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Aug.21, 2017

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TRADING PLACES 62 THE JOURNAL OF COMMERCE www.joc.com Peter Tirschwell AUGUST 21.2017 BY ITSELF, THE vote by West Coast dockworkers to extend their cur- rent contract through 2022 was a historic act. At no point since the founding of the International Longshore and Warehouse Union in 1937 has the rank and file voted to extend a contract; the vote to do so was overwhelming — 67 percent in favor, 33 percent opposed — a landslide by any definition. But will the vote be remembered as a narrow, ultimately inconse- quential act, or a turning point premised on a message to the union leadership that something needs to change? Behind the "yes" vote could be the voice of a new generation rejecting the confrontational tactics that have secured lucrative wages and benefits for current workers, but undermined their future by driving away cargo that may never return. That's the sense from some younger dockworkers who have commented on Twitter and others who reached out to The Journal of Commerce. One second-generation dockworker in his mid-30s said, "I think it's time for a new era of col - laboration. Neither side can afford to repeat the battles of the past. We have too much to lose. "My vote is hoping the rest of the country/world (sees) that the West Coast is still a viable gateway for cargo," he said. The "yes" vote lined up with the voices of politicians, employers, and shippers who urged the union to send a positive message, particularly to the cargo owners. "Approving this contract would send a strong signal to retailers, man- ufacturers and others who rely on the ports that the West Coast intends to remain competitive, despite slip- ping market share in recent years," former US Trade Representative Mickey Kantor and former Trans - portation and Commerce Secretary and member of Congress Norman Mineta wrote in a July editorial. The union leadership seemed disinclined to see the vote as call for change. "The democratic process allowed us to make a difficult decision and arrive at the best choice under the circumstances," ILWU President Bob McEllrath said in a statement. But it makes perfect sense that the lopsided outcome was a collective demand for change. Things have gone seriously off track for this union and the West Coast ports as a direct result. The reality is this: There is only one way the ILWU could secure straight time hourly wages that are more than 50 percent higher than the national average for union workers, and a health care plan ordi- nary people can only dream of, with virtually no deductibles and drugs obtained for a $1 dollar co-pay, and no generics. That was achieved by disrupting the waterfront during contract negotiations, as the union has done consistently since the mid-1990s, culminating with a six- month stretch of bedlam in 2014 and 2015. In its wake, Washington state exporters lost $800 million alone and other shippers hundreds of millions more, ultimately shaving US GDP in early 2015 It's easy money for the ILWU, because asset-intensive carriers and terminals can't afford protracted slowdowns and will inevitably buckle under union pressure. But union members are discovering that lucrative wages and benefits secured by bringing carriers and terminals to their knees during negotiations comes at a heavy price the union can't ignore forever: lost opportunities for the next generation. The West Coast's share of con- tainerized imports from Asia, its bread-and-butter cargo, dropped ever y year from 2007 through 2017 (year to date), declining from 77 percent to 66 percent, according to PIERS, a sister product of The Journal of Commerce within IHS Markit. The West Coast's share of Asia imports used to be even higher. Cargo fled to the far less disruptive East and Gulf coasts and the Cana- dian Pacific Northwest, and little of it has returned. The lost cargo to the US East and Gulf coasts alone amounts to 700,000 TEU annually, with more lost to British Columbia's Vancouver and Prince Rupert. There is no reason other than labor disruption that explains that level of diversion away from the US West Coast. The diversions, more- over, have only accelerated since the expanded Panama Canal opened in June 2016, showing that the wounds of 2014-2015 and the earlier episodes have far from healed. Ca rgo interest s, especia lly exporters with limited options to divert to less risky ports, no doubt will appreciate another five years of labor peace through the end of the extended contract on July 1, 2022. But that alone won't restore their trust in the West Coast. For that to happen, this vote needs to be more than just a one-off act but a historic turning point, where the possibil- ity of labor disruption eventually becomes so remote that shippers will see the West Coast the way they do ports in Europe or Asia. The union could start by renouncing disruption as a form of negotiation, but that is probably wishful think- ing. The vote to extend, however, is a good place to begin rebuilding trust. As Port of Los Angeles Execu- tive Director Gene Seroka told The Journal of Commerce, "The ILWU labor extension is a major step for- ward for the Port of Los Angeles and other West Coast ports. It goes a long way toward bolstering shipper confidence in our supply chain." JOC Contact Peter Tirschwell at peter.tirschwell@ihsmarkit.com and follow him on Twitter: @petertirschwell. A HISTORIC VOTE FOR CHANGE?

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