Impasse between union, employers could shut down some major U.S. ports in Oct.


A shutdown would deal a blow to the nation’s economy and pose a new threat to the weak recovery barely a month before American voters go to the polls. (Charles Krupa/AP)
August 31, 2012

Ports along the Eastern and Gulf of Mexico coasts of the United States face a possible shutdown on Oct. 1 as a result of a deadlock in negotiations between port employers and the main union, the International Longshoremen’s Association.

A shutdown would deal a blow to the nation’s economy and pose a new threat to the weak recovery barely a month before American voters go to the polls. And it would cripple ports including Houston, Savannah, Baltimore, New York and Boston and idle more than 14,000 longshoremen.

The Retail Industry Leaders Association’s president, Sandy Kennedy, said in a statement Thursday that a “disastrous strike” would be “devastating to the retail industry and would have severe consequences for the U.S. economy.” She said it would force retailers to “redirect their supply chains during the crucial period before the holiday shopping season” and “seriously impede the flow of commerce.”

Negotiations between the ILA and the U.S. Maritime Alliance (USMX) broke down last week and there are no plans for them to resume, according to people involved in the talks.

The longshoremen’s union is seeking to protect jobs threatened by automation. It has also sought to protect jobs doing maintenance on the chassis that undergird shipping containers. The maritime alliance, a collection of employers at 14 ports and 24 ocean carriers, is seeking to end or phase out work rules put in place a half-century ago that it said are making it hard for their ports to compete with West Coast ports, Canadian ports and railroads.

“In many ports we are dealing with archaic work rules, things that go back years and don’t make any sense,” said James Capo, chief executive of USMX. “It ends up with us paying billions of dollars. . . . The ILA has absolutely refused to discuss it.”

The ILA did not return phone calls or e-mails.

“There are threats of a strike,” Capo said. “I don’t know if we’ll have one or not. We’re kind of at a standstill.”

Deputy Secretary of Transportation John D. Porcari is monitoring the talks, and Capo said they have spoken twice.

Overall, the maritime alliance said, ILA workers receive $124,138 a year in wages and benefits.

But USMX said it is targeting “antiquated work rules” that date back a halfcentury and have made the Port of New York and New Jersey “the most expensive port in the world.” It said that 34 ILA members at the Port of New York and New Jersey earn more than $368,000 a year in wages and benefits and that one in three makes more than $208,000 a year — not including annual bonuses based on the weight of container cargo.

Those bonuses, known as “container royalties,” totaled $232 million, or $15,500 for the average ILA gulf and East Coast port worker last year, the maritime alliance said. The union gets 10 percent — $21 million last year — through a checkoff on members’ payments, USMX said.

USMX said the container royalties were established in 1960 to protect longshoremen in New York from job losses created by the growing use of automated cargo. Those patterns are continuing; the number of tons of container cargo has increased from about 50 million tons in 1996 to 110 million in 2011.

“The initial reason for implementing container royalties . . . has long been forgotten,” the employer group says on its Web site. “Today, thousands of workers who were not even born in 1960 — or in 1968 when container royalties were first distributed — continue to receive payments. . . . ”

“We’re not trying to put these guys back in the Stone Age,” Capo said. “They’re pretty well paid.”

He added that “some of these issues developed over 50 years. We don’t expect to solve them in one fell swoop. But we have to start to address these deficiencies.” He said the employers were only seeking to cap the container royalty payments.

Concerns about the competitiveness of U.S. ports prompted a report by the Federal Maritime Commission, which looked at the reasons some shippers chose to use ports in Canada or Mexico. The report, issued in July, pointed to a number of factors, other than labor costs. Moreover, it noted, a strike at Canadian Pacific Rail in 2012 left cargo stranded for a time.

U.S. port managers worry that U.S. ports are lagging behind others elsewhere as cargo ships become even larger and automation becomes more widespread.

Capo said that USMX was also seeking to eliminate “archaic practices” that paid some workers for 24 hours of work even if they were only on the job for a few hours.

Other groups urged the two sides to return to the bargaining table.

The Port Authority of New York and New Jersey said that it has invested billions of dollars to improve infrastructure for the maritime industry and is planning more, including the raising of the Bayonne Bridge. It warned that “any disruption to port activity will negatively impact the Port’s position as well as tens of thousands of local jobs and the regional and the national economies.”

“We understand the negotiations themselves have many complicated components that need to be addressed, but we’re also aware of the potential short- and long-term consequences that will occur if cargo is diverted from the East and Gulf Coast ports,” said Kennedy of the retailers’ association. “The negative impact a strike would have on retailers and our overall economy cannot be overstated.”

Steven Mufson covers energy and other financial news.
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