West Coast shipping and the Panama Canal

I first became aware of how important the ports around Los Angeles were for commerce in the US in 2002, when a 10-day work stoppage brought the flow of goods through them to a halt.    At that time, Los Angeles and Long Beach were the only deep-water ports on the West Coast equipped with machinery that could offload big container ships from Asia.  Just as important, all the major rail links across the country terminate at the big Southern California port complex.

The dispute was, of course, about wages and benefits.  But it was also about work rules–the desire of the shipping companies that own the ports to replace typewriters with computers and to record container numbers by scanning barcodes instead of writing them down with pencil and paper and typing them up.  That would ultimately mean layoffs of the typists–something the union was dead set against.  At one point, the shipping companies offered to ensure that all then-employed workers would receive a full salary for life (at the going rate of roughly triple the average American worker’s pay) in return for permission to make productivity improvements.  The union rejected the offer, reportedly because jobs that the workers’ children would otherwise “inherit” would be lost.

Ultimately Washington stepped in to end that strike.

We’ve had a relatively mild reprise of the 2002 job action during recently concluded contract negotiations between the shippers and the longshoremen, ended, again, with Washington’s help.

The 2002 strike, however, marked a crucial turning point in shippers’ attitudes toward what the LA Times has called “a crucial chokepoint in the global economy.”

After that strike, the shipping companies began to develop alternative routes to get merchandise to their American customers.  Measures included revival of East Coast ports and expansion of ports in the Pacific Northwest.

The keystone of the shippers’ plans, however, is the ongoing enlargement of the Panama Canal.  At present, Panamax container ships (that is, the “max” that can fit through the canal) can hold up to 5,000 containers.  When the expansion–mired in cost overruns and delays–is complete in 2017, that figure goes up to 13,000, thereby upping the canal throughput 1.6 times.  There’s already talk of another expansion when this one is done.  (There are also what appear to be hare-brained schemes to spend $50 billion to dig a canal through Nicaragua and  another to create a rail/canal route through northern South America.)

Why do I find this saga interesting?

In a narrow sense, the Panama Canal expansion suggests that future LA port disruptions won’t have the significant negative impact on the US economy that they’ve had in the past.

I also find it noteworthy that an aggressive bargaining stance by a relatively small number of people over a decade ago can continue to have important economic ripple effects fifteen or more years later.

It’s also funny that actions taken to preserve a position of power are ending up having the opposite effect.


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