WikiLeaks Document Release http://wikileaks.org/wiki/CRS-RS22332 February 2, 2009 Congressional Research Service Report RS22332 Trade in the U.S. Gulf Region: Hurricanes Katrina, Rita and Beyond Mary Jane Bolle, Foreign Affairs, Defense, and Trade Division January 26, 2006 Abstract. This report examines trade entering and leaving the United States through the Gulf of Mexico and its 16 major ports - a region extending from southern Florida to southern Texas. It is designed as a tool for planning or reaction in the 109th Congress, 2nd session, as Congress continues to deal with the hurricanes' aftermath; and as a resource to help quickly identify some of the potential trade effects of any other natural or manmade disaster that might strike the U.S. Gulf coast. Included are five graphs, a map, and a table summarizing specific trade data for the 16 ports. Finally, this report looks at potential trade implications of any such disasters and identifies some policy issues. Order Code RS22332 Updated January 26, 2006 CRS Report for Congress Received through the CRS Web Trade in the U.S. Gulf Region: Hurricanes Katrina, Rita and Beyond Mary Jane Bolle Specialist in International Trade Foreign Affairs, Defense, and Trade Division Summary http://wikileaks.org/wiki/CRS-RS22332 This report examines trade entering and leaving the United States through the Gulf of Mexico and its 16 major ports -- a region extending from southern Florida to southern Texas. It is designed as a tool for planning or reaction in the 109th Congress, 2nd session, as Congress continues to deal with the hurricanes' aftermath; and as a resource to help quickly identify some of the potential trade effects of any other natural or manmade disaster that might strike the U.S. Gulf coast. Included are five graphs, a map, and a table summarizing specific trade data for the 16 ports. Finally, this report looks at potential trade implications of any such disasters and identifies some policy issues. It will not be updated.1 Purpose of This Report The Gulf of Mexico can be likened to a gigantic harbor whose span is roughly equal to one-half the distance between the U.S. Atlantic and Pacific coasts. It is not surprising, therefore, that roughly 80% of the value of all trade that enters or leaves the United States along the Gulf coast does so by water. The strength of the Gulf harbor is that it is somewhat protected and centrally located for easy water access to Europe and the Mediterranean, Africa, South America, or, through the Panama Canal, Asia. The problem with the Gulf, however, is that, because of recent weather changes, it has been the site of increased numbers of higher intensity hurricanes. These include Hurricane Katrina, which struck the Gulf Coast on August 29, 2005, and Hurricane Rita which struck the Gulf coast on September 24, 2005, temporarily closing or partially closing five of the 16 trade ports2 and paralyzing the massive network 1 Carolyn Smith and Michael Donnelly, KSG-FDT, CRS, provided statistical assistance. 2 See Table 1 footnotes for a list of ports affected. For other reports on Hurricane Katrina and its effects on commerce, see CRS Report RL33075, U.S. Agriculture After Hurricane Katrina: (continued...) Congressional Research Service ~ The Library of Congress CRS-2 of oil and gas facilities, including drilling platforms, pipelines, and refineries. Such disasters can result in considerable disruption to trade as commodities -- some of them perishable -- are delayed, diverted, destroyed, or simply hung up and unable to get through blocked ports. The U.S. National Hurricane Center has reported that it expects recent wind and water temperature changes in the Atlantic Ocean which spawned these more intense storms to continue -- possibly for 25 years or more.3 This report examines trade entering and leaving the United States through the Gulf of Mexico's 16 major ports, which together account for 99% of all Gulf waterborne trade. It is designed as a tool for planning or reaction -- as a resource to help quickly identify some of the potential trade effects of any natural or manmade disaster that might strike the U.S. Gulf coast. Finally, this report looks at potential trade implications of any such disasters, and identifies some policy issues. Trade Through U.S. Gulf Ports http://wikileaks.org/wiki/CRS-RS22332 Along the Gulf lie 16 of the Figure 1. Composition of Waterborne U.S. 41 largest U.S. ports (see map, Gulf Trade ($198 billion in Exports and Figure 6). Houston, the