Port Settlement Forged, But Remains Tenuous

Following the thinly veiled government threat of invoking Taft Hartley or taking some other kind of executive action, the two sides in the West Coast port labor dispute reached a tentative deal late last week. By Saturday, the ports up and down the coast resumed something approaching normal operations.

The business impact of the labor dispute will linger for many months, as there were as many as 31 ships still off shore. It will be weeks before they are all unloaded. The estimate is that more than 100 have been held at their ports of origin. There are several long-term reactions expected as a result of this latest action. The first and most obvious is the backlog of cargo ships and the delay this has created for a large number of shippers. Produce has been rotting on idled ships and retailers have been unable to get the inventory they ordered. There are shortages showing up all over the consumer sector and many customers are furious. The insurance companies have not been thrilled either. These issues will be solved sooner or later and most of that damage will be somewhat ephemeral.

A bigger issue is the use of West Coast ports in the future. It is not that ports will be abandoned altogether, but this is the second time in roughly 10 years the ports labor disputes have temporarily shuttered operations. Shippers don’t appear to be as sanguine as they once were. Those that opted to shift their port use to other U.S. locations may not be willing to go back to the ports in California, Oregon and Seattle. This is exactly what the rival ports are counting on as they take steps to ensure this new business stays. The majority of the ports on the West Coast are hampered by congestion and regulatory burdens that other ports don’t have.

In addition, the relationship between the International Longshore and Warehouse Union and the Pacific Maritime Association hasn’t become harmonious overnight, and it’s not expected to move in that direction quickly. There are still those workers operating at a very slow pace, partial lockouts in some areas and examples of workings banding together to ignore some contractual mandates.

There may also be an effect on the other transportation sectors. If a shift away from the Western ports comes to fruition, rail and truck transportation will have to alter routes and change their areas of focus. The decision to rearrange will not be taken lightly. For now, there will be many full trucks and trains as the backlog is dealt with, but in another few months that demand could drop sharply.

- Chris Kuehl, Ph.D., NACM economist

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