Protecting the Nation’s Seaports: Balancing Security and Cost ••• Editors: Jon D. Haveman Howard J. Shatz 2006 Library of Congress Cataloging-in-Publication Data Protecting the nation’s seaports: balancing security and cost / edited by Jon D. Haveman, Howard J. Shatz p. cm. Includes bibliographical references and indexes. ISBN-13: 978-1-58213-120-7 ISBN-10: 1-58213-120-1 1. Harbors—Security measures—United States—Economic aspects. 2. Marine terminals—Security measures—United States—Economic aspects. 3. Shipping— Security measures—United States. 4. Terrorism—United States—Prevention— Economic aspects. I. Haveman, Jon D., 1964-II. Shatz, Howard J. HE553.P76 2006 363.325’938710973—dc22 2006011932 Copyright © 2006 by Public Policy Institute of California All rights reserved San Francisco, CA Short sections of text, not to exceed three paragraphs, may be quoted without written permission provided that full attribution is given to the source and the above copyright notice is included. PPIC does not take or support positions on any ballot measure or on any local, state, or federal legislation, nor does it endorse, support, or oppose any political parties or candidates for public office. Research publications reflect the views of the authors and do not necessarily reflect the views of the staff, officers, or Board of Directors of the Public Policy Institute of California. Foreword It is sometimes difficult to understand how much the world has changed since September 11. Even diplomats and foreign policy experts, who have far greater knowledge than most, have difficulty understanding all the consequences of events that have unfolded since September 11. One certain consequence is that the daily media reports of death and destruction from all over the world have made it imperative to intensify security measures in many ways. With this report, Protecting the Nation’s Seaports: Balancing Security and Cost, PPIC tries to shed some light on how one significant element of these global security imperatives is affecting Americans and Californians. California is home to three large seaports that are of major significance to the nation’s economy—Los Angeles, Long Beach, and Oakland. The authors in this volume inform us that all California ports are vulnerable to a terrorist attack and that disabling any of the big three could have serious implications for the economic health of the region, as well as for lives and property in the immediate vicinity. This volume is comprehensive—it describes and analyzes what could happen if a terrorist attack on a port were to occur, what can be done to deter such an attack, the characteristics of U.S. port security programs, what factors stand in the way of an adequate port security policy, and some alternative methods for financing that policy. Most important, this multiauthored volume is not alarmist—it is a thoughtful and balanced look at a major problem and its context: how the global economy has fostered huge increases in international trade and how terrorists could exploit the vulnerability of this massive global goods movement. Protecting the Nation’s Seaports may well become a standard reference volume for understanding the issue of port security for the nation and particularly for California. The authors describe the problems iii and the solutions, but full implementation of new policy is still off in the future. Our hope is that this volume will help speed up the process of both policy development and implementation. David W. Lyon President and CEO Public Policy Institute of California iv Contents Foreword......................................... iii Figures .......................................... xi Tables ........................................... xiii Acknowledgments................................... xv Acronyms ........................................ xix Map of the Ports of Los Angeles and Long Beach ............. xxiii 1. INTRODUCTION AND SUMMARY by Jon D. Haveman and Howard J. Shatz ............... 1 The Issue of Port Security .......................... 1 The PPIC Port Security Project ...................... 5 Summary of Main Findings ......................... 6 The Economic Effects of a Terrorist Attack on a Port ..... 6 Best Practices in Port Security...................... 11 Programs and Finance ........................... 16 Implications and Conclusions ....................... 23 References ..................................... 28 2. PORTS, TRADE, AND TERRORISM: BALANCING THE CATASTROPHIC AND THE CHRONIC by Edward E. Leamer and Christopher Thornberg ......... 31 Introduction ................................... 31 The Cost-Benefit Analysis of Security .................. 35 Most Shocks Do Not Cause Recessions................. 37 September 11 Did Not Cause the 2001 Recession........ 