Gulf's Imports), 2004 th largest, ranks 4 and New Orleans, the second largest, ranks 12th in size (based on total Gulf Trade as % of Composition of trade value -- see Table 1) Total U.S. Trade Exports + Imports Chemicals - 12% among all U.S. ports for waterborne trade. Three- Agriculture - 8% quarters of imports and exports Oil - 52% Machinery - 6% of the 16 Gulf ports are from Gulf trade - 9% three industries: oil, agriculture, Base metals - 7% and chemicals. This Textiles,apparel - 3% specialization results in large Rubber & plastics - 3% part from geography. Because Other - 9% the Gulf area has traditionally been rich with oil and gas, the Source: CRS calculations on data from World Trade Atlas. See footnote 4. processing industry for these resources grew up around them, making the Gulf a magnet for additional oil and gas imports. The chemical industry and many of its products derive, in turn, from crude oil. Symbiotically, they also feed into the 2 (...continued) Status and Issues, by Randy Schnepf and Ralph Chite; CRS Report RS22257, Hurricane Katrina: Shipping Disruptions, by John Frittelli; CRS Report RL33124, Oil and Gas Disruption from Hurricanes Katrina and Rita, by Lawrence Kumins and Robert Bamberger; and CRS Report RS22297, Ports in Louisiana: New Orleans, South Louisiana, and Baton Rouge, by Vanessa Cieslak. 3 Interview with meteorologist Stanley Goldenberg of the National Hurricane Center, reported in Katrina: Why It Became a Man-made Disaster; Where It Could Happen Next, National Geographic Special edition, fall, 2005, p. 35. CRS-3 agricultural industry. Agricultural exports through Gulf ports owe their abundance to the barge-based Mississippi River transportation system, which carries products from at least 16 states cheaply and efficiently, and deposits them in New Orleans or nearby ports. Overall, (see Figure 1) Figure 2. Dollar Value of U.S. Gulf Exports waterborne exports and imports and Imports, 2004 that pass through U.S. Gulf of EXPORTS: IMPORTS: Mexico ports account for less $62 billion $136 billion than one-tenth of U.S. trade 160 (9%), but a much greater share 140 Chemicals - $7 of the oil (52%), agricultural 120 Base metals - $13 (8%), and chemical (12%) 100 industries. The remaining 80 Oil & gas - $96 quarter of that trade is mostly Rubber/plastic - $4 machinery, base metals, 60 Machinery - $8 Agriculture - $14 textiles/apparel, and 40 Oil & gas - $8 rubber/plastics.4 20 Chemicals -$18 Other - $20 Other - $10 http://wikileaks.org/wiki/CRS-RS22332 0 Figure 2 shows the relative Source: CRS calculations on data from World Trade Atlas. size and composition of U.S. See footnote 4. Gulf exports and imports separately: Imports, at $136 billion in 2004, are more than twice the value of exports, at $62 billion; and oil imports, at $96 billion clearly dominate Gulf imports (accounting for 70%) and account for nearly half (48%) of all Gulf trade. Figure 3. Gulf Port Share of U.S. Agriculture Agricultural Exports and Imports, 2004 Industry group Industry Commodity The United States is the (%) Exports Imports world's largest agricultural 70 56 62 64 60 52 exporter, facilitated by the 50 41 42 42 40 37 Mississippi River, which is an 30 24 22 16 19 22 15 important component of the U.S.'s 20 10 9 6 com p arat i v e advantage i n 0 A M An Po at ma A "C C e ta R n g p G W in O ea org So se A A Sp Ve C ic e e ta A agricultural trade. The river is the ll ll or al b ic ll ll of s, b ll ra il t h e i h s er ge ul yb eds ve e Fa Fa fe c le tr ea a e of p ts ts g y " le ns central artery of a 14,500 mile & & lP ra ro oi oi nd fe ro um ls ls ro in d e, du s uc fr du ($ ($ inland waterway. Its barge traffic te c ui 0. 0. ct a ts 9 3 s bi bi ($ ts ts takes agricultural commodities -- l.) l) 0. ($ ($ 9 13 1 bi bi l.) bi especially grain -- down to ocean- l.) l.) Source: CRS Calculations on data from World Trade Atlas. going vessels in New Orleans and See footnote 4. South Louisiana, and delivers such imports as coffee back up the river. 