America’s seaports are critical gateways for goods entering and leaving the United States. Last year, many West Coast ports struggled to keep pace with the enormous amount of goods arriving from Asia, resulting in long delays to deliver home goods, electronics, holiday gifts, and other products to U.S. consumers. This year, the West Coast ports and their dockworkers’ union are negotiating a new long-term labor contract. If these negotiations go poorly, there could be new delays that could also undermine our nation’s long-term competitiveness.

What’s the situation?

Seaports are critical gateways for goods and raw materials entering and leaving the United States. A good illustration: the 29 West Coast ports – including the ports in Los Angeles, Long Beach, Seattle-Tacoma, and Oakland – handle handling approximately 60% of all imports coming from Asia. Critical to the operation of these ports are the dockworkers – the men and women responsible for loading and unloading ocean vessels at these ports, who are represented by the International Longshore and Warehouse Union (ILWU).

ILWU workers and the port terminals renew labor contracts every few years. The current labor contract for the West Coast ILWU members will expire on June 30. The union leadership and the port terminals – represented by the Pacific Maritime Association (PMA) – started negotiating a new contract on May 10. Both parties share a goal of agreeing on a new contract by July 1, but because this contract will set pay, benefits, work hours, and other issues for several years, much is at stake.

Taking a look back

Every negotiation over the last twenty years has seen at least a short-term service disruption, snarling supply chains and hurting businesses. For example:

  • 2002: Negotiations over technology integration led to work slowdowns and an 11-day shutdown of West Coast ports. President George W. Bush invoked the Taft-Hartley law to reopen the ports. A labor agreement was reached that moved the handling of shipping information from a manual to an electronic process.
  • 2008: In May the ILWU engaged in an illegal day-long work stoppage that shut down all major West Coast ports. In July, three weeks of work stoppages started in Los Angeles and Long Beach and spread to the Pacific Northwest. Contract negotiations ultimately led to terminal operators securing the right to automate and the development of port automation projects.
  • 2014: Stalled contract negotiations led to work slowdowns, creating gridlock at ports. This forced the Obama administration to intervene in 2015.

What’s at stake

This year, the stakes are especially high. U.S. businesses are still recovering from the supply chain challenges of last year, which saw record traffic flows snarling West Coast ports. These contributed to historic delays in delivering goods and products to businesses and consumers.

Supply chain fears persist. A recent MetLife and U.S. Chamber Small Business Index survey found one in four small business owners cite supply chain issues as their biggest problem, and 61% said they changed their supply chain in the last six months in response to disruptions. Any service delays at these ports due to contract issues – even temporary ones – would be catastrophic to U.S. businesses and consumers still recovering.

In many ways, the ILWU comes to the negotiating table with significant leverage. The terminals are under immense pressure to improve service levels and not have a repeat of last year, and as shown above there is a long record of the ILWU employing work slowdowns to win concessions.

There is an additional critical element in these negotiations for our long-term competitiveness, and that is the productivity of these ports, or how quickly they can load and unload ships.

A high level of productivity means containers and goods move quickly through ports, helping keep transportation costs low and getting products to store shelves quickly. Unfortunately, our nation’s ports rank as some of the least productive in the world. The World Bank Group and IHS Markit recently ranked the top ports in the world and the U.S. failed to put a single port in the top 50. Our two most important ports – Los Angeles and Long Beach – ranked #328 and #333, respectively while our most productive port was the port of Philadelphia at #89.

Cutting the performance gap will mean modernizing our ports the way the rest of the world has already done – in part through automation. With trade volumes expected to continue growing this is especially important. Many of our ports are already at capacity and cannot handle any more traffic without degradation in service levels. Without improvements from automation and other changes, our less-competitive ports will hurt the competitiveness of U.S. businesses.

This issue has created a clear battle line between the port terminals and the ILWU. The union views automation as an existential threat to their members’ livelihood by eliminating jobs. Citing recent studies, the terminals disagree and contend that keeping up with growing freight flows requires automation.

Bottom line

Both sides are hopeful that these negotiations will not lead to service disruptions, despite history saying otherwise. But both sides agree that no one should expect negotiations to be completed by the end of the current contract on June 30.

Source: US Chamber of Commerce