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New COVID-19 scenario will greet West Coast labor negotiations
American Shipper
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The approaching expiration next July of the current US West Coast dockworker contract is prompting more than the usual amount of interest among shippers. This is due to the possibility that any disruption tied to the negotiations for a new contract could ext the paralysis that has consumed container shipping since last year. Several importers have already put contingency plans in place in the event of labor disruption on the West Coast docks, and some tell they have already begun diverting cargo to East Coast ports.

The focus is not unjustified: every negotiation since 1996 between the International Longshore and Warehouse Union (ILWU) and port employers represented by the Pacific Maritime Association (PMA) has resulted in backups on the docks to one extent or another, including body blows to containerized trade, such as the six-month stretch of labor action in 2014 and 2015 that resulted in 24 ships anchored off Los Angeles-Long Beach as the 2015 TPM container shipping conference began in early March of that year.

But given widespread predictions that constrained capacity and high rates will ext well into the first half of 2022, an entirely new and untested dynamic will surround West Coast longshore contract negotiations. While there are several reasons to believe that, like previous cycles, the negotiations could unravel, there are natively viable reasons to envision at least the potential for a settlement with minimal impact on cargo flow.

The disruption scenario remains compelling. Management sources tell they anticipate the union will aggressively seek to roll back terminal operators’ rights to automate and thereby densify limited terminal acreage, especially at the ports of Los Angeles and Long Beach. The TraPac Los Angeles and Long Beach Container Terminal facilities have already been automated, APM Terminals automated a section of its Pier 400 terminal in Los Angeles, and the MSC-owned Total Terminals International (TTI) Long Beach has plans in the works for a 10-year automation project that the ILWU has claimed will result in “the destruction of jobs and maximum extraction of foreign profit.”

In recent years, ILWU members have become increasingly vocal in their opposition to terminal automation, seeing it as an existential threat despite having agreed in 2008 and in all subsequent contracts to allow automation at West Coast terminals. By the time the current agreement expires on July 1, 2022, the dockworkers will have received some $800 million in incremental wages and benefits in return for that concession.

Employers will be reluctant to surrer the right to automate; automation is seen as the only way to significantly expand capacity on highly valuable but limited-acreage terminal land. Automating terminals enables operators to handle almost twice the annual container throughput of a manual terminal on the same footprint. The ports have virtually no more land upon which to build new terminals, so the best way to keep ports growing and jobs in the long term is to densify their operations through automation.

There is precedent on the East Coast to restrict automation, where the International Longshoremen’s Association negotiated a contract with East and Gulf coast employers that bars additional automation during the life of the agreement through September 2024, with the understanding that dockworkers will show they can achieve higher productivity. In a welcome video message to an ILWU convention in June, ILA president Harold Daggett said, “There is no nice way to say it: automation means the elimination of your jobs, forever.” In a video posted this month to note the 85th anniversary of the ILA, he said “We will never allow automation from Maine to Texas, never.”

The position of the ILA has made the automation issue even more sensitive on the West Coast, for both sides. West Coast employers are in no mood to offer the ILWU “give backs” on the automation they achieved in the 2008 contract. Nonetheless, the ILWU can leverage resistance to automation for higher pension benefits and wages, and to ensure that new jobs that are d by automation fall under the jurisdiction of the ILWU. This is a major concern for rank-and-file members. TTI in Long Beach, which is 80 percent owned by MSC, in May disclosed to the union its plan to automate its 385-acre Pier T terminal. Contract negotiations generally a year before the contract expires, and the existing contract expires July 1.

The bottom line: the COVID-19 pandemic has in no way dimmed the combustible potential of automation in West Coast labor talks.

Then there is the current disarray of the container tem globally and the impact any additional slowdown could have. In prior years, carriers, who hold most of the seats on the PMA’s board, were motivated to settle with the union, even if that meant granting lavish pay and benefits that made dockworkers among the highest-paid blue-color workers in the US.

But carriers’ prior motivation to settle was tied to the disruption being isolated to the West Coast. Today, the crisis is global, and further disruption to the tem on top of shocks such as the Suez blockage and the partial shutdowns of the Yantian and Ningbo ports will only ext capacity shortages and record-high rates deeper into 2022 or beyond. Could that make carriers less inclined to submit to union demands?

Carriers may be basking in the glow of investor approval, paying down debt and funding expansion and acquisitions, but they are acutely aware of the pain being inflicted on customers and are feeling the blowback in the form of proposed anticarrier legislation on Capitol Hill. Those record profits could help fund further dockworker pay and benefits, if that could lead to a quick contract resolution.

For its part, the ILWU has wind in its sails, and it will seek to take full advantage of the situation. It is expected to seek what it believes is its fair share of record carrier profits, having played a key role in keeping cargo moving throughout the pandemic. It has little need to worry about pressure to compromise, let alone a Taft-Hartley back-to-work order from President Joe Biden, the most pro-labor president in a generation, although both sides are expected to sp considerable time in Washington in the coming months. The union has never cared much about its image, given its track record of deflecting blame for disruption onto foreign-based carriers, even for the 2014–15 actions, or even the consequences of disruption, having continued disrupting the docks despite seeing market share slip away to other ports over many years.

Yet in these volatile times, for now, employers are highlighting how they are working together with the union to handle the unrelenting growth of US imports from Asia that have moved through West Coast ports. Imports from Asia from June 2020 through June 2021 increased on average 29 percent over the same months in the previous year. West Coast employers recognize the efforts of longshoremen to move these record volumes. A statement that pops up on the PMA website reads: "Your work is critical to supporting our economy and ensuring Americans continue receiving the goods and supplies we rely on."

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