4 All data in this report reflect the Harmonized Tariff Schedule, which groups numerous commodities into 99 industry classifications which are, in turn, aggregated into 22 separate industry groups. All data are taken from World Trade Atlas, published by Global Trade Information Services, Inc. and represent export and import data from the U.S. Census Bureau manipulated by the U.S. Maritime Administration to reflect waterborne trade. CRS-4 Each grain-laden barge can carry the equivalent of roughly 15 rail cars or 60 trucks, at a fraction of the cost of these other modes of transportation. In 2004, agricultural exports in the Gulf totaled $14 billion. Of this, $13 billion was in vegetable products, and nearly $1 billion was in animal products. Vegetable exports (see Figure 3) were dominated by corn (62% of U.S. total), rice (42%), grain sorghum (24%), wheat (22%), soybeans (64%), and fats and oils (47%). Nearly 40% of all U.S. Gulf "cereal" grain exports go to four countries: Japan, Mexico, Egypt, and S. Korea. Animal products were dominated by poultry (mostly frozen) exports, accounting for 37% of all U.S. poultry exports, much of which goes to Russia. Oil and Gas The Gulf of Mexico is one of the great oil and gas production and refining regions in the world. It is a major region for oil and gas infrastructure, including pipelines, oil and gas wells, oil and gas platforms, and a refinery at virtually every port. Nearly 60% of all oil consumed in the United States is imported. Roughly half (see figure 2) of all imported oil enters the United States through the Gulf -- much of it from Mexico, Venezuela, Saudi Arabia, Nigeria, and Iraq. Primary oil exports are to Mexico and include MBTE, http://wikileaks.org/wiki/CRS-RS22332 a gasoline additive/blending component that has fallen into disfavor in the Figure 4. Gulf Port Share of U.S. United States but is used by others Chemical Exports and Imports, 2004 elsewhere, and such "heavy" products as Industry group Industry petroleum coke, which has various uses, and is something the United States can 70 (%) Exports Imports 57 spare. 60 50 43 40 29 30 20 19 17 Chemicals 20 10 7 0 A fe or in A fe in ll ll rt or rt or ga The numerous chemical plants in ch ch ili ill ga ga ni ze iz em em c ni ni er rs ch c c ic ic s the Gulf, particularly along the Texas ch ch al al em em em ex im ic po po al ic ic and Louisiana Gulf coasts, account for a s al al rt rt s s s s ($ ($ slightly greater share of Gulf exports 18 7 bi bi l.) l) Source: CRS calculations on data from World Trade Atlas. and imports than does agriculture. See footnote 4. Twenty percent of all U.S. chemical exports exit through Gulf ports (see Figure 4), including 57% of all Figure 5. Gulf Port Share of Other fertilizers, and 43% of all organic Major U.S. Gulf Exports and Imports, chemicals, to such countries as S. Korea, 2004 Mexico, and China. Twenty-nine Industry group Industry percent of all fertilizer imports enter the United States through Gulf ports. (%) Exports Imports 50 40 40 36 31 Other 30 20 18 21 22 18 16 15 15 12 13 12 10 9 10 Figure 5 shows other major 0 A K tex ket W tto or & a A C C & m St C tte iles , w O Sa Sh A Iro A ppe ste eta Zi mi r l ll ni t o d ll or phu ll o lu re products exported through Gulf ports nc nu oo n c p ra lt, ip n ru ba s, k w l s/ su bb ,b se sl flo l ag er as m and their share of total such U.S. exports at e ls /p ,a in ro pa la r, sh g s st c h re ea st including textiles and apparel: knitted or ic ($ et l ( rt ru ic h, 13 ed $2 ct ke st ur bi r on crocheted fabrics (21%), cotton products es l.) e bi l.) Source: CRS calculations on data from World Trade Atlas. See footnote 4. CRS-5 (13%), wool (12%); and straw products (18%). Major products imported through these ports are base metals (16%), including iron and steel (31%), copper (15%), and aluminum (15%). These ports also serve as gateways to 40% of all ores, 36% of all vessels entering the United States (most of them for the oil platforms), 22% of all salt/sulphur, and 18% of all cork imported into the United States. Trade Implications and Policy Questions The extent to which the key U.S. Gulf industries are affected by disasters in the Gulf area depends on which ports and industry infrastructures are affected. The 16 key ports in the Gulf of Mexico are depicted below in map form (Figure 6) and in table form (Table 1). For each port, Table 1 lists (column 1) the name of the port and its ranking (based on total exports and imports) among all U.S. ports; the total 2004 trade value (column 2); the total value of that port's exports together with major exports and their share of that port's total (column 3); and the total value of that port's imports together with major imports and their share of that port's total (column 4). If some ports are damaged, products can be shipped out of the country through other http://wikileaks.org/wiki/CRS-RS22332 ports, but transportation costs may increase and perishable commodities may be lost. Although Figure 6 shows commodity