For nine months, American companies have dealt with an increasingly frustrating and costly slowdown of operations at West Coast port facilities, which are key to the vitality of the nation's and Southern California's economy.
As management and labor have wrangled over terms for a new long-term contract, the slowdown has been a logistical nightmare for companies dependent on a functioning supply chain. Manufacturers are missing parts and raw materials, retailers are missing inventory and farmers are seeing the fruit of their labor literally rot before it can be shipped to customers overseas. All of this means our economy is losing steam and losing customers — an untenable situation.
Now the latest deterioration in the contract talks — which resulted in an almost complete shutdown of the Los Angeles and Long Beach ports over the holiday weekend, with 33 ships lined up waiting to be unloaded Monday — has the potential to turn the slowdown into a full-scale crisis.
If the West Coast's 29 ports are not returned to full operation soon, it will create a shock wave that reverberates across the economy, derailing a promising economic recovery that is creating jobs and restoring a sense of economic security for the nation.
It doesn't take an economist to recognize that when you're not open for business, you risk losing customers. That's exactly the situation American companies find themselves in as they are unable to fill orders and export goods because of congestion at the ports.
The manufacture of cars, computers, airplanes and other high-value manufactured goods is dependent on the ability to move components efficiently around the globe to meet the needs of both domestic manufacturers and foreign customers. Honda already announced that it will slow production this week at six factories in the Midwest and Canada because of a shortage of crucial parts, hung up on Western docks.
For American farmers, the cost of a shutdown is equally crippling, as orders for many agricultural products are already taking a hit because of the uncertainty over whether they can be delivered in time.
The Washington, D.C.-based Agriculture Transportation Coalition, which tracks ocean shipping issues, estimated in December that nationwide the lost sales for fruits, vegetables and meats totaled more than $400 million per week. In California, citrus growers are being hit especially hard. Their trade association reckons reductions in sales to Asian markets are already down 25%, costing growers an estimated $125 million.
Some of these losses, while painful enough in the short term, could become permanent if foreign customers ultimately find the products they need elsewhere. Our competitors around the globe, be they in manufacturing or agriculture, are all too willing to poach future business from the U.S. Such a hit to the economy is almost impossible to measure, but it will continue to have real-world consequences going forward.
If the breakdown in the contract negotiations gets worse, if it devolves into a strike or lockout, Los Angeles and the nation would feel even more pain quickly. A lockout in 2002 cost the U.S. economy more than $1 billion per day, and a similar shutdown today would cost our economy more than $2 billion a day, the National Assn. of Manufacturers estimates.
Such a crisis is preventable. Both management and labor must be willing to compromise, yet a federal mediator has been unable to resolve the remaining contract issues. President Obama has directed Labor Secretary Thomas Perez to engage in the dispute to revive negotiations, which is a welcome sign. He is scheduled to meet Tuesday with the employer group, the Pacific Maritime Assn., and with the International Longshore and Warehouse Union. But the president must be prepared to use his bully pulpit — and all other means at his disposal — to ensure that our nation remains open for business.
Mickey Kantor, a former U.S. trade representative, was the secretary of Commerce during the Clinton administration. He is a consultant with the Retail Industry Leaders Assn.