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Reviving the China trade

Michael Leone, Boston Harbor's port director, was waiting.

Sitting in his car at the very edge of the pier at Conley Terminal on Castle Island in South Boston on Friday, Leone was scanning a horizon that was still smudged with a stubborn morning fog. And waiting.

A few feet away, in a beat-up white van, two line handlers, specialists in roping ships to docks, were sipping coffee from paper cups. Also waiting.

At any moment, the Zhong He, a Chinese container ship, was expected to loom into view and eventually block the horizon completely, stirring the sleepy gantry cranes and container stackers into a flurry of off-loading activity.

By the end of this weekend, the Donau Bridge, another Chinese floating football field, was also expected to pull into Conley's berthing area and take on cargo for a direct trip from Boston to China.

Leone, who's been port director since 1998, did not begrudge a wait of a few more hours, even a few more days.

'Boston has been waiting for direct service to China for 15 years,' he said.

When the Donau Bridge leaves for Qingdao, China, which it is scheduled to do later today, it will be the first direct service from Boston to a Chinese port since the early 1980s. The outbound service, which will leave Boston Harbor every week, will be provided by the China Ocean Shipping Co. (COSCO) and its partners, K-Line, Yang Ming Line, and Hanjin Lines. The same group of Asian shipping companies have been providing inbound service to Boston Harbor since March 2002.

The launch of direct China container service is a major victory for Leone and the Massachusetts Port Authority, which has been wooing Asian carriers for years. The arrival of Chinese container ships also is a rare piece of good news for Boston Harbor, which often seems to be mired in a long-running losing battle with larger ports to the north (Halifax) and south (New York), rising labor costs, and a lack of facilities and infrastructure.

The resumption of direct trade with China is also a back-to-the-future moment for the Boston area, a throwback to 200 years ago, when trade with China, from both Salem and Boston, enriched many of the families that went on to fund the early growth of the region.

'Forbes, Perkins, Gardner — you can pick almost any prominent name from Boston in the early 1800s, and it was somehow associated with the China trade,' said William Sargent, curator, Asian export art, at the Peabody Essex Museum in Salem. Elias Hasket Derby of Salem, often cited as America's first millionaire, made his fortune in the China trade.

At that time, Boston shipping merchants imported luxury items like tea, porcelain, and silk from China. In return they exported silver, seal fur, spices, and ginseng.

This brief halcyon period was easily forgotten, as a much longer decline settled in and continued. By the end of the 19th century, America was producing many of the luxury items it once imported from China, and Boston Harbor was locked in a losing battle with larger harbors and other modes of transportation, like trains and trucks. When Asian imports began to surge again, during the 1970s, better-situated West Coast ports grabbed much of the action. Boston's reluctance to embrace modern container shipping put it further behind, and the harbor teetered on irrelevance as major shipping lines continued to move their operations elsewhere. Occasionally, administrations would pump up broad ambitious programs, like former governor William Weld's 'Atlantic Rim' proposal, but those initiatives were usually bedeviled by the details.

Yet a few years ago, as some Chinese lines began shipping through the Panama Canal and calling on East Coast ports like Norfolk and New York, Massport began to pursue the idea of persuading a line to initiate direct service to Boston Harbor.

'It was a difficult discussion,' recalled Nick Bellows, assistant director of maritime marketing at Massport. 'For a container ship moving up the East Coast calling on ports, we're at the end of the string.'

Bellows said that a container ship making a stop in New York harbor has to budget an additional two days if it wants to call on Boston: 19 hours sailing time between New York and Boston; 8 to 12 hours in port; and 19 hours back.

To bolster its case to the shipping lines, Massport organized the largest area exporters and importers into a 'Port of Boston Action Committee' in 1999. The idea was to get some of the area's biggest shippers — International Forest Products Corp., Gillette, Staples, Reebok — to use their leverage over shipping companies to make the Boston call worthwhile.

As the committee began its work, it was obvious how much had changed between these old shipping partners. China is now a manufacturing powerhouse, exporting more than twice as many containers of cargo to New England as it imports. Most of its exports are consumer goods, appliances, clothing, and shoes.

