As of today, July 30, there is no U.S. West Coast longshore agreement in place, a month after the previous six-year pact expired. In any contract year, the time between expiration and agreement is especially volatile, because the risk of cargo-disrupting labor actions is at its highest. It’s the reason we see evidence of diversions by shippers seeking to avoid the risk that comes during this time.
And that risk of disruption isn’t diminishing, not just because there is no agreement, but also because major issues are unresolved, at least in terms of what has been said publicly. There is no known agreement, for example, on who will foot the bill for an estimated $150 million-a-year Obamacare tax set to come due in 2018 tied to the International Longshore and Warehouse Union’s generous, “Cadillac” health care plan. So contentious is this issue that the possibility was raised earlier this year that negotiators would replace the most recent six-year agreement with a three-year pact that defers resolution on the health care debate.
In terms of actual disruption on the docks, though, there has been virtually none, despite all the potential inherent risk that comes in any longshore negotiation, and that led shippers to accelerate or divert thousands of containers. We’re now well past the mid-July date that Pacific Maritime Association President and CEO James McKenna predicted there would be a deal, and as of June 30th, there were no signs of an imminent agreement.
The signals, to the extent they’re visible, have been positive. Nearly every one in a series of updates co-released by the ILWU and PMA have mentioned the two sides’ commitment to keep cargo moving — words almost entirely absent in prior negotiations.
To the extent there has been any disruption this year, it’s been unrelated to the contract talks. A brief instance of longshoremen “hard-timing” the TraPac terminal at the Port of Los Angeles on July 2 was tied to that terminal’s implementation of cargo-handling automation allowed under an earlier contract. Pickets erected by the Teamsters union in early July that some dockworkers initially refused to cross were tied to the Teamsters’ long-standing campaign to organize drayage drivers. A skirmish at the Port of Portland, Oregon, lasting a few hours on July 15 was tied to a 2-year-old ILWU dispute with ICTSI, the operator of the Portland terminal, involving jurisdiction over the handling of reefer containers.
None of those actions was related to the longshore talks themselves. This is in stark contrast to 2008, which saw a coastwise strike and numerous instances of labor tactics that slowed container movements, and, of course, to 2002, which saw a 10-day work stoppage that caused thousands of shippers to rethink their supply chains.
If this year’s negotiation ends without the pyrotechnics seen in 2008 and 2002 — and that’s still a big if — it will mark a major departure in how ILWU negotiations play out and could begin to change perceptions of the U.S. West Coast as a risky port range to ship cargo through.
It’s too early to draw firm conclusions, but a few themes stand out. It had always been accepted as a truism, especially as volumes grew at astonishing rates prior to the Great Recession, that ILWU members felt comfortable in their grip on the market. The East Coast as a gateway in the U.S. market was much less developed, and an ILWU member could legitimately ask, “Where else is the cargo going to go?”
That’s less the case today. At the beginning of the negotiations, McKenna was clear that the situation had fundamentally changed: “West Coast ports have lost significant market share in recent years, and face renewed competition from Canada, Mexico, the Panama Canal and other domestic ports for cargo.”
How much the threat of competition has hung over these talks will become more clear in time. Competition, moreover, is a different threat depending on what part of the coast you’re talking about. Pacific Northwest ports have lost market share to Canadian ports, which is one reason they fought so hard in Congress to get the Harbor Maintenance Tax on imports changed. The tax is assessed on imports moving through U.S. ports but not Canadian ports.
The same competitive threat isn’t as immediate at Los Angeles-Long Beach, which is benefiting from the growth of mega-container ships in the trans-Pacific trade. Those 10,000-TEU-plus ships make fewer U.S. port calls and often avoid the PNW ports. This is leading to a market share shift to LA-Long Beach from the PNW, which ought to give Southern California dockworkers a renewed comfort level in their competitive position.
The story, of course, still must play out. Things easily could turn nasty like they have in prior years. But the indications pointing to a disruption-free negotiation — exactly what McKenna predicted at the TPM Conference in March — are so far positive.
Contact Peter Tirschwell at email@example.com and follow him on Twitter:@petertirschwell.