheat on safety or pollution standards. While it would take a highly motivated port management to check and track thousands of trucks, it wouldn’t take much effort to do a type of spot-checking when dealing with a finite number of firms.

Unfortunately, all this logic got swept away by a completely separate issue—revolving around unions and pay issues. There is another side to the independent trucker issue—these drivers do not earn a lot of money for the competitive reasons detailed above. This has been an ongoing issue—particularly for the Teamsters Union, which works hard to organize drivers, but has been unable to make any inroads into the Ports under the current system.

As clean truck programs were being devised at both Ports, labor rights groups along with the Teamsters saw their chance and jumped. They aggressively and successfully lobbied to alter how the rules on clean trucks would be written.

Instead of focusing on the trucks, the rules focused in large part on the drivers themselves – mandating that the trucking companies would have to hire the drivers as employees, rather than hiring them on a piecemeal basis. Under the rules, truckers would be paid on an hourly basis, receive basic employee rights including unemployment and workers comp, and most importantly could now be effectively organized into a union.

Suddenly the clean truck programs were no longer about Southern California residents, but became focused on the controversial issues of unions and workers rights.

Needless to say the trucking companies fought back fiercely. And the Ports themselves balked. The Port of Long Beach refused to pass the same rule that was passed by the board at the Port of Los Angeles – albeit barely.

And of course ultimately the employment provision turned out to be the fatal flaw in the program, as even the left-leaning 9th Circuit could not reasonably agree to allow such rules on employment to stand. It proved to be too big an interference in a secondary market – in a nation that has plethora of rules about extending market power at one level of the supply chain into others.

Worries over unionization are understandable given issues the Ports already have with the International Longshore and Warehouse Union (ILWU), the group that organizes port workers themselves.

Now the entire process is back to square one. Without the agglomeration of trucks, there is almost no way to get truckers to buy clean trucks short of a direct subsidy. And even if such a subsidy were provided, there would be little incentive for these trucks to be properly maintained, or properly tracked.

Environmentalism and social justice are often lumped together as two causes of the political left. Yet ironically here we have an example of how the underhanded pursuit of one of these goals has served to nullify the very logical approach to dealing with another. The activism of labor groups has left Southern California back in a lurch—bearing the costs of air pollution, traffic congestion, and unsafe roadways. Whatever your opinion on unions—it is a shame to see how the process was hijacked.

** The Ports have been saying for years that they need increased capacity. But really, there is no shortage of capacity. Instead the limitations are due to punitive rules regarding hours and overtime. Except during the absolute busiest time of the year—the Christmas product rush—no extra shifts are run. The Ports operate during normal business hours—when road traffic for commuters is heaviest. Trucks sit idle for hours at the Ports waiting for a load. If a lunch break occurs when a container is literally inches from being placed on a truck—too bad, the truck waits until the break is finished.

Trucking firms would never stand for having their capital used in such an inefficient way. They would push for major reforms—moving hours of operation away from rush hour periods, so that trucks making deliveries could do so faster and more consistently. They would push for better scheduling that would prevent trucks sitting inactive for hours. Indeed, having larger trucking firms running products in and out of the Ports would give a countervailing weight to the control of port operations current exerted by the ILWU.

CATEGORY: Environment



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