Striking Costs : Region Has Much to Lose if Shippers Decide to Go Elsewhere

Could the ports of Los Angeles and Long Beach, through episodes of labor unrest and disruption such as the harbor pilots’ strike of the last four days, kill the goose that lays the golden eggs?

That is, could freight be diverted to other ports, including ambitious East Coast port complexes that see opportunity in the West Coast’s difficulties?

That’s the long-term question that remained even after a judge’s decision Tuesday forced the pilots to remove pickets from three terminals at the port of Los Angeles, thus allowing longshoremen honoring the picket lines to resume unloading container ships.

If work resumes at a pace close to normal at the affected terminals in San Pedro, the strike’s short-term effect will be slight, said shipping sources. But the labor unrest, which made headlines in Asia, will give shippers reason to look again at the enticements of other ports--from Seattle and Oakland in the West to New York, Baltimore and others in the East.

Competition is only natural given the great prize. Trade through the ports of Los Angeles and Long Beach is booming again this year. Total freight moving through the ports will expand to roughly 105 million tons, worth $173 billion. Freight movement since 1990 is up 42%, as port business continued right through the recession.

The ports’ economic ripple effect in the railroad business, in construction of the $1-billion Alameda Corridor project and in warehousing, freight forwarding and financing throughout the five- county Southern California region is enormous.

But disruptions have been occurring. There were serious slowdowns in freight movement last year when Los Angeles longshoremen balked at a contract negotiated with shippers by the San Francisco-based International Longshoremen’s and Warehousemen’s Union .

There have been one-day work stoppages and a truckers’ dispute that threw up picket lines at the ports last year. Also, there was a weird protest against Long Beach leasing a terminal to China, one of its largest shippers.

And there is a dispute over unionization of all work associated with a new coal terminal at the port of Los Angeles that threatens the terminal’s opening in October.

Disputes will happen, of course. And Southern California’s dockworkers and harbor pilots are respected for competence and dedication.

But Los Angeles and Long Beach can’t take continued good fortune for granted, even though the region has natural advantages in the ports’ deep water and prime location for shipments from Southeast Asia. This region’s rail complex and its gigantic consumer market are great advantages also.

The Seattle-Tacoma port complex, which handles about 20% of West Coast trade, lacks the rail infrastructure and the population to displace Los Angeles-Long Beach. Still, the Pacific Northwest ports will see more Asian freight in August from shippers who diverted their shipments from Los Angeles in the last four days.

And the East Coast, which once dominated U.S. trade, is making a bid to take Asian business back by calling shippers’ attention to the cost of labor and strikes on the West Coast. Within limits, the Easterners have an advantage. It can cost $400 to $600 per container less to ship from China through the Suez Canal to New York, or Norfolk, Va., or Charleston, S.C., rather than Los Angeles.

The East Coast ports have picked up some Asian trade and are ambitious for more, although a great expansion would depend on heavy investments to modernize the Suez Canal.

But Southern California depends on investments too. In particular, it needs big money for the Alameda Corridor rail-and-truck project to facilitate expansion of our own trade.

The Alameda Corridor depends on $400 million of federal funding, which means oversight by the U.S. Congress, where delegations representing the deep-water ports of Norfolk and Charleston are influential.

So what, besides court injunctions to stop picketing, should be done to calm labor conditions at the ports and move forward? The underlying causes of friction should be dealt with. The 12 harbor pilots struck with a demand that their annual pay of $113,000 be increased to $195,000, about what pilots make at other ports.

But pilots at other ports, including Long Beach, are independent contractors who take substantial business risks and pay for their own medical and pension expenses. Los Angeles harbor pilots are civil-service employees, assured of jobs, benefits and pensions. It was suggested several years ago that they privatize and make more money, but they declined. It may be that they struck this time because they fear forced privatization in the near future.

So the fear factor should be removed. A long-term agreement should be worked out to privatize the trade, allowing Los Angeles pilots to make a bundle and the port to operate free of a source of disruption.

There is fear elsewhere within the successful longshoremen’s union. The shipping clerks and front-office workers who keep track of the ships and containers feel threatened that bar codes on containers and other forms of automation will displace their jobs. Fear can make unions suspicious and hobble progress.

What is needed is a union leader like Harry Bridges, the longtime head of the ILWU who, in 1961, negotiated the “mechanization and modernization” agreement that allowed containerization on West Coast ports. That agreement helped secure leadership among U.S. ports for Los Angeles-Long Beach.

Bridges had vision and courage. If officials of unions, the city and the shipping community today show vision and courage, disputes can be settled and the golden goose of the region’s twin ports can be nurtured, instead of throttled.

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Bustling Harbors

Imports and exports through the ports of Los Angeles and Long Beach have increased dramatically in this decade as the twin ports have surpassed New York to become the nation’s busiest destinations for foreign goods.

Combined tonnage for ports of Los Angeles and Long Beach

1996: 102.6 million tons

Number of 20-foot-equivalent units handled during 1996, in thousands*

Los Angeles / Long Beach: 4,215.5

New York: 1,534.8

Seattle: 938.6

Oakland: 802.2

Charleston, S.C.: 800.6

Norfolk, Va.: 722.8

* A common port measurement that describes units in terms of how many 20-foot containers they are equal to.

Sources: Pacific Marine Assn., Journal of Commerce