West Coast Port Shutdown Has Ripple Effect

The news out of San Francisco on Friday, February 6 was not auspicious for oceangoing commerce. Nor was it good for the lengthy inland chain of producers, manufacturers, packers and truckers who send goods of all kinds to market at the nation’s West Coast ports. The Pacific Maritime Association (PMA) announced that the weekend’s vessel loading and unloading operations would be temporarily suspended, with yard, rail and gate operations continuing at terminal operators’ discretion.

On behalf of 72 companies among the world’s leading shipping lines and terminal operators, the PMA negotiates and administers maritime labor agreements with the International Longshore and Warehouse Union (ILWU) including a coast-wide contract covering roughly 13,600 longshore, clerk and foreman workers at 29 ports along the West Coast. These ports drive nearly half of all maritime trade in the United States, including more than 70% of all imports from Asia.

PMA stated that because ongoing union slowdowns had brought ports up and down the coast almost to a standstill, PMA member companies concluded that they would no longer continue to compensate workers at “premium pay for diminished productivity.”

“After three months of union slowdowns, it makes no sense to pay extra for less work,” said PMA spokesman Wade Gates, “especially if there is no end in sight to the union’s actions which needlessly brought West Coast ports to the brink of gridlock.”

On average, union dock workers earn a salary average of $147,000 per year and would see their wages climb about 3% under a proposal, along with fully-paid health care costs of about $35,000 per year per union member. Pension costs would also rise under a proposal, according to the PMA.

The PMA was founded in 1949, when break bulk cargo was transported in the belly of ships. Since then, it has negotiated several landmark labor agreements with the ILWU, including the Mechanization and Modernization Agreement of 1960 that paved the way for containerized cargo to reshape the industry. The metal cargo container, now recognized across the globe, is the standard means of transport for many of the goods that fuel the U.S. and world economies.

A spokeswoman for the ILWU said in an email February 6, “The PMA is playing a dangerous and unnecessary game of brinkmanship by idling vessels for two days in a not-too-disguised effort to intimidate the ILWU membership.”

On February 5, ILWU President Robert McEllrath said, “PMA is leaving ships at sea and claiming there’s no space on the docks, but there are acres of asphalt just waiting for the containers on those ships, and hundreds of longshore workers ready to unload them.”

On February 6, 26 ships were waiting at anchor outside the ports of Los Angeles and Long Beach.

This is particularly bad news here in Tulare County, which last year took its place as the nation’s number-one agricultural producer. News of the port shutdowns came just days before the county was to host its annual World Ag Expo, the largest show of its kind in the world.

“The ports shutdown is a devastating blow to California farms–we are extremely disappointed by the stalemate and the waste of wholesome  healthy fresh produce, nuts, and other Ag products not able to reach their destinations abroad. This slow down has a huge ripple impact all across the Ag sector and is causing tremendous economic impact and other setbacks,” said  Tricia Stever Blattler, Executive Director of the Tulare County Farm Bureau. “Especially with the drought moving into a fourth year, it is so difficult to watch these products go to waste knowing how much work goes in to producing these crops with limited water.”

“Today’s announcement by the Pacific Maritime Association further jeopardizes California citrus exports as the industry reaches what would normally be peak demand for California fruit,” stated California Citrus Mutual President Joel Nelsen.  “Last October we began warning those in government about impacts to our $2.4b industry that historically exports 25% of its fresh tonnage; that warning manifested into little action.”

California navel oranges and lemons begin a major push into Asia and Australia in late December, beginning an export season that runs well into April.

“But already we have quantified losing 25% of our opportunity year to date,” said Nelsen. “Fruit is rotting on the docks, sales are being canceled by the customer and our industry has slowed its harvesting so as not to place matured fruit into the market place.  All this damage is created by two entities that seek to maximize their economic well-being while sacrificing others.”

In 2002 the PMA and ILWU reached a landmark agreement that ushered in an era of technology for the West Coast waterfront; in 2008, they agreed to enable automation at port terminals. Since 2002, the  workforce has increased as new technology has enabled greater cargo volumes at West Coast ports.

The port shutdowns threaten an export opportunity representing $500 million for California citrus alone.

For the 20012/13 season the industry exported approximately 28m cartons of navel oranges with an estimated value of $385m. Lemons ranked second, with six million cartons exported at a $109m value.  The previous season comparable numbers were 28.7m cartons at $385m and almost identical figures for lemons.

Further compounding the problem is that needed inputs that arrived in December continue to sit on docks unable to be loaded onto trucks and shipped north to industry locations. Some of California’s citrus is being trucked to ports along the Gulf Coast for export via the Panama Canal as those ports and ones along the East Coast are said not to be involved in the work stoppage.

“Holding hostage food destined for those that want it thereby diminishing revenues for innocent stakeholders is not a vehicle that should be pursued, but that is exactly what the two parties are doing.  Apparently government condones the activity,” concluded Nelsen.

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