Five years ago, a third-party logistics executive toured China as part of a trade delegation. "We could see what was about to happen back then," he recalls. "Each time we boarded planes during the tour, flight attendants passed out newspapers to all the passengers. During the flights, everyone studied the business news. Everyone seemed focused on business. It was amazing."

Nothing has changed. I experienced the same thing on a trip from Beijing to Shanghai this spring.

By now we're familiar with the volume of China trade. What's less appreciated, though, is how this relatively sudden emergence of China as a world economic power is beginning to drive the business models of U.S. ports and 3PLs in new directions.

The Port of Oakland, for example, will off-load two million containers during 2004, an increase of six percent over 2003, drawn mostly from trade with Asia. If container traffic in Oakland continues to grow at six percent a year, the Port will off-load four million containers in 2016. To the south in Los Angeles, an onslaught of imports from China has begun to clog the roads and fill 3PL warehouses to the brim. On the east coast, 3PLs are angling to absorb the business overload.

One IWLA member company has been handling imports of toys, food and spirits from Asia since 1987. Their chief executive has watched the company's Asian business power growth over that period. He says that about half of the products that used to be shipped through their facilities by U.S. and European sources now come from Asia.

Outsourcing is not just about low manufacturing costs. The trend is also driving logistics prices down.

For example, one member of the International Warehouse and Logistics Association (IWLA) handles about 100 containers per day arriving from Asia. Fees for some of that work are so low that the company has to outsource the unloading of the containers. Once containers have been unloaded, the company picks up the logistics chain and handles warehousing, repackaging, other value-added operations and deliveries.

To increase efficiency, reduce receiving and shipping errors and perhaps take back the work the company has had to subcontract out, they are installing new technologies, beginning with a radio frequency (RF) scanning system. Will the increased productivity allowed by RF help? They hope so. But the up-front costs are so high that it is difficult to see how it will work.

Another IWLA member manages cargo for customers moving goods through Los Angeles-Long Beach. About one-third of the company's customers are engaged in the China market, up from virtually none four years ago. The increase has begun to max out existing warehouse capacity. In the last 12 months, they have added about 20 percent to their warehouse space. They have also opened up a transload center where they bring containers to move the goods directly to a trailer.

The growth of trade with Pacific Rim countries thus far has largely benefited West Coast ports, even for cargo bound for the East Coast. It was cheaper to off-load on the West Coast and run freight by rail and truck to eastern destinations.

Today, however, that looks like it's about to change. Research suggests that the rapid growth of trade with China and Asia combined with the design and construction of larger container ships could begin to shift trading patterns in a way that will re-energize the East. The glut of traffic on the West Coast has led shipping lines to lay plans to move containers to the East Coast by way of the Suez Canal, which would lead to an Atlantic crossing and ports of call in the East.

East Coast 3PLs are already preparing to handle increased volumes. One IWLA member, for example, has been investigating potential locations for new warehouse space. They don't think they're alone.

The company also has retained consultants to advise on shifting trading patterns--and partners. Ten years ago, they geared up to receive goods from Mexico as a result of NAFTA, but suddenly everything moved to China. Recently, they had freight move though their facilities from Cambodia, not China. What does that mean? Their adviser tells them that China has gotten too expensive and that it is important to start thinking about how other Southeast Asian nations, such as Cambodia and Vietnam, may soon affect the trading equation.

And so it continues. Import trade from the Pacific Rim that began flowing into the U.S. decades ago shifted first to Korea in response to demands for lower prices. Now, China has taken over. As China prospers, grows, and raises prices, manufacturers will shift once again to Southeast Asian countries. Then, of course, there is India.

One thing is clear, the ever-changing shift in global trade is sure to spur new challenges and opportunities for 3PLs and their customers.