specialization, by port, many ports export high volumes of key commodities. All 16 ports except Gulfport handle oil as an export or import and typically include refineries. All 16 ports export chemicals although only 10 specialize in chemical exports. Most grain exports pass through Texas or Louisiana. Only Pascagoula specializes in exporting poultry, although sizable quantities of poultry (not shown in table 1) also pass through Mobile, New Orleans Gulf Port, or Houston. Gulfport specializes in textile and apparel exports. Hurricane Katrina closed or partially closed five main Gulf ports: New Orleans, South Louisiana, Mobile, Pascagoula, and Gulfport. Hurricane Rita affected two: Beaumont and Galveston. Most ports were quickly reopened. While some goods found other import or export routes, some oil production facilities have still not reopened at the time this report was published. Currently, monthly statistics on waterborne trade in U.S. Gulf ports are lagging economic activity by at least seven months. Thus, statistics from which to estimate changes in the value of exports and imports as a result of these hurricanes will likely not be available until about mid-2006. Meanwhile, the U.S. Census Bureau has begun releasing preliminary export and import data for all Gulf ports covering months since Hurricanes Katrina and Rita struck; however, these data have not been further refined by the U.S. Maritime Administration. These data are available at [http://www.census.gov/foreign-trade/Press-Release/gulf_index.html]. With data from either source, however, it may be hard to separate out effects of Katrina from other effects such as overall weather and supply and demand -- especially on agricultural products, which may vary considerably in tonnage and value from year to year. The potential for additional hurricanes in the Gulf region in the coming years raises a number of trade policy questions. Some of the most important ones revolve around options for protecting the trade infrastructure, which includes the Mississippi River, grain storage elevators, the various ports, oil facilities in the Gulf of Mexico, and U.S. merchant vessels. CRS-6 Table 1. Commodity Specialization by Port: Waterborne Exports and Imports (all $ in millions) U.S. Gulf of Mexico Port and rank (total trade Total 2004 exports, Major EXPORTS Total 2004 imports, Major value) among all U.S. Total 2004 and share of total Port exports for each IMPORTS and share of total Port ports trade value industry imports for each industry 4. Houston, TX $29,064 (mil.): chemicals (32%), $36,835 (mil.): oil (48%), base $65,899 machinery (23%), oil (11%) metals (14%), chemicals (9%) *12. New Orleans, LA $9,579: vegetable products (37%), $12,592: base metals (37%), oil $22,171 chemicals (23%), oil (12%) (24%), chemicals (9%) 15. Morgan City, LA $143: machinery (51%) floating $14,134: oil (100%) $14,277 vessels/docks (29%), *16. S. Louisiana $7,644: vegetable prods. (cereals and oil $6,541: oil (73%) $14,185 seeds) (79%) **18. Beaumont, TX $1,295: oil (51%), chemicals (32%), $11,992: oil (98%) $13,287 cereals (15%) 20. Corpus Christi, TX $2,043: chemicals (48%), oil (32%) $9,920: oil (93%) $11,963 vegetable. prods. (13%) 22. Texas City, TX $8,629 $1,423: inorganic chemicals (75%) $7,206: oil (99%) http://wikileaks.org/wiki/CRS-RS22332 24. Port Arthur, TX $7,219 $724: oil (63%), chemicals (27%) $6,495: oil (94%) 25. Freeport, TX $1,434: chemicals (62%), rubber/plastic $5,727: oil (94%) $7,161 (24%) 27. Baton Rouge, LA $6,693 $1,274: chemicals (76%), oil (19%) $5,419: oil (68%), iron/steel (18%) 31. Lake Charles, LA $6,055 $806: oil (40%), chemicals (34%) $5,249: oil (98%) *33. Mobile, AL $1,694: wood pulp (24%), oil (23%), $3,431: oil (56%), base metals $5,125 chemicals (14%) (18%) *35. Pascagoula, MS $764: poultry (29%), machinery (26%), $3,878: oil (94%) $4,642 oil (22%) *37. Gulfport, MS $1,622: textiles/apparel (60%), wood pulp $2,355: textiles & apparel (78%) $3,977 (11%), machinery (8%), poultry (8%) **40. Galveston, TX $703: cereals (49%), machinery (14%), oil $2,586: oil (67%), machinery (15%) $3,289 (11%) 41. Tampa FL $1,735: fertilizer (85%) $1,462: inorganic chemicals (35%), $3,197 oil (15%); vehicles (15%) Total: Gulf Ports $197,769 $61,947 $135,822 Source: CRS calculations on U.S. Customs data manipulated by the U.S. Maritime Administration. *Ports closed or partly closed by Hurricane Katrina. ** Ports closed or partly closed by Hurricane Rita. Figure 6. Sixteen Key Ports in the U.S. Gulf of Mexico