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Economic Damage Worsens Going Into Second Port Shutdown

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Economic concern escalates as West Coast ports shutdown for a second time on Thursday over an unresolved labor dispute.

The shutdown, which is expected to last four days, was prompted by a nine month labor dispute between the Pacific Maritime Association and the International Longshore and Warehouse Union. Even with congressional pressure and federal mediation, the two sides have been unable to agree on a new contract for port workers.

The dispute has already had a profoundly negative impact on the auto industry, farms, retail and manufacturing. As The Columbus Dispatch reports, Honda will be reducing production at its Ohio plants for at least six days starting on Monday because they are not getting the parts they need shipped.

Additionally, agricultural exports through the ports have fallen as much as 50 percent, while the meat and poultry industry estimates it is losing $40 million a week, according to the Sacramento Bee.

Kurt Salmon, a global management consulting firm, warns damage has already been done and will continue to get worse if the dispute is not solved.

“But even if contract talks succeed in overcoming the stalemate between dockworkers and port terminal operators, the challenges for the retail industry are just starting, and consumers – and investors – could feel it in their wallets,” Kurt Salmon detailed in a press release. “The ports are simply not structured to manage the combination of large ships and high volume. Retailers need to investigate new supply chain options – fast.”

Kurt Salmon also notes that companies that have had to rely on more expensive alternative shipping routes have already begun passing the increased cost to customers.

Local lawmakers in California from both sides of the aisle have come together in the hopes of resolving the conflict. The Sacramento Bee reports that more than a dozen Republicans and Democrats in the state legislature have introduced a resolution urging both sides to reach an agreement.

The PMA has argued that the union is making unreasonable demands which are preventing them from reaching a deal. Last week, the PMA offered a “comprehensive contract offer” in the hopes of ending the dispute once and for all. The offer would raise ILWU wages by 14 percent over 5 years, maintain an employer-paid health care plan and increase the ILWU pension to as much as $88,800 per year.

The proposed wage increase and benefits would be included onto the current average full-time wages for longshore workers of $147,000 per year. The union however rejected the deal, arguing that it still doesn’t address some key issues and that it has already sacrificed a lot in an attempt to reach the PMA halfway.

“We’re this close,” ILWU President Robert McEllrath said in a statement. “We’ve dropped almost all of our remaining issues to help get this settled – and the few issues that remain can be easily resolved.”

Retailers have grown so concerned they have sent several letters to the PMA and ILWU along with lawmakers. In one letter, dozens of manufacturers, farmers, wholesalers, retailers, importers, exporters and distributors wrote to express concern over the rhetoric and growing hostility from both sides during the negotiation process.

“As customers of your ports, and industries affected by their operations, our members desperately need this negotiation to be concluded and operations returned to normal levels of through-put,” the letter noted.

“Over the summer months, both sides verbally agreed to work during the negotiations without interruptions,” the letter continued. “That promise was broken and the consequences have been to the detriment of our collective industries, the economy and our global competitiveness.”

“The stakes are extremely high and the uncertainty at the West Coast ports is causing great reputational and economic harm to our nation,” the letter declared. “The competitive marketplace will respond if you continue on this current path.”

As the letter points out, foreign competitors are already using the slowdowns and the resulting uncertainty as a reason not to buy American made or grown products. Additionally, retailers are already seeing delays stretching far into spring.

PMA has explained the shutdown as being necessary to address the growing costs of the labor dispute and port congestion.

“In light of ongoing and costly ILWU slowdowns, PMA members will temporarily suspend premium-pay weekend and holiday vessel operations on four upcoming dates, while yard, gate and rail operations will continue at terminal operators’ discretion,” the PMA detailed in a press release.

“In Southern California, terminal operators will expand daytime vessel operations on non-holiday weekdays,” the PMA argues. “Weekend and holiday pay rates command a premium of at least 50% of the basic longshore wage rate.”

“As a result, working hours on those days would be paid at between $54 and $75 per hour for longshore workers and clerks, and between $77 and $92 per hour for foremen,” the PMA continued. “PMA members have concluded that they will not conduct vessel operations on those dates, paying full shifts of ILWU workers such high rates for severely diminished productivity while the backlog of cargo at West Coast ports grows.”

“While the ILWU has claimed that the parties are ‘this close,’ they continue to push demands that would cripple the West Coast waterfront,” the PMA notes. “In particular, the Union is demanding the right to fire any arbitrator who rules against them at the end of each contract period, even though those arbitrators are the referees who keep West Coast ports operating smoothly.”

While the PMA has accused the union of purposely causing the port slowdowns as a means of pressure it at the bargaining table, ILWU defended itself by noting much of the congestion was happening before the current negotiations.

“This is an effort by the employers to put economic pressure on our members and to gain leverage in contract talks,” McEllrath told the San Francisco Chronicle. “The union is standing by ready to negotiate, as we have been for the past several days.”

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