Report: ILA-USMX to Resume Contract Negotiations for East/Gulf Coast Ports
A report from S&P Global’s Journal of Commerce says talks are set to resume between the International Longshoremen’s Association and the terminal operators at U.S. East Coast and Gulf Coast ports represented by the U.S. Maritime Alliance (USMX). This comes after weeks of an impasse between the union and the employers which reportedly centers around the use of semi-automated equipment in the ports.
The union and the association have not confirmed the reports, but sources told the Journal of Commerce that talks are set to resume on January 7. That would be just nine days before the end of the master contract for all the longshoremen handling containers and vehicles at the U.S. ports. The two sides extended the deadline as part of an agreement on wage increases struck in October to end a three-day walkout. The deadline is midnight on January 15 with the union having threatened to resume the strike on January 16, just four days before the inauguration of Donald Trump as the next U.S. president.
Union members are anxious for an agreement because they are waiting for the agreed 60-plus percent wage increase to start. The ILA deferred the implementation of the wage increase until the other issues were resolved in the contract. In addition to the ILA’s firm stance against automation, issues regarding benefits are still to be resolved.
USMX responded to the ILA saying that it was willing to extend the existing contract structure to review proposed automation. The terminal operators contend that they are out of space to expand in most locations and must use new technologies to respond to the need to increase volumes. The current contract establishes a review committee that includes union representatives for any proposed semi or fully automated systems.
Major U.S. ports including the Port of New York – New Jersey currently do not have automated systems for handling containers putting them at a disadvantage to other global ports which have embraced the technology. Ports on the U.S. West Coast which are under a different union have accepted some automation technologies.
The ILA contends the technology is a replacement for jobs and not needed to maintain productivity at the ports. In addition to container handling systems, it objected for example to an automated gate system deployed by APM Terminals in Mobile, Alabama calling it a contract violation.
President-elect Trump met with the union leaders and issued a strong statement in support of the ILA and its fight against automation. He called on the foreign-owned shipping companies to respect the longshoremen in the contract negotiations. President Joe Biden and his administration pressured the USMX to raise its wage offer in October to settle the prior strike.
Carriers and shippers have already begun to prepare for a possible prolonged work stoppage in mid-January. Maersk, CMA CGM, and Hapag-Lloyd have all issued alerts to customers calling for efforts to expedite container movements out of the terminals while saying they would explore the options if a strike paralyzes the ports. Maersk and Hapag have also announced plans for a work disruption surcharge for all containers moving through the U.S. ports.
Trade groups continue to urge the two sides to resolve the contract. They have said a strike would have dramatic impacts on the U.S. economy while Trump has promised to lower costs for the American consumer.
WHAT THE ILA IS FIGHTING AGAINST
Can U.S. Ports Catch Up with Global
Competition?
U.S. ports are lagging behind international counterparts in efficiency, leading to congestion, delays, and increased costs.
Public ownership and political interference are contributing to poor investment decisions and limited competition.
Privatization could introduce much-needed efficiency, competitiveness, and investment, ultimately benefiting businesses and consumers.
The world has watched for decades as U.S. ports have lagged behind their international counterparts. As they have become increasingly plagued by congestion, delays, and rising costs, it becomes increasingly clear that the publicly-owned port authorities are failing to meet the demands of modern global trade. The solution lies in privatization, a much-needed approach that could revitalize our failing ports.
The importance of ports to the U.S. cannot be overstated, as demonstrated by the sheer volume of trade passing through American ports. In 2023, over $2.1 trillion worth of goods, more than 40% of all goods entering or leaving the United States, passed through a port.
However, despite the importance, American ports continue to lack efficiency. This inefficiency manifests in longer vessel turnaround times, lower crane productivity, poor infrastructure management, and limited use of automation. These issues result in supply chain disruptions and thus increased costs for businesses and consumers.
The inefficiency of U.S. ports is illustrated by their poor performance in global rankings. According to the Container Port Performance Index (CPPI), which measures global port efficiency based on various factors, U.S. ports consistently lag behind other developed countries. This inefficiency is particularly evident when examining specific port rankings. For instance, the Port of Houston, which handled over 293 million tons of cargo in 2022, ranked a dismal 327th in the 2023 CPPI. The Port of Los Angeles, one of the busiest ports in the country, ranked 378th, while the Port of Savannah came in at 398th.
These low rankings translate into inefficiencies that impact the entire supply chain. U.S. ports experience longer vessel turnaround times and lower crane productivity compared to global competitors, particularly those in East Asia. This inefficiency is further exacerbated by the limited use of automation in U.S. ports. While automation has been widely adopted in ports around the world, U.S. ports have been slow to embrace this technology, resulting in increased costs.
This inefficiency is due to the inherent flaws of the publicly-owned port authority model. Under the government’s port authority, political considerations often override commercial criteria, leading to poor investment decisions. Insufficient or misplaced investments result in underutilization of existing port assets. Limited competition among ports reduces incentives for efficiency improvements.
Privatizing port operations can introduce much-needed efficiency and competitiveness.
The benefits of privatization are not merely theoretical. Evidence from successful port privatizations around the world demonstrates the potential for significant improvements. For instance, the privatization of the Port of Brisbane in Australia, completed in 2010 for 2.1 billion AUD, successfully achieved the Queensland Government’s objectives and overcame challenges associated with transitioning a government-owned monopolistic asset to the private sector.
A study published in the NBER Digest found that when private equity funds acquire airports from governments, key performance metrics improve significantly. While airports and seaports are different, this study suggests that private ownership can lead to improved infrastructure management and operational efficiency in transportation hubs.
Privatization does not necessarily mean a complete absence of government oversight. Various models of privatization, such as public-private partnerships, can maintain a degree of public involvement while harnessing the efficiency of private sector management.
In conclusion, the inefficiency of U.S. ports under public ownership is a significant drag on the nation’s economy and competitiveness. By embracing privatization, we can unlock the potential of our ports, bringing them in line with global standards of efficiency and productivity. Simply by creating a more competitive port system that benefits businesses and consumers, we can provide a boost to American economic growth, reduce supply chain bottlenecks, and strengthen our position in the global market.
By SchiffGold.com via Zerohedge.com
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