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Mar.09, 2015

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TRADING PLACES 118 THE JOURNAL OF COMMERCE MARCH 9.2015 Peter Tirschwell IGNORING THE CUSTOMER TH E S H O RT A N N O U N C E M E NT on Feb. 20 that a West Coast labor agreement had been struck spoke volumes about why the current sys- tem of longshore labor relations is rotten to the core. After subjecting thousands of companies to months of costly delays and disruption, you would think the International Longshore and Warehouse Union and the Pacific Maritime Associa- tion would acknowledge the pain they caused and perhaps say some- thing to the effect that efforts will be made to restore trust in West Coast ports. After all, it's the shippers' cargo that ultimately pays the bills, and there is no shortage of alternative routes for nondiscretionary cargo. Nothing of the kind was said, other than a line that the agree- ment will be "good for workers and for the industry." To the extent that it wasn't coincidental that "work- ers" appeared in the sentence before "industry" — and I'm sure it wasn't — it lays bare the insular priorities of the negotiating parties, versus the larger economy that depends on well-functioning ports. It was left to port authorities such as Oakland to acknowledge the customer and its concerns: "Ship- pers are looking to us to accelerate the flow of cargo," Chris Lytle, the port's executive director, said in a press release after the settlement was announced. "We owe them our best effort." The failure by the ILWU and the PMA to acknowledge the dam- age to sales, employment, profits and future business opportunities speaks to how a national economic engine such as the West Coast port system is under the control of parties whose first loyalty is to themselves rather than the economy. The lack of an iota of acknowl- edgement or responsibility also underscores the descent of the PMA-ILWU relationship into bit - terness and hostility over the past several months, such that any joint wording about working together for a better collective future was impos- sible by the time the agreement was grudgingly signed on Feb. 20. That was a far cry from the hal- cyon early days of the negotiations last June and July when the ILWU and PM A on several occasions announced jointly that "both parties have pledged to keep cargo moving." How distant and empty those words seem now. And it wasn't as if others were coming to the aid of shippers, either. As the economic pain emanated from the West Coast, Washington appeared oblivious, unconcerned or both, with the White House only stepping in after the news made national headlines. That doesn't bode well for the idea that the process will be reformed in any meaningful way, such that disrup- tion will be dismantled as a tool of leverage, during the five-year dura- tion of the new agreement. What we'll see now is a sig- nificant reaction from importers and exporters. Not all cargo can avoid the West Coast — not by a long shot — but unlike 2002 when many C-Suites were blindsided by the 10-day lockout, this time there is complete understanding of the risks and a full realization that, though it may be five years in the future, they will be going through this again unless long-term changes in their supply chains are made starting now. As my colleague Bill Mongel- luzzo wrote in an analysis after the agreement was announced, "Importers and exporters, disgusted by months of fruitless contract nego- tiations, port congestion and public bickering between the ILWU and PMA, will say enough is enough. Retailers and direct shippers in sur- veys have indicated they will most likely shift some of their cargo vol- ume to East Coast ports." Oakland put it well in a Q&A issued after the settlement: Question: Will it be more of the same at the next contract negotiation? Answer: There's a history of challenging bargaining over water- front contracts. The hope is that both sides will recognize the need to settle future contracts without further damaging the economy. Hope: That's about all the reassur- ance shippers have at this point. JOC Contact Peter Tirschwell at and follow him on Twitter: @petertirschwell. The failure by the ILWU and the PMA to acknowledge the damage speaks to how the West Coast port system is under the control of parties whose first loyalty is to themselves rather than the economy.

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