News / Sigh of relief from US trade as new deal for peace at west coast ports is brokered

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A new five-year deal placed on the table on Friday could soon bring an end to the long-running dispute at US west coast ports.

If the deal brokered by US labour secretary Tom Perez and his team is ratified by the International Longshore and Warehouse Union’s (ILWU) 20,000 dockworker members and the Pacific Maritime Association’s employer group, terminal operations at the 29 ports can begin to return to normal.

However, there is an estimated backlog of ships and containers that could take between six and eight weeks to overcome.

This is likely to see retailers continue their prolonged wait for inventory and exporters forced to continue to divert boxes to alternative gateways in Canada and Mexico to ensure shipment of their goods.

The disruption has seriously impacted retail, manufacturing and agriculture businesses in the US, ranging from the world’s largest retailer Wal-Mart to car plants such as Honda and fast-food giant McDonald’s – which has famously had to deal with shortages of french-fries at its Japanese restaurants.

The gridlock at the ports which handle over 70% of US’s Asian imports, saw the G6 shipping alliance cancel 18 transpacific sailings over the coming months after the number of ships awaiting berths outside Los Angeles and Long Beach grew to more than 30.

There is little doubt that anchoring containerships for days at a time in the San Pedro Bay also hit the already-fragile bottom lines of carriers; given that the idled ships were unable to earn, but still incurred operating costs such as mortgage payments and charter hire.

A new contract that would enable port employers and their labour forces to again pull in the same direction was welcomed by all stakeholders.

In a joint statement, the presidents of the ILWU and the PMA, said the tentative agreement was “good for workers and the industry” and, encouragingly, added: “We are pleased our ports can now resume full operations.”

The Washington-based National Retail Federation responded to Friday’s announcement by congratulating the two sides for reaching a deal and thanking the labour secretary for his intervention.

NRF president and chief executive Matthew Shay said the parties should quickly ratify the deal and “immediately focus on clearing the crisis-level congestion at the ports”.

“As we welcome today’s news, we must dedicate ourselves to finding a new way to ensure that this nightmare scenario is not repeated again,” cautioned Mr Shay – no doubt thinking ahead to contract negotiations for the US east coast, where the labour agreement will be due for renewal in two years.

Federal Maritime Commission chairman Mario Cordero said: “I want to thank Secretary Perez and his team, and the Federal Mediation and Conciliation Service (FMCS), for helping to bring about the resolution between the ILWU and the PMA. This is welcome news for all parties involved including US exporters, importers, and ocean transport intermediaries who rely on our west coast ports to move their cargo to market efficiently.”

The FMCS said: “Shippers can expect that normal operations will be restored as soon as possible at our nation’s west coast ports.”

But what is “normal” at the container terminals on the US west coast? Even before the labour slowdowns and the retaliatory weekend and holiday working suspension by port employer, “normal” still meant congestion and delays to cargo movements.

The cascading onto the transpacific trade of bigger ships – hitherto Asia-Europe trade workhorses – had already challenged the ports’ confident”big ship-ready” boasts.

While port executives pointed to their sufficient water depths, quay length and super post-panamax gantry cranes, in practice the arrival of the bigger ships and their much greater container exchange requirements put massive pressure on landside operations and a fragile infrastructure.

The challenges these vessels brought to the system included previously seldom deployed gangs of dockers drafted in to cope with the longer vessel stays in port; a complex and disorganised chassis system; and a chronic shortage of truck drivers all contributed to congestion prior to the deterioration in the relationship of the new contract negotiations.

All three of these factors remain.