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West Coast Ports Reopen, but Crippling Labor Dispute Has Already Cost US Economy Billions

Stalled negotiations between dockworkers and port operators have stretched on for months, jeopardizing American jobs and international reliance on the efficient operation of Pacific terminals.

by Alex Mierjeski
Feb 18 2015, 10:40pm

Photo by James R. Tourtellotte

Ports along the West Coast reopened Tuesday after a longstanding labor dispute led companies that operate the shipping terminals to lockout most of their dockworkers over the weekend, restricting the loading or unloading of cargo from idling ships and causing severe slowdowns in operations.

For months, disagreement over a new contract has roiled relations between port operators and the International Longshore and Warehouse Union (ILWU) — one of the strongest labor unions in the country — resulting in slowdowns and bottlenecks that observers estimate are costing the US economy billions of dollars each month. West Coast ports account for about 50 percent of US cargo, and manage more than 70 percent of imports from Asia.

Though terminals affected by partial slowdowns last weekend have reopened, significant damage has already been done.

"The largest West Coast port, Long Beach, has been badly affected, with freight movement down by about 50 percent," John Logan, director of labor and employment studies at San Francisco State University, told VICE News. "It could take one to two months for ports like Long Beach to get back to normal."

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With pressure for a resolution mounting from labor and trade groups as well as members of Congress, President Barack Obama dispatched Secretary of Labor Tom Perez to San Francisco to mediate stalled negotiations between dockworkers and their bosses that have stretched on for nearly ten months. Perez arrived in the city on Monday.

"Secretary Perez made clear that the dispute has led to a very negative impact on the US economy, and further delay risks tens of thousands of jobs and will cost American businesses hundreds of millions of dollars," Labor Department spokeswoman Xochitl Hinojose said in a statement Tuesday.

Perez has urged the two sides "to come to an immediate agreement to prevent further damage to our economy," Hinojose added.

Roughly 20,000 dockworkers represented by the ILWU across the 29 ports from San Diego to Seattle have been without a contract since July as their union hashes out terms with the Pacific Maritime Association (PMA), which represents shippers and dock operators. While important elements like healthcare have been resolved, issues like the employers' refusal to pay premium wages on weekends and holidays remain in arbitration.

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Though a media blackout prevents the ILWU and PMA from commenting on the ongoing talks, a labor source familiar with the negotiations told VICE News that they were likely to extend into Wednesday.

The absence of a resolution has meanwhile jeopardized American jobs and international reliance on the efficient operation of West Coast ports, which handled $892 billion in imports and exports in 2013, according to US trade data.

According to the Agriculture Transportation Coalition, US agriculture exports have suffered an aggregate loss of $1.75 billion each month for the past two months because of gridlocked ports. The American Meat Institute and National Pork Producers Council reported losses of $170 million per month, the US Hides, Skins, and Leather Association reported monthly losses of hide exports worth $185 million, hay and forage exports are down by $25.6 million a month, and French fry exports from Washington potato farmers have dropped $23.5 million per month.

The situation is such that McDonald's outlets in Japan started rationing French fries in December to cope with dwindling supplies of processed potatoes from America. The company has since sent more than 1,000 tons of French fries to the country by air.

"Agriculture exports from southern California are stuck waiting (rotting) at the ports. Specifically several broccoli growers form the Imperial Valley and Central Valley of California have called me asking if exporting through the Port of Ensenada (Mexico) is viable," said one agriculture exporter quoted in an ATC impact report obtained by VICE News. "The financial loss and negative effects to their market opportunity is substantial."

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But as farmers and exporters worry about getting products out, companies reliant on imports await shipments languishing on megaships along the Pacific coastline.

"The prolonged slowdown at the port operations is now impacting some of our North American production operations due to parts shortages," a spokesperson for Japanese automaker Honda said in a statement to VICE News. The company's plants in Ohio, Indiana, and Ontario will halt production on select days this month, running at only 50 percent on others.

Toyota is also slowing operations, having "eliminated overtime at some manufacturing plants in North America," spokesperson Amanda Rice informed VICE News.

The parent company of Subaru is using air delivery to ship auto components to US factories at an additional cost of up to $60 million per month.

A joint study last year by the National Retail Federation and the National Association of Manufacturers determined that a total shutdown of West Coast ports would cost the American economy some $2 billion per day. It estimated that during the last prolonged port shutdown, which persisted for only ten days in 2002, the economy lost close to $1 billion daily and needed months to recover.

Pending a contract agreement soon, continued slowdowns could ultimately lead companies to lose faith in the ability of West Coast ports to operate effectively.

"It slows the supply chain, which has short-term ramifications in the sense that we can't get goods to market, we can't get both imports and exports," Stephen Schatz, a National Retail Federation spokesperson, told VICE News. "But in the long term, we can lose markets in Asia due to our inability to get goods there."

"Having non-fully functioning ports on the West Coast doesn't help anyone," he added.

Follow Alex Mierjeski on Twitter: @Amierjeski
Photo via Wikimedia Commons