At a recent PMA Fruit Trade Conference in Chile, Marcel Van Dijk from the Port of Los Angeles explained how labor issues slowed down trade at one of North America's busiest ports. In a talk on last year's labor dispute between port workers and port operators, he detailed the origins of the dispute, the way it was resolved and some of the lingering issues that could affect trade in the future.
There's a different perspective in the U.S. when it comes to ports, noted Marcel, because there aren't lots of other ports in close proximity. In Europe, he explained, if there are problems or disruptions in one port, then shippers can opt for another location that's not too far away. But the ports in Los Angeles and Long Beach make up the biggest entryway to the West Coast for many miles around. That made labor negotiations very different from those typically seen in Europe.
“There are a lot of bigger ships that move through Los Angeles that require a lot of moves,” said Marcel. “There are 5,000 moves made against every ship, on average, and that requires a lot of coordination.” The large volume of goods passing through there and the lack of alternatives raised the stakes in negotiations, and even though there wasn't an outright strike, the slowdown that dragged on for several months made significant ripples throughout the U.S.
“There were a lot of complaints from coastal exporters,” said Marcel. “Apple growers in Washington, citrus growers in California and grain, beef and poultry suppliers in the Midwest went all the way to Washington D.C. to say that something needed to be done because the labor dispute was costing them a lot of money.” When the Secretary of Labor arrived to speed along negotiations between stevedores and port operators, an agreement was reached in a couple of weeks because, according to Marcel, there was a threat that the government would step in if a deal wasn't reached quickly.
What escalated the situation?
According to Marcel, some of the biggest points of contention during negotiations had to do with worker compensation. Port workers are some of the best-paid blue collar workers in the United States, noted Marcel, and added labor costs brought on by national health care legislation troubled port operators.
“Port workers' health plans are very good, and they have very low co-pays,” said Marcel. “Those kinds of plans were taxed by the Affordable Care Act, so that was another $150 million in tax liability.” It didn't help any, in Marcel's eyes, that the arbitrator in negotiations between the two sides was a union member.
What's next?
But compensation issues were resolved, along with concerns about the chassis pool, and the latest contract goes through June of 2019. There will be a period of relative calm between labor and port operators, as there usually is after a contract, but actions on the East Coast could have ramifications for future negotiations even during this time of calm.
According to Marcel, East Coast ports encouraged Asian shippers to bypass West Coast ports through the Panama Canal during last year's slowdown. That stoked some competition between both coasts, and if one side grabs a deal that assures more stability for shipping lines, then the other side could match that.
“If the ILA, which is the longshore union on the East Coast, extends their contract for 10 years,” said Marcel, “then the ILWU, the West Coast union, will likely do something similar.”
