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USMX-ILA reach agreement - 3 reasons for concern

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USMX-ILA reach agreement - 3 reasons for concern

February 05, 2013 - 18:01
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NEW YORK, Feb. 6, 2013 (RISI) -One more step. Last week, Dockworkers and port management for many of the US East and Gulf Coast ports finally reached a tentative labor agreement. This comes after harried months of strike threats, management ultimatums, and the penultimate decision to bring in a government mediator.

On February 1, 2013, US Federal mediator George Cohen announced that the International Longshoreman's Association (ILA) and the US Maritime Alliance (USMX) had agreed on the terms for a new six-year "Master Contract" between the two sides. This umbrella agreement would affect all of the 14 major US ports from Maine to Texas.

But there is still more to come. In a single statement from mediator Cohen, the only release from either party on this outcome, the agreement is still "subject to the ratification procedures of both parties and, as well, to agreements being achieved in a number of local union negotiations." No timeline was announced for the ratification or for the status of the local agreements to be completed.

Three reasons for concern

For the most part, everyone breathed a little easier at the end of 2012 when a pre-holiday strike was averted and the two sides agreed to an independent mediator. And, for the majority of forest products logistics, these discussions have long centered on labor issues surrounding container handling at the ports, leaving breakbulk largely unaddressed. But there are still reasons to be concerned with how these negotiations have been handled and what impact this agreement could hold for the future.

Economic shock

With more than 50% of the US containerized shipments passing through the US East and Gulf Coast ports, a strike would have reportedly affected over $450 billion in US trade. At a time when the US and world economies are still remarkably fragile, nearly all parties involved agreed that a shock of that magnitude would have far reaching implications.

These ports represent approximately 14,500 ILA jobs and provide over half a million additional jobs related to the shipping industry. And the USMX, representing all of the US and East Coast ports, as well as 10 of the largest carriers worldwide, carries a significant responsibility for the health of the larger economy.

The National Retail Federation, which has been vocal since the beginning of the USMX-ILA negotiations, has stressed the vital economic importance of keeping ports open to international trade and commerce. "Our ports and cargos that flow through them are truly our economic lifeline to the world," said NFR President and CEO Matthew Shay.

This economic specter has been at the center of the public and industry's concern for these talks and, with any new master agreement, will continue to be a point to watch. As ports grow to handle more cargo, their economic impact will only expand.

Containers, containers, containers

Two contentious issues have been at the epicenter of these talks: container royalties and labor productivity. Although a minority of forest products is shipped using containers, with the largest volume since transported as breakbulk, the agreements surrounding the handling of containers is a concern to watch. Ports worldwide continue to ramp up their container-handling ability, sometimes at the expense of breakbulk shipping, and forest products logistics must assume containerization will grow for it's shippers as well.

While many were focused on the container issue, a larger anxiety is the dispute around work rules. Port management, terminal operators and ocean carriers have pointed to what they call "waterfront abuses" from dockworkers. These include payment for hours worked during a day, overtime pay, and so-called "no-show" jobs.

Although details of the new master agreement were not released, management has been demanding that these abuses must finally be eliminated. Over the next few years, dockworkers and shippers will be asked to substantially improve productivity. In turn, it is expected that ports will look to their container productivity even closer as a measure of their efficiency and profitability.

More to come

This melodrama is far from finished. The tentative master agreement must be ratified by both the USMX and the ILA, and is subject to the agreements being hammered out with local union negotiations. No timeline was given for these points, but both parties did agree that there was no longer any threat of a work stoppage during the process.

However the details of the master agreement have yet to be released, presumably for both the USMX and ILA to present the terms to their bodies. This news will unlikely stay secret for long. What the new agreement contains is anyone's guess, but many industry watchers warn that it will contain enough for both sides to be preparing for the next showdown.

Finally, US ports have enjoyed relatively peaceful labor relations for the past four decades. Since 1977, ILA contract negotiations have been successfully completed without disruption to service. But how long will this last? Port strikes are not uncommon throughout the rest of the world. Unless the new agreement produces an historic long-standing resolve between the USMX and the ILA, there is every reason to expect we may visit these same or similar issues in the next few years.

How did we get here

How did we get to this point, through nearly a year of discussions in an atmosphere that veered from optimistic to contentious and eventually entailed intervention by the Federal Mediation and Conciliation Service?

Click here for a video review of the ILA-USMX negotiations timeline and major developments by the Journal of Commerce.

Click here for the JoC's completed coverage of the ILA-USMX negotiations.