West Coast Port Labor Talks Stall
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West Coast Port Labor Talks Stall

October 19, 2022 | Brief

Amid Uncertainty, Cargo Is Diverted to East Coast Ports

The US West Coast port labor talks have stalled, creating uncertainty and causing shippers to divert cargo from West Coast ports to those on the East Coast. The twin hub Ports of Los Angeles and Long Beach are especially critical to the US economy. Together they handle more cargo than any ports in the United States—including 42 percent of all annual containerized trade with Asia.[1] In 2021, cargo activity at all of the West Coast ports accounted for 37 percent of all imports to the United States and accounted for 8.7 percent of GDP.[2]

Negotiations began in mid-May 2022 between the 22,000 members of the International Longshore and Warehouse Union (ILWU), who have been working without a contract since July 1, and the Pacific Maritime Association (PMA), which represents the 70 employers at the 29 port terminals on the West Coast. Reportedly there are tentative agreements on health care and other benefits, with outstanding issues related to automation of port functions and wages.

Although no strike is currently planned, and both sides say they are committed to keeping normal operations throughout the negotiation period, businesses have reason for concern due to a history of disruptions during past negotiations and potential impacts on costs and schedules during a period of high inflation.

Insights for What’s Ahead

  • East Coast volume will continue to increase: Businesses and logistics managers will continue diverting cargo to East Coast ports to avoid potential slowdowns until a deal is reached. This is already resulting in growth at the Ports of New York & New Jersey and Savannah (the two largest US ports not on the West Coast), while the Ports of Los Angeles and Long Beach experience declines.
  • Disruptions negatively affect business: Significant port slowdowns and stoppages harm US businesses through the direct losses of exports, higher costs of imports, interruptions in manufacturing due to delayed inputs, and reductions in consumer purchasing power as the price of goods increases. If there were a 15-day work stoppage at the Ports of Los Angeles and Long Beach in 2022, it is estimated there would be a reduction in annual GDP of $7.6 billion.[3] A shutdown of this length is highly unlikely, but even a more plausible shutdown of just a couple of days comes with costs—estimated to be about $0.5 billion per day.
  • Federal Intervention: If there is a stalemate in negotiations and a strike or lockout occurs, the US administration would likely intervene very quickly to limit the stoppage to just a few days. The president could seek a court injunction triggering a back-to-work order under an 80-day cooling-off period using the Taft-Hartley Act.
 

Cargo Diverted to East Coast Ports

Businesses will continue diverting more cargo to East and Gulf Coast ports to avoid slowdowns. This is already resulting in growth at the Ports of New York & New Jersey and Savannah (the two largest US ports not on the West Coast), while the Ports of Los Angeles and Long Beach are experiencing declines.

Year-over-year, monthly container traffic at the Port of Los Angeles has declined for the last six months, and the Port of Long Beach has declined for the last two months (see table below).

The Port of New York & New Jersey has seen growth every month this year, with August being its busiest month ever, and the first month in recent memory that it handled more containers than any other port in the United States. More than 840,000 containers were moved in and out of the Port of New York & New Jersey in August.[4]

The Port of Savannah saw record-breaking levels for i

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AUTHOR

ErinMcLaughlin

Senior Economist, ESF Center
The Conference Board
Former VP of Private Market Resources
American Council of Engineering Companies


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