Heed expensive lessons from West Coast ports

A container ship is moored in Elliott Bay and in view of the Space Needle Tuesday, Nov. 11, 2014, in Seattle. (AP Photo/Elaine Thompson)

It’s probably more than most Americans want to know but our nation’s logistical transportation system operates in a fragile balance of just-in-time deliveries.

The economy depends on it; so do our consumer-centric lifestyles — and our national defense. And so does the profitability of America’s global companies, large and small — especially in South Carolina where our economic successes and ambitions are welded to global transactions.

This multi-modal transport system is tuned and integrated mostly beyond public perception, a background-noise abstraction most of us would just as soon ignore — too many trucks on our highways, too much noise on the railways, too many impacts on our environments. But every now and then we get a glimpse of this system’s strategic imperatives — and a reminder that technology might define the transport system, but it remains a very human enterprise. Like right now, at major West Coast ports.

The Pacific Maritime Association and the International Longshoremen’s and Warehousemen’s Union’s six-year contract expired last June and the parties are supposedly at the table with federal mediators. The circumstances are similar to East Coast longshore labor and management anxieties a couple of years ago that ended with a new International Longshoremen’s Association master contract.

But the tactics are very different and the stakes are much higher, especially for the retail industry.

Since talks got focused last summer, a wave of congestion and terminal shutdowns has insidiously descended upon major West Coast ports — engendering high-cost disruptions throughout America’s logistical systems. Customers’ interests seem to be the last things on negotiators’ minds. Congestion is measured in hours or days, creating the worse of all circumstances for container ship operators —anchorage queues as giant vessels wait for berth time at backlogged terminals.

Major shippers, especially big box retailers, are scrambling with contingency plans, including cargo diversions to East Coast ports. Charleston’s container volumes were up 15 per cent last month. “Yes, some of this relates to the West Coast,” says S.C. State Ports Authority chief Jim Newsome.

Nissan, Walmart and FedEx have publicly acknowledged their West Coast “challenges.” Dozens of other global retailers are simply too busy dealing with the problems. Air cargo prices are moving upwards and U.S. factory production has been tempered as the component inventory deliveries become uncertain.

And this is not just about imports. McDonald’s recently announced that West Coast ports issues were disrupting shipments of french fries to 3,000 franchises in Japan.

A “lockout” of ILWU workers in 2002 cost the national economy billions each day — and left a marketing target on West Coast ports’ dependability. East Coast ports have openly exploited this in their competitive scramble for larger and larger ships abetted by the Panama Canal expansion scheduled to open later this year.

We Charlestonians, so proud of our natural harbor commercial port, might quarrel with the notion that West Coast ports are that strategically important.

But they are. These ports handle about 25 percent more containers that East Coast ports. Los Angeles and Long Beach, the giant twin ports of San Pedro Bay, annually handle about three times the container volumes as Charleston and Savannah combined.

This gateway flow of mostly retail related commerce impressively equates to 12.5 percent of America’s gross domestic product, according to the National Association of Manufacturers.

The National Retail Federation has warned that a five-day stoppage would affect 73,000 jobs across America and produce a negative $1.9 billion daily impact on the economy.

Harder to measure, though, are the effects of what actually is happening.

The parties seem to be relying on no-strike clauses of their interim agreement, but one newly automated terminal at Los Angeles was effectively shut down after union workers complained about the safety of certain mechanical equipment. “Efficiency” night shifts have been canceled, and there are universal complaints about availability of container chassis. Management accuses the unions of affecting slowdowns and procedural grievances as exertions of their primary leverage. Union leadership accuses management of not engaging enough labor to remedy the congestion.

This saga, while tilting an eighth of America’s economy toward disruption and uncertainty, has become a nasty high-stakes poker game — with the nation’s transport system as the ante.

The core issues seem simple and predictable. Ocean carriers want documented labor-cost models for the long term. This includes concrete understandings about Obamacare-era health insurance and pensions and work rules. The unions want what unions always want — broadest possible jurisdictions over the ever-evolving technology of the maritime transportation industry, preservation of liberal work rules and the “Cadillacs” of health insurance and pensions.

Today the ILWU workers — employed in what clearly is a port industry sellers’ market — are in a very good place. The average full-time ILWU worker earns $142,000 annually in wages. Some earn more than $300,000 annually. The PMA reports the “benefits” package costs employers $82,000 per worker annually.

What’s playing out is another clash of a scalable technology-driven global economic system clashing with bare-knuckled old-fashioned labor union tactics. Both sides are tugging against realities. Management surely understands port operations are still very dependent on humans — and collective bargaining. The unions understand the imperatives of cost controls and productivity.

It is certain the parties will get to an agreement, and then a weary industry will wonder anew why it took so long and cost so much — especially in terms of the ultimate reliability of West Coast port operations.

Ron Brinson, a former associate editor of this newspaper, was president/CEO of the American Association of Port Authorities 1979 to 1986, and president/CEO of the Port of New Orleans 1986 to 2002. He can be reached at rbrin1013@gmail.com.