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As Port Negotiations Near, What You Need to Know

Contract negotiations between the International Longshore & Warehouse Union (ILWU) and Pacific Maritime Association (PMA) are not set to start until next week, but some discord already appears to be brewing.

The sticking point? Not surprisingly, it’s automation with some jabs thrown out Monday over the release of a report in support of it.

The PMA, representing some 70 ocean carriers and terminal operators at West Coast ports, is set to sit down with the ILWU May 12. The latter negotiates labor contracts on behalf of roughly 15,000 dockworkers at the 29 ports running along the West Coast.

Industry stakeholders are closely watching the upcoming negotiations, with more on the line this time around as global supply chains still dig themselves out from the challenges posed during the height of the Covid-19 pandemic, alongside the current impacts of the war in Ukraine and China’s strict efforts to tamp down on the virus with its zero-Covid policy unleashing new waves of uncertainty.

Stakeholders remain generally upbeat ahead of the talks, even as some shippers continue to re-route to other ports and create contingency plans in a bid to avoid disruptions to their business.

“I’m optimistic that the talks will move forward in a very pragmatic and reasonable manner [and] that it will not be a prolonged negotiation,” Port of Long Beach executive director Mario Cordero told Sourcing Journal late last month. “I think both parties know there’s a lot at stake and I think why there is a lot of talk about the potential prolonged labor negotiation, a lot of that may be overdramatized. The two parties have a sense of what their responsibilities are and that is coming to a meeting of the minds in a reasonable time.”

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The sentiment that fears of prolonged contract talks are being overblown appeared to also be shared by ILWU President William Adams last month in a taped interview with Port of Los Angeles executive director Gene Seroka.

“We will get an agreement, and it takes both sides. And, right now we’re getting ready,” Adams told Seroka, adding, the PMA is “doing what they have to do.”

Background to the current talks

Contract season typically sees negotiations begin in May, with the exception being 2008 when both parties sat down in March.

Yet, getting a head start isn’t always a surefire way to avoid goods movement disruptions. The 2008 discussions neither produced a timely resolution nor stopped port slowdowns until an agreement was struck in August of that year.

What happens when talks go awry? Retailers and other shippers likely shudder when they recall 2014 negotiations that went into overtime and spilled over into 2015, when a tentative agreement was reached in February of that year.

The gridlock that occurred when talks failed to bear out in a timely 2014 labor agreement prompted a work slowdown at an estimated cost of $1 billion to $2 billion a day and lengthy backlog of container ships waiting to be unloaded. Meanwhile, companies scrambled to obtain inventory and move goods by alternative modes of transportation or other ports, which came with an increased cost.

The situation prompted President Obama to send Labor Secretary Tom Perez to California to help the two parties hammer out a deal.

Two years later, in 2017, the ILWU’s membership voted to extend the existing contract through July 2022.

Fast forward to the current deal. The PMA in November floated the idea of extending the contract for one year in light of the continued supply chain challenges, but the offer was rejected.

The ILWU held an internal caucus in February during which time they planned their strategy for negotiations, with the current contract set to expire July 1 at 5 p.m.

Executives from across the supply chain weighed in on the looming contract expiration for dockworkers at heavily trafficked SoCal ports.
A view from the Port of Los Angeles. Kari Hamanaka

What the White House says

Nearly 50 associations sent a letter to President Biden and Vice President Harris at the beginning of March urging them to get involved in the negotiations.

These groups included the Council of Fashion Designers of America (CFDA), American Apparel & Footwear Association (AAFA), National Retail Federation (NRF) and Retail Industry Leaders Association (RILA).

The groups pointed to the more than 44 percent share of container traffic handled by the West Coast ports in underscoring the need for an agreement to be made before the clock expires.

“Even a relatively short port slowdown or shutdown could compound inflationary pressure and cause long-lasting damage to consumer confidence and American businesses,” the groups wrote in their letter, going on to cite the impacts of the 2014-2015 slowdown.

Labor Secretary Marty Walsh told Bloomberg in late March he wasn’t anticipating any issues and that he intended to watch the situation closely.

The supply chain is front and center in the news, NRF vice president of supply chain and customs policy Jonathan Gold said during the annual TPM conference earlier this year.

“I think this administration wants to do everything it can to try and keep the economic recovery going forward,” Gold said.

Hot-button topics

There’s been plenty of speculation about what issues will be tackled at the negotiating table. The list is likely to include ocean carrier profitability in 2021, along with wages and automation.

A public relations campaign over automation may have already been started last week, with the PMA’s release of a paper outlining technology’s merits in keeping the West Coast ports competitive.

The paper called out the ILWU as having “accepted the terminals’ right to automate, but, worried about job losses, [as] it has resisted efforts to introduce the technology. Yet, contrary to the ILWU’s concerns, automation at San Pedro Bay ports has added work, not come at its expense.”

The study cited an 11.2 percent increase in ILWU workers at the ports of Los Angeles and Long beach between 2015 and 2021. Increased automation at the ports occurred after 2015.

It also referenced the “evolution of the logistics industry” and the impacts of e-commerce on transportation within the supply chain.

The ILWU was swift in its criticism of the paper with coast committeeman Frank Ponce De Leon calling it a “self-serving document” and a one-sided view of automation. He denounced the paper as an “insult to all workers who have seen their jobs outsourced to machines.”

“The very purpose of automation is to replace human workers with machines, and in this case to harm a U.S.-based workforce and local communities only to increase the profits of the largely foreign-owned terminal operators,” Ponce De Leon said in a statement.

“The bottom line is that automation has destroyed longshore jobs. Container volume has increased at the automated terminals, but this has been at the expense of other terminals that have had an offsetting drop in container volume,” he added. “The increased productivity that the PMA is claiming at the two automated terminals has meant less work at other terminals and an overall loss of employment for longshore workers.

“We haven’t seen an overall increase in productivity at the ports, just a shell game to mask the human cost of job destruction,” Ponce De Leon said.