Southland would quickly feel economic effects of a port shutdown

Container ships just outside the Angels Gate entrance to the Port of Los Angeles can be seen from Point Fermin Park. For U.S. imported products, about 40% sail through the sprawling harbors in San Pedro Bay.
(Bob Chamberlin, Los Angeles Times)

Elbowing their way into malls this weekend for dolls, televisions and reindeer sweaters, shoppers probably will give little thought to how the future holiday presents got to retail shelves.

For U.S. imported products, about 40% sail through Southern California’s sprawling harbors in San Pedro Bay, underscoring the key role the twin ports play in international trade.

So how severe would the economic hit be if labor problems were to shut down the ports of Los Angeles and Long Beach, along with the rest of the 29 West Coast cargo-handling destinations?

In the Southland, the financial pain would be immediate for many of the nearly 700,000 people who base their livelihoods on the goods-movement industry — dockworkers, truck drivers, warehouse workers and importers, among others.


But the region and nation might escape more serious discomfort, some economists say, especially if any disruption were to be cut short by government intervention, as happened in 2002.

Such predictions aren’t a mere academic exercise. As West Coast dockworkers enter a sixth month without a contract, representatives of the union, employers and big retailers appear to be returning to old scripts from 12 years ago.

In 2002, an employee group representing international shipping lines accused dockworkers of go-slow tactics amid negotiations for a new West Coast contract.

Management then locked out workers for 10 days, crippling international trade along the coast and sending ripples through the regional and national economy.


Now, amid negotiations for a new contract, employers say the International Longshore and Warehouse Union is slowing cargo flows once again. And business groups, including the National Retail Federation, have called for the federal government to inject itself into contract negotiations, warning a shutdown could prove dire for a still-fragile economy.

Both the union and the Pacific Maritime Assn., which represents employers, say their focus is on the negotiating table, and neither side has raised the prospect of a strike or lockout, a more amicable stance than in 2002. But the various parties have grown increasingly irritable in public.

Employers accuse the union of worsening already heavy congestion caused by a surge of cargo as the economy improves and a shortage of trailers that truckers use to haul goods, among other factors. They say businesses are already piling up heavy costs, because of the slow movement of goods.

In response, dockworkers, who have never acknowledged use of the slowdown tactic, have accused management of a smear campaign.


The National Retail Federation has sought to pressure the sides to a deal. The group has urged that a federal mediator help reach an agreement.

The retailers and other national business groups have lobbied the president that, if the ports were to close, he should invoke the Taft-Hartley Act to reopen ports — just as President George W. Bush did in 2002 to end the 10-day lockout, citing threats to the economy and national security.

“The impact [a closure] would have on jobs, down-stream consumers and the business operations of exporters, importers, retailers, transportation providers, manufacturers and other stakeholders would be catastrophic,” the groups wrote President Obama in early November.

According to a report commissioned by the retail group and the National Assn. of Manufacturers, a shutdown would cost the national economy roughly $2 billion a day in lost gross domestic product.


Agriculture firms could lose sales if they can’t get their goods out of the country, and manufacturing plants that rely on the timely shipment of parts may go dark, said Jonathan Gold, vice president of supply chain and customs policy at the National Retail Federation.

“It could be felt far and wide throughout the economy,” he said.

But international trade experts and economic impact specialists said the estimates of economic loss are grossly inflated and make too many assumptions.

Although the report acknowledges cargo wouldn’t be dumped into the sea, it still estimates too much would be a total loss and underestimates the ability of businesses to adjust, said Patrick Anderson, principal of Anderson Economic Group, a business consulting firm that specializes in economic impact studies.


In 2002, the economy lost $1.67 billion during a 10-day lockout, according to a study from Anderson’s firm — far less than the $1-billion-a-day figure cited then, or the $2-billion figure used now.

The principal author of the retailers’ report said there’s a difference of opinion over how many goods would never sell. Part of the loss stems from reduced buying power consumers and businesses would have, said Jeffrey Werling, executive director of the Interindustry Forecasting Project at the University of Maryland, who conducted the study for the retail federation.

As companies face higher costs to get their cargo into the country, prices for many items would rise, sending down demand and sales, he predicts.

But even a 20-day shutdown, which Werling pegs as a $50-billion hit, wouldn’t be catastrophic for a national economy with a $17.5-trillion gross domestic product, he said.


“This is tough for certain people,” Werling said. “But it’s something the economy can inherently bounce back from.”

He compared a shutdown to severe weather, like that seen across much of the country earlier this year, which helped send first-quarter GDP down 2.9%.

Economists said the pain from a lockout or strike would primarily hit those employed at the ports or workers closely linked to international trade such as warehouse employees, dockworkers and truck drivers. For Southern California, that would be a hit given the large number of importers, exporters and logistics workers.

“If they go out, it’s going to put everyone out of business,” said Dick Schroeder, owner of Wilmington-based trucking firm Ohana Transportation Inc.


But several factors would probably limit any pain, economists said.

A closure probably would be short-lived, given the immense political pressure Obama would face to intervene. In addition, Southern California’s economy is diverse enough to weather such a storm, international trade economist Jock O’Connell said.

“The impact will not be that great,” said Sung Won Sohn, a California State University Channel Islands economist and former Port of Los Angeles commissioner. “If it’s a matter of three weeks, we would be OK.”

If a labor showdown erupts, goods still to come wouldn’t disappear but would largely be rerouted or come through the West Coast when ports reopen, economists say. And though that would impose additional costs for many, the businesses hired to reroute goods would take on work they otherwise wouldn’t, lessening the total economic drag.


For Gary Toebben, chief executive of the Los Angeles Area Chamber of Commerce, the real fear isn’t what occurs during a shutdown, but what comes later.

Los Angeles and Long Beach face increased competition from ports nationally and abroad, especially as Panama prepares to open an expanded canal that would allow bigger ships from Asia to bypass Southern California and head straight for the Gulf and East coasts.

Toebben said now is the wrong time to give shippers another reason to look elsewhere.

“I am even more concerned about the long term and the image of doing business in the ports of L.A. and Long Beach,” he said.


Twitter: @khouriandrew

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