Many of Boston's waterbound exports, by contrast, are relatively raw. The area's largest waterbound exporter, Northeast Consolidators, ships lumber and wood chips. International Forest Products exports waste paper and pulp. Boston Hides & Furs, based in Chelsea, ships containers full of animal hides from Midwest slaughterhouses.

Products generated by Boston's celebrated high-tech industry are shipped by air. The 40-foot containers that leave the area via Boston Harbor, staked on the decks of container ships, are more likely to be stuffed with the kind of heavy raw materials dispatched to locations around the world, like China, where low wages and highly sophisticated factories can turn them into finished goods and consumer products.

So our lumber comes back from China as furniture. Some of our waste paper is made into the boxes that are used to package appliances and furnishings. The hides shipped from Boston return from China as belts and shoes.

Although many American industries dream about penetrating the huge Chinese market, the shipping patterns reveal that the higher-end commerce is flowing the other way — the Chinese are doing a better job exploiting our markets.

Still, direct container service to China, ensuring a 24-day passage from Boston to Qingdao, was a valuable connection.

To establish that connection Massport suggested to New England shippers that they promise to divert their cargo on other trade lanes to a new carrier if that carrier agreed to make a Boston call.

'The idea was for large New England shippers to say to shipping companies that we would give them preferential treatment in other ports if they would call on Boston,' said Bellows.

The Chinese shipping line COSCO bought the idea, and organized a group of Asian shipping companies to deliver the service.

'We always considered it ironic that we probably ship to Asia out of every major port in the United States — Houston, Los Angeles, Norfolk — but we couldn't ship from our own home port,' said Dan Kraft, president of International Forest Products of Foxborough and son of New England Patriots owner Robert Kraft. 'That was frustrating.'

Kraft was an enthusiastic supporter of the arrangement with COSCO.

'The agreement wasn't formal, nothing in writing, but there is an understanding that we will favor COSCO in other ports,' he said.

The new direct China service has already had an influence on his company, Kraft said, citing International Forest Products Corp.'s recent purchase of a waste paper facility in Woburn.

'We would not have bought that facility if we didn't have the direct service to Asia from Boston,' Kraft said.

Steven Zambo, president of Northeast Consolidators, one of the region's largest exporters, was also involved in the negotiations with COSCO. Zambo said he expects to have 10 containers on the very first direct China-bound container out of Boston: six containers of hides, four containers filled with lumber.

'This service will help Boston quite a bit,' Zambo said. 'China is where the growth is. They are on the fast track.'

Of course to succeed, the service will need cargo, thousands of containers of cargo bound for China every week.

Massport has spent about $160 million in recent years trying to make the port — which is hampered by low water, high labor costs and no good dockside rail service — more attractive. Yet the Port of Boston has had difficulty luring and keeping major international shippers. Maersk-Sealand, the last big shipping line to make regular calls in Boston, pulled out in 2000, providing only barge service to its bigger port operations in Halifax and New York.

'I actually think Boston's China service has a good shot at success,' said Eugene Gilligan, the editor of Shipping Digest, a Newark-based weekly that covers the container shipping industry. 'Since the recent lockout on the West Coast, the Port of New York has had real congestion problems. Many trucks have been idling for hours, trying to get cargo and drop off cargo. That's an opportunity for Boston . . . it makes sense for New England exporters to give Boston a try.'

Gilligan also believes that China is the right trading partner. 'Trade from China is just exploding,' he said.

Not all observers are so optimistic, however. 'The basic trend in shipping has been fewer, bigger ships going to fewer, bigger ports,' said David Luberoff, the associate director of the Taubman Center for State and Local Government at Harvard's Kennedy School of Government. 'Direct service with China could be a promising market, but it doesn't change the long-term prospects for Boston Harbor. There's very little chance that Boston will ever return as a great American port.'

Indeed, the Port of Boston captured less than 20 percent of the goods New England imported and exported in 2002. Short term, however, things are looking up. Massport recently reported an increase of 10 percent in overall cargo volume and a 30 percent increase in exports alone for 2002. Much of this volume, the report stated, is 'attributable to the increased trade with Asia and is being carried by direct ship calls from China Ocean Shipping Co. and its partners.'