The port value calculation

However, there is no internationally established approach to calculating this impact. A recent report for the US ports industry is striking: it claims that the economic impact of its ports is $4.6tr. As this physical amount is hard to put in perspective this impact is expressed as a percentage of US GDP, which the report claims is a staggering 26%. In comparison, an economic impact study in the Netherlands reports that the GDP share of its ports industry is about 3%.

In the US, the direct impact of ports is only about 0.7% of GDP, the remainder is made up by the cargo that moves through the US ports. The share of the ports industry in GDP increased from 20% of GDP in 2007. In absolute terms, the impact increased from $3.2tr to $4.6tr. That is surprising, as the total cargo volume handled in the US ports in 2014 was lower than in 2007.
These results are clearly driven by the method. The calculation includes all the value added at each stage of producing an export cargo, as well as the value added at each stage of production for the firms using imported raw materials and intermediate products that flow via ports.

While I often stress the significant impact of ports on the overall economy, this approach of economic impact calculation is, in my view, flawed and sends the wrong message.

First, the method suggests that all value creation from trade can be attributed to ports. In my view, importing and exporting companies create value for their stakeholders, and they need well performing ports.

Second, the calculations lead to a huge difference in value creation between imports and exports, with a higher value for export flows. The role of ports in providing access for US consumers to products from overseas is undervalued, while the role of ports in creating and sustaining export related manufacturing jobs is overvalued.

Third, the key contribution of ports in reducing ‘generalised transport costs’ is close to irrelevant in the calculation. Paradoxically, the relatively high employment and wage levels in the US ports drives up valued added, while in reality it drives up transport costs.