Workers want raises. Shippers want robots. The supply chain hinges on reaching a deal

The immediate future of the global supply chain rests on a bargaining table in San Francisco, where the union representing all West Coast shipbuilders is working on signing new contracts with its collective bosses. shipping.

The current contract, which covers more than 22,000 International Longshore and Warehouse Union workers at 29 ports scattered across the US Pacific coast, expires on July 1.

The problem at stake is the continued inflow of goods into the country, after two years of supply chain disruptions due to pandemic shutdowns, raw material shortages, soaring fuel prices and sometimes stranded giant ships. in the Suez Canal. Forty percent of all U.S. imports pass through West Coast ports, with more than 30% of all containerized imports going to the Ports of Los Angeles and Long Beach, which together make up the complex. largest port in the country.

Past contract negotiations have stretched past their expiration dates and led to major disruptions to port operations, as workers and shipping companies, desk and West Coast representatives docked at Pacific ports. Maritime Assn. industry group, agitated for a better deal.

In 2002, negotiations got so bad that the PMA, which represented 70 ocean carriers and terminal operators, locked its workforce for 10 days until the George W. Bush administration intervened. card. In 2014 and 2015, the Obama administration also stepped in to help end a year-long contract war with slowdowns and outages.

The context of the negotiations is completely different from the previous rounds. In 2002 and 2015, shipping companies faced low profits or total losses, due to the large number of new super-large ships that led to low freight rates and transportation revenue.

But the past two years have brought great financial backing for shipping companies, with the entire industry hitting more than $150 billion in profits by 2021. One of the industry’s leading players, AP Moller- Maersk, had the most profitable year of any company in Danish history, with $18.7 billion in profits – a trend that shippers have continued through 2022, with 6, $8 billion in profit reported in the first quarter alone.

Meanwhile, total imports from Asia to the US West Coast have increased over the years, giving ILWU workers more power at their key point in the global flow of goods. Soaring import demand led to a historic fallout at the LA port complex last year, with more than 100 giant container ships idling offshore waiting to dock at certain times during the holiday season. . That number has since fallen to 30 ships awaiting unloading, but as labor talks kick off this summer, supply chain experts are bracing for a fresh batch of shipments.

Christopher S. Tang, a distinguished professor at UCLA’s Anderson School of Management who studies supply chains, said “congestion at ports has improved, but” this will only last for a while. short time because of the coming tsunami”. Peak shipping season typically kicks off in August for the back-to-school and holiday seasons, and retailers burned by delays in previous years are starting to kick in anticipation. Combined with a backlog of ships idling at the port in Shanghai, which has been locked down by COVID-19, Tang believes another crisis will soon come.

With the supply chain and its link to inflation coming to light for the first time in decades, both sides opened negotiations with cautiously positive words in statements released before negotiated, and initiated a mutually agreed media ban.

ILWU President Willie Adams wrote that “the men and women of ILWU look forward to the opportunity to meet with employers and seek a contract that honors, respects and protects the good work of the United States as well as to U.S. importers and exporters” in an open letter published in early May. James McKenna, PMA’s chief executive officer, said in a video statement that the organization is committed to negotiating a new contract without interruption.

Politicians weighed in, urging both sides to reach an agreement. Adams was invited to a meeting at the White House last October to talk about supply chains with President Biden, Vice President Kamala Harris and Transportation Secretary Pete Buttigieg, among others, and was asked participated in a visit to the port complex in November by California Gov. Gavin Newsom and the Biden administration’s port envoy, John Porcari. In May, as negotiations began, Senator Dianne Feinstein of California published a letter to Adams and McKenna asking them to quickly reach terms, noting that any slowdown or halt which would “exacerbate global supply chain disruptions”.

Should the negotiations heat up, the Biden administration has also indicated it will step in. “We don’t need to get into this negotiation unless we have to,” Labor Secretary Marty Walsh said in a May interview with Bloomberg.

The possibility of a conflict is clear. PMA CEO McKenna highlights the fact that ILWU workers receive “world-class wages,” averaging $195,000 per year for full-time workers, plus benefits, and claims. that PMA is committed to promoting automation at ports.

ILWU President Adams countered both views in his open letter. “We do not apologize for achieving wages that allow workers to provide for the families, retirement and health care that these difficult and dangerous jobs require,” Adams wrote. notes that “decades of negotiation ago made permanent work good work. ”

On the question of automation, Adams was more forceful when he wrote that “automation not only kills good jobs, it also doesn’t move more goods” and poses a national security risk as facility hacking infrastructure is becoming more and more popular.

According to Jake Wilson, a sociology professor at Cal State Long Beach who has written several books, after two years of working to weather the pandemic, with record profits, ILWU is well organized and historically strong. may be looking for increases to beat inflation. about ILWU and global logistics labor.

“When you look at the added value and importance of the work that shipbuilders do, it’s a small percentage of an overall system that is highly profitable for these large corporations,” says Wilson.

West Coast dock workers are the highest-paid logistics workers in the United States, but Wilson notes that “these jobs are still getting squeezed — dock workers don’t get a raise in For many years, the constant pressure to work longer hours and work through the night and other demands necessitated hiring more union dock workers. ”

The numbers reflect Wilson’s argument. PMA paid $2.26 billion in wages in 2021 and $1.55 billion in other benefits, according to its annual report. The shipping industry made $150 billion in profits.

A comprehensive 10% increase for West Coast goers would increase West Coast labor costs from $3.8 billion to about $4.2 billion. That $400 million increase accounted for just over a quarter of 1% of industry profits last year. The estimated cost of 10 days of work stoppage in 2002 was in the billions of dollars for the US economy. Ten days of lost profits out of $150 billion for the year would amount to more than $4 billion for shipping companies alone.

“What is truly unique about shipbuilders around the world is their strategic location in choke points around the world. Working in ports provides a lot of leverage,” Wilson said. “The money is there, shippers are accumulating huge amounts of profit, while most people are not.” Workers want raises. Shippers want robots. The supply chain hinges on reaching a deal

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