37 Natural Disasters Also Do Not Cause Recessions ........ 39 How Much Disruption to Supply Chains?............... 42 The Problem Is With Labor ....................... 45 Previous Port Closures Hold Lessons for the Present........ 47 Previous Port Shutdowns Have Not Had a Great Effect on the Economy ............................... 51 Event Studies ................................... 56 v Summary and Conclusions ......................... 59 Appendix...................................... 63 References ..................................... 67 3. THE COSTS OF A TERRORIST ATTACK ON TERMINAL ISLAND AT THE TWIN PORTS OF LOS ANGELES AND LONG BEACH by Peter Gordon, James E. Moore, II, Harry W. Richardson, and Qisheng Pan ................................ 71 Introduction ................................... 71 The Los Angeles and Long Beach Ports................. 73 The Southern California Planning Model ............... 74 Radiological Bomb Attack Simulations ................. 76 Terminal Island Attack Simulation .................... 79 Qualifications and Comparisons...................... 86 Conclusions.................................... 89 References ..................................... 89 4. BOOM BOXES: CONTAINERS AND TERRORISM by Stephen S. Cohen.............................. 91 Introduction ................................... 91 Threats ....................................... 94 Direct Catastrophic Damage ...................... 94 Disabling Autoimmune Reactions................... 99 Itineraries, Scenarios, and Documentation: Or, One Container, Two Containers, Three Containers, Four ... 100 Simple and Less-Simple Itineraries .................. 101 Mixed Loads and Complicated Itineraries ............. 103 “Container Bob” and Other Indicators ............... 104 Defense ....................................... 107 Layers ...................................... 108 Conclusion .................................... 120 The Threats .................................. 120 The Constraints ............................... 120 The Approach to Defense......................... 120 References ..................................... 124 vi 5. HARNESSING A TROJAN HORSE: ALIGNING SECURITY INVESTMENTS WITH COMMERCIAL TRAJECTORIES IN CARGO CONTAINER SHIPPING by Jay Stowsky .................................. 129 Introduction ................................... 129 How Has the Private Sector Responded to the Terrorist Threat to Shipping and Ports?.................... 132 The Coexistence of Successive Technology Generations ..... 135 Other Factors Shaping the Private Sector Response ........ 137 The Need for Standards .......................... 138 “Public Good” Aspects of Maritime and Port Security..... 139 Liability Issues ................................ 140 Tradeoffs Between Security and Other Societal Values .... 142 The Special Sensitivity of the Security Market to Terrorist Events .................................... 143 Key Technologies ................................ 143 Sensor Technologies ............................ 144 Identification and Authentication Technologies ......... 145 Screening Technologies .......................... 146 Surveillance Technologies......................... 147 Antitamper Seals and Tracking and Inspection Technologies ............................... 147 Integrated Solution and Data Analysis Technologies ...... 149 Conclusions and Policy Recommendations .............. 151 References ..................................... 153 6. GOVERNANCE CHALLENGES IN PORT SECURITY: A CASE STUDY OF EMERGENCY RESPONSE CAPABILITIES AT THE PORTS OF LOS ANGELES AND LONG BEACH by Amy B. Zegart, Matthew C. Hipp, and Seth K. Jacobson .. 155 Introduction ................................... 155 Organizational Challenges .......................... 157 Background .................................. 157 Findings and Recommendations .................... 162 Status of Implementation......................... 165 Conceptual Challenges ............................ 168 Background .................................. 168 vii Community Emergency Response Teams.............. 171 Findings and Recommendations .................... 172 Status of Implementation......................... 173 Obstacles and Success Factors ....................... 176 Key Success Factors ............................. 178 Conclusion .................................... 180 Interviews ..................................... 181 References ..................................... 182 7. THE GOVERNMENT RESPONSE: U.S. PORT SECURITY PROGRAMS by Jon D. Haveman, Howard J. Shatz, and Ernesto Vilchis ... 185 Introduction ................................... 185 Port Security Before the September 11 Attacks............ 187 Current Port Security Measures ...................... 190 Maritime