Shippers’ Panama Canal Threat: Real or Bluff?

Not long ago, I wrote about how the goods-movement industry uses threats about the Panama Canal to try to keep costs low on the West Coast docks. “Diversion!” they shout. It’s a not-too-subtle threat to move cargo from the West Coast – where wages and environmental standards are high – to the East Coast.

Well, try not to get whiplash from the latest warning cries from these same folks. According to leading trade publication The Journal of Commerce, an executive from a shipping line is now warning of possible cargo diversion—from east to west! The International Longshoremen’s Association represents dock workers on the East and Gulf Coasts, and they’re currently negotiating a new contract. Making the bosses nervous is the fact that the ILA has a new, tough-talking leader.

The JOC reports: “David Arsenault, vice president of Hyundai Merchant Marine, told the Propeller Club of Los Angeles-Long Beach that retailers are already discussing contingency plans with their ocean carriers as the September 30 contract expiration date is only seven months away.” “Contingency plans,” of course, is code for diversion. (“Only” seven months away? Seems to me a lot of negotiating can happen in seven months—if one is bargaining in good faith, at least.)

First things first: How do wages on the two coasts compare? According to work out of Cal State Long Beach, the differences are striking. In the early 1980s, the mean hourly wages of unionized dock workers differed by about 16 percent (with the West Coast ILWU making about $21/hour to the East and Gulf coast ILA’s $18/hour). By the late 1980s and early 1990s, however, wages for the ILWU started going up modestly, while wages for the ILA started going down dramatically. By the end of the 1990s, the West Coast premium had jumped to 80 percent– an $11 hourly differential.

(The reasons for this are varied, and include, among other things, the fact that the West Coast bargains as a single unit, while on the East Coast, workers are put into competition with each other from port to port. The ILWU also has greater control over the dispatch of labor, and has a different approach to technological advances.)

The ILA seems ready to make some headway in closing this gap, and achieving closer parity with its West Coast sisters and brothers. More fundamentally, the ILA has identified several issues related to automation and worker safety that will determine the success of the negotiations. Presumably, the ILA recognizes that the increased traffic that is expected to go along with the Panama Canal provides them additional leverage in contract negotiations. The East and Gulf Coast employers are none too happy about this—or about the ILWU’s statements of support for the ILA struggle.

Stories like the one in the JOC are laughable. They discuss employer actions as though they are forces of nature, rather than decisions that people are making: “West Coast ports could see a diversion of cargo…” the article opens. Journalists and others often use the passive voice to imply that diversion is something that just happens, and to hide the fact that it happens because specific individuals and organizations make it happen. A more honest sort of journalism would note that “employers are threatening to move cargo in response to ILA contract proposals.”

Funnier still is how incoherent the employers’ positions are. They are simultaneously threatening to move cargo from East to West, and also from West to East. So what are we to make of all of this? Nothing. We should recognize that the employers are going to say whatever they think they need to say to threaten and scare, and we should put little stock in what they do say. (Ironically, a subsequent JOC commentary makes this point nicely, though perhaps not as the author intended: “What’s said in a panel discussion at a conference usually includes a measure of posturing and hyperbole, and isn’t necessarily a reliable guide to what happens in the give-and-take of negotiations.”)

The unions should fight for what they think is right and what they think is achievable, ignoring the talk coming out of both sides of the bosses’ mouths. When people stop being coherent, it’s time to stop listening to them.