Billion Dollar Battle At The Port

The battle between the dockworkers International Longshore and Warehouse Union (ILWU) and the Pacific Maritime Association (PMA) took over 9 months to settle.  From Seattle to San Diego, all 29 west coast ports in the union were affected, but the massive ports of Los Angeles and Long Beach were most critically hit.

Battle at the port

They are the two busiest seaports in the United States, combining to bring a total of 40% of the nation’s incoming container cargo, with $1 billion in goods moving through daily. During the extended dispute, shipping gridlocked and essentially came to a halt, with the Pacific Ocean off the coast of southern California turning into a virtual parking lot for container vessels.

portAnyone who has ever been a member of a labor union knows that contract renewal disputes are a typical occurrence.  With the dockworkers contract set to expire last June, negotiations began in May… yes, May of 2014.  By the time February of 2015 arrived, all contract disputes had been resolved except for one.

According to a Bloomberg report, “Talks had broken down this month over a union demand that it be able to fire arbitrators in workplace grievances. The two sides had reached terms over salaries, benefits, the right of union members to maintain and repair truck chassis used to haul shipping containers and health care.”

On February 11th, the National Retailers Federation issued a press release asking the White House to intervene in the port crisis.  Jonathan Gold, Vice President of the NRF, issued the request stating:

“The slowdowns need to end. The brinkmanship needs to stop. The ILWU and PMA are delaying cargo and merchandise in the short-term while harming the competitiveness of the West Coast ports in the long-term. This stalemate is hurting American businesses, their employees and consumers. It’s time for the White House to immediately engage in this critically-important economic priority and force the two sides to remain at the negotiating table until a deal is done. The time for monitoring has passed. The time for action has come.”

ContainersAccording to USA Today, the NRF wasn’t the only organization demanding action on this crisis. The U.S. Chamber of Commerce also pressed for action with chamber CEO Tom Donohue also releasing a statement. “This is now a growing crisis that is impacting farmers, retailers, and manufacturers throughout the country, as well as trucking and railroad companies who have far less cargo to move,” Donohue said. “The time is long past for the parties to agree on a contract. President Obama should urge the parties to quickly resolve their differences, get back to work, and keep the ports open.”

Fortunately, it worked.  On February 14th, it was announced that Labor Secretary Thomas Perez was being sent in to end the dispute and by the close of the day on February 20th, the crisis was resolved.

Interestingly enough, Perez pulled the Obama card.  Bloomberg.com stated, “The deal came after Perez gave the dockworkers’ union and shipping lines and terminal operators at the ports until the end of Friday to respond to a contract settlement he proposed. If they didn’t reach an agreement, he said he would move the talks to Washington next week.” Apparently, the thought of moving talks to Washington gave negotiations a huge shove forward.

The contract is ‘tentative’ until the union members vote on it, hopefully by April, but it was at least enough to get the ports back in business.

“After more than nine months of negotiations, we are pleased to have reached an agreement that is good for workers and for the industry,” ports association president James McKenna and longshoremen’s union president Bob McEllrath said in a joint statement. “We are also pleased that our ports can now resume full operations.”

portOn a conference call with reporters that took place shortly after the announcement Perez stated, “The parties have agreed to ensure that there are fully operational ports up and down the West Coast beginning tomorrow evening.  I am confident that they understand the urgency of the task of eliminating the backlog.”

Chris Kirkham and Andrew Khouri reported in the LA Times about the long-lasting consequences that would still be felt for some time to come. While the deal may be done, it could still take up to three months to clear the backlog of cargo on the docks and ships that are stranded offshore. “Many businesses and workers won’t recover the money they lost because of port gridlock. More than 4,400 ships bring nearly $400 billion worth of goods through the ports of Los Angeles and Long Beach every year, a crucial link in the global supply chain of factories, warehouses, docks, highways and rail lines.”

Sadly, the final toll that this crisis took on our nation and the economy is still being realized. Some of the losses included:

  • The Washington, D.C.-based Agriculture Transportation Coalition, which tracks ocean shipping issues, estimated in December that nationwide the lost sales for fruits, vegetables and meats totaled more than $400 million per week.
  • In California, citrus growers are being hit especially hard. Their trade association reckons reductions in sales to Asian markets are already down 25%, costing growers an estimated $125 million.
  • California citrus growers have lost $500 million in export business since November because containers now sit for an intolerable 10 days at the pier before being loaded,
  • The meat industry tallied its losses in the tens of millions of dollars.
  • At one point, a total of 32 of these massive ships were anchored outside the ports, unable to unload thousands of cargo containers filled with auto parts, electronics and clothes destined for store shelves across the country.
  • Importers of furniture, books, clothing — even Mardi Gras beads — said their products were stuck on the docks.
  • Wal-Mart Stores Inc. warned that their supply for upcoming holidays could be affected.
  • Some businesses have attempted expensive workarounds, rerouting goods via air or through Gulf and East Coast ports, analysts said. Items ordered by retailers for the spring probably won’t reach stores on time.
  • Some farms in California that normally export 60 tons of alfalfa hay and grass per week have been forced to stockpile it or sell it cheaper domestically.
  • Local trucking companies have had to lay off nearly all their employees since the volume of their business has dropped by 80% or more.
  • The manufacture of cars, computers, airplanes and other high-value manufactured goods is dependent on the ability to move components efficiently around the globe to meet the needs of both domestic manufacturers and foreign customers. Honda already announced that it will slow production this week at six factories in the Midwest and Canada because of a shortage of crucial parts, hung up on Western docks.
  • Companies across the globe are also feeling the effects. A shift toward “just in time” manufacturing means companies keep their inventories low, making them far more susceptible to supply chain interruptions.

Some of these hits, while painful enough in the short term, could become permanent if foreign customers ultimately find the products they need elsewhere.Port of LBDespite all the losses, it appears that this crisis was resolved just in the nick of time.  Prior to the recent settlement, all news sources agreed that a few more months of the crisis would cause substantial long lasting damage to our economy.

However, there are critics that point out that this nightmare could have been avoided in the first place.  In an article on thecommonsenseshow.com they report that, “The import crisis on the West Coast began in May of 2014. The Obama administration did not attempt to intervene until nearly nine months later, when Obama finally dispatched Labor Secretary, Thomas Perez, to California to resolve the crisis.

As one person put it, “With the American economy teetering on the brink, Obama knew he had little wiggle room to get this crisis solved and we should all be asking why he did not act for nearly nine months.”