A Perception, Shattered

After sitting through this month’s Trans-Pacific Maritime Conference session on East Coast longshore negotiations, a large importer of consumer goods wasted no time in making contingency plans to avoid the East Coast this year.

“I was on the phone five minutes after the Daggett-Capo show with our management,” he said, referring to International Longshoreman’s Association President Harold Daggett and United States Maritime Alliance Chairman and CEO James Capo. “We are now including West Coast rates and Prince Rupert in our bid package.”

With the last coastwide strike on the East Coast 35 years ago, the industry has come to take labor peace there for granted. Throughout the tumultuous years in the late 1990s and early 2000s, culminating in the 10-day shutdown of West Coast ports in the fall of 2002, the East Coast was quiet. To shippers, former ILA President John Bowers was a steady, non-confrontational hand at the helm of the ILA.

The sharp contrast between East and West set the stage for the establishment of New York-New Jersey, Savannah and other East Coast ports as integral to importers’ supply chains from Asia and helped buttress the rationale for the expansion of the Panama Canal. Even a two-day shutdown at New York-New Jersey last fall, the first walkout in a quarter century at the East Coast’s largest port, dented but largely failed to alter the perception of the East Coast as trouble-free and open for business.

That perception was shattered in 1 hour, 15 minutes on March 6 in Long Beach. Speaking to a TPM crowd of some 1,600 shippers, carriers, intermediaries and 3PLs, Daggett openly said a strike could occur if issues of new technology and automation, chassis, union jurisdiction and container weights weren’t resolved to the union’s satisfaction.

“I’m not threatening a strike, but you’ve got four hurdles to jump over,” he said (Story, page 13).

For many shippers, the swift reaction to dust off contingency plans is a legacy of 2002, when the lockout of International Longshore and Warehouse Union members caught many off guard. That event, an epochal moment in modern logistics, introduced the concept of supply chain risk to the United States’ largest retailers and manufacturers. CEOs became wise to ports, railroads and terminals, and logistics teams developed a finely honed sense of potential danger.

So when Daggett spoke of “dark clouds” hanging over the upcoming negotiations between the ILA and USMX to replace the contract that expires on Sept. 30, they were ready. Conciliatory statements by ILA Executive Vice President Benny Holland, a stalwart of the Bowers era who seemed to sense the collective alarm in Daggett’s confrontational language, did little to reassure shippers. “I can tell you now it’s our intention to keep moving that product from the manufacturer to the consignee and to the consumer and not to have a labor strike,” Holland said.

Neither were shippers reassured by comments from Daggett himself, who told the audience about his own record of labor peace as head of New York-Jersey maintenance and repair Local 1804-1. “We have negotiated fair and competitive contracts for decades that have protected our members’ salaries, benefits and jobs while helping companies make money, all the while doing so without any disruption in service,” he said.

Beyond the threat of a strike, Daggett also took a swipe at the whole modern logistics system created by the introduction of containers. Containers may have paved the way to modern retailing, opened the door to global supply chains and in a larger sense helped create the world we live in today, not to mention being the basis for the careers of everyone in the TPM audience.

But for Daggett, the automation of terminal operations that containers require has been a “disaster.” “In the Port of New York-New Jersey, we had 35,000 longshoremen working every day on breakbulk. Thirty-five thousand men working on breakbulk! Today, on containers in New York and New Jersey, we have less than 4,000 on the busiest day. That’s what automation does, it takes away jobs,” he said.

It’s ironic that just when shippers are reassessing their views of the East Coast, they are also, somewhat belatedly, reassessing their views of the West Coast. Indeed, as the East Coast simmers with potential disruption, shippers are realizing the West Coast has been quiet for years and is embracing a more trade-friendly approach because of the upcoming expansion of the Panama Canal and the potential loss of West Coast cargo it might represent.

That’s a change in the landscape that could have important ramifications in coming years, depending on how the ILA negotiations turn out.

Peter Tirschwell is senior vice president for strategy at UBM Global Trade. Contact him at ptirschwell@joc.com, and follow him at twitter.com/PeterTirschwell.

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