Labor negotiations between West Coast dockworkers, cargo handling companies and container shipping companies enter a new high-stakes phase with the expiration of the contract covering US seaports in Washington state south of California.
With the two sides remaining far apart on issues such as compensation and automation, the multi-year contract was set to end late Friday, raising fears of potential disruptions at key U.S. gateways for trans-Pacific trade, including the nation’s busiest container port complex in Los Angeles and Long Beach.
In a joint statement on Friday, the two sides said they had not reached an agreement to extend the contract, while work on the docks continues as negotiations for a new working agreement continue.
Congestion at Southern California ports has been at the center of U.S. supply chain issues that have contributed to inflation spikes and tied up retail and manufacturing inventories.
More recently, congestion has eased, but a return to large backlogs at West Coast ports ahead of peak holiday shopping periods this fall would be disastrous for merchants. It would also be a blow to the Biden administration, as port congestion will drive up shipping costs just as the government tries to rein in inflation that is at its highest level in four decades.
The International Longshore and Warehouse Union, which represents 22,400 dockworkers at 29 ports, and the Pacific Maritime Association, which represents employers and shipping companies, met with President Biden in early June to discuss the talks. The two sides later released a joint statement saying they are not preparing for a strike or lockout by workers.
On Thursday, Labor Secretary Marty Walsh said the talks had gone smoothly so far, with no major disagreements between the parties.
“This negotiation has been going on for six weeks now,” Walsh said. “It’s not a lot of time and this contract is a very big contract. I guess there will be problems. There are going to be difficult conversations. But that’s the beauty of negotiations.
Importers and freight industry officials remain wary after disputes during contract negotiations in 2002 and in 2014 dozens of container ships piled up off the southern California coast, costing individual retailers million in increased costs and lost sales.
No one expected a deal before the contract expired. Shipping industry officials said the union’s influence is greatest after the contract expires and when getting goods into the country becomes more urgent later in the year.
Some importers are already re-routing cargo to east coast ports to guard against west coast disruptions. “I think everyone is anticipating some sort of slowdown and that’s why we’re seeing such a shift of freight from the west coast to the east coast,” said Craig Akers, director of operations at the Toy Shippers Association.
Both sides have agreed not to talk about the negotiations, which began May 10 in San Francisco. Before the start of the talks, the parties said that the discussions would be conducted on a daily basis. Observers say union leaders took a two-day break from the talks, slowing progress.
Expiring the contract without an extension removes workplace grievance mechanisms and raises the specter of slowdowns in the event of a labor dispute at one of the ports.
People familiar with the talks say the two biggest issues in this year’s negotiations are worker compensation and employers’ desire to bring more automation to their container terminals.
The ILWU agreed to allow automation in a previous contract, but in practice it opposed operators’ efforts to add robotics to the docks. Two of 13 container handling facilities at Southern California ports have been fully or partially automated. Two other terminals have started to introduce automation, or say they plan to do so.
The employers’ group released a report before talks began in May touting the effectiveness of automation, saying the most advanced automated facilities at Southern California ports were processing containers up to twice as fast as neighboring conventional terminals. He also cited payroll data, saying the average dock worker with more than five years of full-time experience in 2019 earned nearly $190,000 a year.
A report endorsed by the union and released Thursday countered that automation is neither efficient nor productive and that it kills jobs. As for wages, he said that in 2019, the average dockworker in Los Angeles and Long Beach — which accounts for about three-quarters of the coast’s workforce — earned $89,950.
“It can be loud, smelly and harsh, but I think we’re well paid,” said Jaime Hipsher, a 46-year-old dock worker who drives a truck that hauls containers through ports. Ms Hipsher said she made between $80,000 and $110,000 a year, depending on how many shifts she could take, but she said there were fewer jobs to choose from due to increased automation.
The Labor report also said California should impose a tax on Southern California automated terminals to offset the decline in tax revenue from any docker jobs lost to automation.
The union argued its workers deserved a pay rise after transporting record amounts of goods during a global pandemic as shipping companies made record profits. Sea-Intelligence, based in Denmark, estimated that global shipping companies that publish their results publicly had more than $120 billion in revenue last year, triple the profits of the previous 10 years combined.
Shipping industry officials say importers are diverting goods from the West Coast partly because of last year’s congestion and because they still face delays in inland transportation from Los Angeles and Long Beach.
The influx of cargo on the East Coast causes ship backups from New York to Savannah, Georgia.
Griff Lynch, executive director of the Georgia Ports Authority, said there were a record 34 ships waiting for a berth off Savannah on Thursday.
“There aren’t a lot of shippers we talk to that don’t say they’re trying to work around the West Coast,” he said.
Write to Paul Berger at Paul.Berger@wsj.com
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