Port Strike Would Hurt U.S., Asia

Despite six weeks of negotiations, the International Longshore and Warehouse Union and the Pacific Maritime Assn., which represents almost 100 West Coast shipping lines, have failed to reach an agreement for a new contract for the West Coast. Since the prior contract expired on July 1, many union work actions have affected port operations up and down the coast. A full-fledged strike would put the U.S. and many other economies at great risk.

In the last few weeks, crane drivers walked off the job for two days in Oakland, effectively shutting down one of the nation’s busiest ports. Work slowdowns also have impacted the flow of goods through the behemoth ports of Los Angeles and Long Beach. Ports in the Pacific Northwest are experiencing slowdowns as well.

A West Coast port shutdown could trigger a reaction in international financial markets, with the biggest risk being a worsening of the Asian financial and economic crisis. There would also be a major national economic impact; a 20-day strike at ports in California, Oregon and Washington, for example, could cost this country close to $40 billion and 200,000 jobs. The impact of such a shutdown would increase daily across the country and even could trigger a sudden spike in American consumer prices.

What makes a West Coast dock shutdown a potential detonator of a national and international financial and economic crisis? The size and magnitude of the trade flowing through the ports, the dependency of this North American gateway on Asian economies and the relative inflexibility to divert cargo to other ports.

Since 1980, waterborne trade through West Coast ports has increased from $61 billion to an estimated $285 billion this year. That is double the rate of increase in total U.S. trade growth.

This growth in trade activity is directly related to the increasing import-export activity with Asia. West Coast ports are now dominated by trade with Asia, which accounts for about three-quarters of all port activity (sea and air) in California and about 60% in Washington state. International trade accounts for about 19% of the U.S. gross domestic product and more than one-third of California’s gross state product.

But the real dependency is on the other side of the Pacific. Asian exports arriving by ship at West Coast ports are expected to exceed $200 billion this year. This is the principal source of the vital foreign exchange net earnings needed to sustain the currency values, to service large foreign debts and to import the components and machinery required for growth and development of the stricken Asian economies. A significant disruption of West Coast ports would hamper recovery. It might also affect financial markets.

The ability to shift significant volumes of Asian trade to East Coast or Gulf of Mexico ports in the event of a West Coast shutdown is now extremely limited because container facilities--ships, ports and infrastructure--are too specialized. The West Coast ports have made about 70% of all port investment in the 48 contiguous states for the past five years. As a result, high-volume shipping is a powerful, integrated and, alas, inflexible system. Almost all the containers destined for the Central and Mountain states now pass through West Coast ports. So do nearly half of containers destined for the North Atlantic states.

But because of the specialization, the U.S. does not have the luxury of simply diverting Asian cargo to East Coast ports. Shipping is no longer a collection of roving ships docking here and there.

For all these reasons, the risk of a port strike is simply too great for the U.S. and world economies. The current set of management-union negotiations warrants a watchful eye from the White House and Treasury as well as the Department of Labor. If need be, both sides should be locked up at Camp David to finish the talks. But, in no case, should the ports be allowed to shut down.