Virtually every stakeholder group in the supply chain would like nothing more than to never again experience a West Coast port congestion crisis like the one that occurred from summer 2014 to the following February. So when the presidents of the longshore workers union and the organization representing its members’ employers, groups that had been at the center of that congestion crisis, recently stated at a public forum that they would consider beginning contract negotiations ahead of the 2019 expiration and perhaps even extending the current contract, everyone from business groups to legislators began pushing them to follow through.
A first step has been taken. Just as he promised at the Journal of Commerce’s annual Trans-Pacific Maritime (TPM) Conference held in Long Beach in March, James McKenna, president of the Pacific Maritime Association (PMA), has sent a letter to the president of the International Longshore and Warehouse Union (ILWU), Robert McEllrath. As has been widely reported, at the forum McKenna told McEllrath to look for a letter requesting the consideration of early negotiations and a contract extension. PMA spokesperson Wade Gates would not comment on the subject to the Business Journal beyond confirming that a letter has been sent. The ILWU declined to comment.
(Port of Long Beach Photograph)
Federal Maritime Commission (FMC) Chair Mario Cordero, who is also a former member of the Long Beach Board of Harbor Commissioners, told the Business Journal that he “absolutely” supports starting the longshore contract negotiations for West Coast workers early. The FMC is the federal organization responsible for overseeing international shipping operations and interests in the U.S.
“What we need to do is give confidence to the industry that the West Coast will continue to be a leading gateway, and thus anything that can be done to further that confidence is a good thing for everybody,” Cordero said.
Cordero said he isn’t surprised that the ILWU and PMA said they would entertain a contract extension because the International Longshoremen’s Association, the East Coast longshore workers’ union, is considering the same option.
Ensuring that the next negotiating process goes smoothly is “very important” for West Coast ports and the U.S. economy, Cordero said.
“If you look to what’s happening today, movement through our nation’s ports accounts essentially for one-third of the GDP [gross domestic product],” Cordero said. “When we look forward to the end of next decade, 2029, there are many experts who believe that international trade will be 60 percent of our GDP.” This projection is based on expectations of increased cargo volumes. “From that perspective, I think it’s paramount that we make sure that we . . . foster fair, efficient, and reliable movement of the international container trade.”
Visits by CMA CGM’s mega-ship the Benjamin Franklin to the ports of Los Angeles and Long Beach are going to become a regular occurrence, according to Cordero. Unloading vessels carrying more than 18,000 twenty-foot equivalent units of cargo on a regular basis requires coordination from many aspects of the supply chain, and certainly among labor at the docks. The advent of mega-ships makes it even more important to ensure any obstructions to smooth cargo movement, including labor negotiations, run smoothly, Cordero said.
Jonathan Gold, vice president of supply chain and customs policy for the National Retail Federation, told the Business Journal that having a new contract agreement in place before the current contract expires in 2019 would help avoid the congestion that occurred at West Coast ports during the last round of negotiations. “There needs to be a better way for these negotiations because of the impact it has on the overall economy,” he said.
“We can’t afford to have our ports shut down or disrupted because of ongoing labor negotiations,” Gold said. “It benefits both parties to have that stability.”
Port of Long Beach CEO Jon Slangerup said that “early negotiations and an extension of the current agreement would be a godsend, because what everybody’s looking for is stability and predictability.” He added, “And in this game, that has been sorely lacking.”
Slangerup noted that the congestion crisis of 2014-2015 and its impacts on stakeholders and the economy are not easily forgotten. When asked how important it is for the Port of Long Beach that the next longshore contract negotiations go smoothly, he said, “There’s nothing more important, right?”
If the ILWU and PMA do negotiate a new contract early, or extend the existing contract, “they would be heroes,” Slangerup said.
Pressure from the International Longshoremen’s Association (ILA) might make the ILWU more amenable to doing so. “What I think is one of the blessings in all of this is that the ILA on the East Coast has made it clear that they will do everything they can to steal their brothers’ business on the West Coast,” Slangerup said. “That was kind of a wake-up call. No longer is it one kind of lock-step group of longshore workers,” he explained. “I think the longshore leadership here is very sensitized to that.”
Gene Seroka, executive director of the Port of Los Angeles, said he supports early negotiations between the ILWU and PMA, adding that it’s important “to work with both parties on the forward view of how we can have great stability in our supply chain.” The longshore labor groups “play an important role in everything we do,” he noted.
In the weeks following the TPM Conference, supply chain and trade stakeholders co-authored letters to McKenna and McEllrath urging them to begin discussing a contract extension.
On March 15, more than 80 national, regional and local business organizations representing a wide array of industries sent a letter to the presidents urging them to work together and reminding them of the disruption that occurred when they failed to do so a year and a half ago. The groups said they “urge the ILWU and PMA to begin early negotiations on either a contract extension or a new contract with the goal to conclude negotiations before the current contract expires on June 30, 2019.”
The letter continued, “The impact of cargo disruptions during the 2014 negotiations was widespread and affected many stakeholders at the ports and throughout the United States. The costs were enormously high for many sectors. We cannot afford a repeat in 2019.”
The California Business Roundtable sent a letter with similar sentiments on April 11. Four days later, Congressmembers Dan Newhouse (Washington), Dave Reichert (Minnesota), Devin Nunes (California), Cathy McMorris Rodgers (Oregon), Doug LaMalfa (California), Aumua Amata Coleman Radewagen (American Samoa), Mike Coffman (Missouri), Mike Simpson (Idaho) and Kurt Schrader (Connecticut) sent a letter to McEllrath and McKenna.
The legislators’ letter began by expressing appreciation for the comments the two presidents made at the TPM Conference. “During the 2014-2015 disruption, farmers, manufacturers and retailers across the western U.S. suffered hundreds of millions of dollars in damages because they could not get their goods to market,” the letter stated. “Foreign market share was lost, which not only hurt businesses trying to use the ports, but as you are aware, the shippers who transport goods, the workers who load and unload cargo, and the ports that rely on a steady stream of traffic were negatively impacted.” The congressmembers urged the two groups to work together to avoid a repeat of this scenario.