There are certainly positive elements of the role in the form of greater demand for services provided by Californians. This demand then results in more jobs and tax revenues for the state. At the same time, however, the flow of traded goods through the state imposes an uncompensated burden on the state’s residents. Although this discussion is relevant for many states, including inland states through which many traded goods flow, it is decidedly more important for California and other states possessing significant global gateways.

In excess of 10 billion kilograms of exports and 20 billion kilograms of imports travel on a select number of California’s highways in excess of what California ships on the highways of other states. Although there are benefits and costs to providing these services, it is reasonably clear that there are uncompensated costs for the state. The total cost of moving goods through Southern California includes the cost of labor and other compensable services provided, in addition to the cost of pollution, congestion, and deterioration of the highways. The benefits, jobs, business profits, and tax revenue are derived from fees paid by shippers for services. The costs of providing this service, then, exceed the benefits received, as pollution, congestion, and highway wear and tear remain uncompensated.

This imbalance between benefits and costs represents a subsidy from the state of California to producers and consumers in other states. This subsidy, when applied to exports, makes it less expensive for producers in other states to make their product available for sale in foreign markets, potentially disadvantaging California producers exporting to those same markets. When applied to imports, this subsidy reduces either the cost to individuals in their consumption of imports or the cost to producers of obtaining intermediate inputs for the production of some good. By artificially lowering the costs of production in other states relative to the costs for California producers, the subsidization of imports is even more likely to disadvantage California producers as it affects competition in domestic markets rather than abroad.

Source: California's Global Gateways: Trends and Issues, Jon D. Haveman David Hummels, pp. 33-34; Copyright © 2004 by Public Policy Institute of California, All rights reserved. San Francisco, CA

...[T]he number of source ports covered by CSI is perhaps a more relevant number than the value covered, if only because it takes only a single container to wreak local physical and broader economic havoc...The numbers are especially low for California’s largest ports, for which less than 7 percent of all ports of origin are covered by the CSI...California’s largest ports continue to receive containers from many foreign ports that are not participating in the CSI. It remains an open question as to just how much security is being provided by the Container Security Initiative.

Source: Id., pp. 71-72.