Updated: May 31, 2022
Frank Costa, Vice President of Sales for OEC Group’s New York office, discusses the negotiations between the International Longshore and Warehouse Union (ILWU) and the Pacific Maritime Association (PMA) and offers shippers advice on how to survive potentially cataclysmic fallout.
What are the main issues in this year’s negotiations?
For the last several decades, the ILWU’s three sticking points have been automation, wages, and jobs, with automation acting as the top priority. Any automation generally means a decrease in jobs first, and then wages, healthcare, pensions, and other meaningful benefits. This year in particular, with historic container volume going through the ports and so much congestion going on, the workers believe the timing is right to set themselves up for a more secure future. It’s going to be an interesting negotiation.
What do you make of early reports on representatives from both sides insisting that they’ll get a deal finished?
Two years that stick out in my career are 2002 and 2015. In both years, both sides repeatedly said they would come to an agreement quickly. Here is what actually happened: in 2002, the PMA locked out the ILWU from coming to work for approximately eleven days. Bush enacted the Taft-Hartley Act to bring everyone back to the table and back to work. The lockout caused major bottlenecks. In 2015 there was a two-day lockout, but the Taft-Hartley Act was not invoked and the agreement that year was upheld until 2017. The lesson is, based on past history, nobody knows exactly where this negotiation will go right now. It’s best to prepare for the worst and hope for the best.
Is this year comparable to any other negotiation year that you can remember?
This year’s negotiation feels more intense than previous years. Both the ILWU and the PMA have strong bargaining positions. We’ve never seen supply chain disruptions like we have over the last two-plus years due to COVID-19, and union workers remained on duty right through the worst of it. Ports were forced to function with depleted manpower, and pandemic protocols became essential on the jobsite. Never-before-seen congestion and vessel backlogs are still being battled. Operators on the ground put forth a herculean effort to overcome that and process historic amounts of freight—breaking records constantly. On the PMA side, simply satisfying import demand over the last several years is a marked achievement. International carriers that the industry relies on have broken volume records and revenue records consistently since this new market took hold. Overall, both parties have the leverage to come in aggressively, and I think there’s going to be some tough times ahead.
If negotiations go poorly, what can we expect to see on the West Coast?
Even in a normal contract year you’ll see some slowdowns and work stoppages. Those are simply the tactics used in the negotiation process. However, in a system that’s already historically strained, particularly on the West Coast, these basic strategies could be detrimental. We may be looking at even worse conditions than we’ve seen over the past two years.
What actions can a shipper take now to survive this impending situation?
Most shippers believe that they can rely on the East Coast. However, that is not necessarily the case. Carrier allotments on the East Coast are pretty well booked up right now. As a result, shippers that strictly send goods to the West Coast and decide to swiftly shift to the East will struggle because they do not have previously established relationships. Therefore, any shipper that is interested in that shift should start thinking about it right now. Also, we have begun suggesting cross border opportunities and East Coast routings to our clients so that they can be ready if they need to utilize that strategy.
What is the one thing you want shippers to take away from this conversation?
I think the most important thing shippers need to have, in order to survive this potentially catastrophic situation, is flexibility. The best thing they can do to survive is to work closely with a proven forwarder or carrier and explore alternate routes now versus waiting until later. Once things start backing up, it’s going to be too late.