Los Angeles, CA – As the possibility of a crippling work stoppage at 30 US West Coast ports looms on the horizon, a study just released by the National Association of Manufacturers (NAM) and the National Retail Federation (NRF) outlines what impact such an event would have on the US economy.
Closed-door negotiations have been underway for more than a month between the Pacific Maritime Association, which represents terminal operators, and the International Longshoremen & Warehouse Union to craft a contract that would frame the work of more than 14,000 dock workers at container load centers from Puget Sound to San Diego.
The current contract expires at 5:00 pm, July 1. If no contract has been agreed to by the deadline, both the PMA, which represents the terminal operators, and the ILWU could agree to extend the existing agreement into August, but there is no guarantee as past contract negotiations between the two groups have historically been contentious.
According to the joint NAM-NRF study, “a prolonged strike between the negotiating parties could lead to reduced or shuttered terminal operations for an extended period. If such disruptions occur, the economic impact would be significant and widespread” and the repercussions “would grow with time.”
A 5-day stoppage, the study said, would reduce the country’s GDP $1.9 billion a day, disrupt 73,000 jobs, and cost the average household $81 in purchasing power, while a 10-day stoppage would cut GDP by $2.1 billion a day, impact 169,000 jobs; and cost the average household $170 in purchasing power.
A port closure of 20 days would slash GDP by $2.5 billion a day; affect 450,000 jobs; and cut the average household’s purchasing power by $366, the study said.
“Understanding the Consequences”
“It is important for the parties at the table as well as others to fully understand the economic consequences of a port disruption,” said NRF President and CEO Matthew Shay. “Any supply chain disruption, whether it’s a port slowdown or outright stoppage, would cripple international trade, stymie supply chains and hurt domestic employment and consumer spending.”
For retailers and their customers, a port closure, “would mean a delay in back-to-school and holiday shipments that could significantly drive up consumer prices,” Shay said.
Manufacturers, said NAM President and CEO Jay Timmons said, “depend on the ability of West Coast ports to efficiently move cargo valued at 12.5 percent of US GDP. A shutdown would erode that figure and inflict long-term damage to our competitiveness as manufacturers and as a nation. The parties must come to an agreement before the current contract expires.”
In 2002, negotiations between the PMA and the ILWU failed with the resulting 11-day port shutdown imposing such havoc on the national economy that then-President George W. Bush had to invoke the Taft-Hartley Act to order both parties back to work.
A research report published at the time by the University of California at Berkeley estimated that total cost of shutting down the West Coast ports was about $2 billion a day in lost business and tax revenue from sales and wages. The strike also created a backlog of cargo that took weeks to alleviate.
Traditionally ILWU-PMA contracts cover three years. But after the 2002 lockout, a six-year contract was instituted as a way of ensuring labor stability for a longer time.
The six-year duration was renewed again in 2008 as the economy was struggling and stability was again a priority. In the current negotiations, the three-year term is again back on the table.