Western dock strike feared

Bruised U.S. economy might suffer another blow if West Coast ports close

July 23, 2002|By Paul Adams | Paul Adams,SUN STAFF

The price of everything from running shoes to televisions could go up if West Coast dock workers go on strike this summer, which would deal a fragile U.S. economy another blow as it struggles to recover from a widening crisis in confidence, economists and retail experts said yesterday.

Talks between the International Longshore and Warehouse Union and the Pacific Maritime Association have been suspended while union leaders consider the shipping lines' latest proposal.

The ILWU's top executives have sharply criticized the offer, leaving retailers dependent on goods from Asia increasingly worried that their supply lines could be cut by a protracted strike.

The dock workers' contract expired July 1, but the two sides have agreed to keep extending it while negotiations continue.

"What's making my guys particularly nervous right now as these talks drag on is that we're entering the Christmas sourcing season," said Erik Autor, vice president and international trade counsel for the National Retail Federation. "The next three months are absolutely make or break for retailers, and if they can't get their goods into the distribution centers and onto shelves, it really spells disaster."

By some estimates, West Coast ports handle about 42 percent of U.S. waterborne trade. Every year, about $260 billion in goods flow through the ports. The economic activity generated by the ports is equal to about 7 percent of the nation's gross domestic product.

The East Coast would not be immune to a strike. Some of those goods flow East by train and truck. Diverting ships to Gulf of Mexico or East Coast ports won't work, either, because many of the ships serving the West Coast are too big to fit through the Panama Canal.

East Coast ports would also be hard-pressed to handle the enormous volume of containers that move across West Coast docks.

"I think some of that cargo short term could come into East Coast ports, but I don't think it would be long enough to sustain the demand for more ships on the East Coast," said Peter Shaerf, a New York container shipping analyst.

The extra steaming time alone would discourage most shippers.

A trip from Yokohama, Japan, to Baltimore is 9,626 miles and takes about 27 days with a trip through the Panama Canal. The trip from Yokohama to Los Angeles would take about a third as long and could be handled by larger, faster ships than those that can fit through the canal, Shaerf said.

The port of Baltimore has made no contingency plans to accommodate more cargo in the event of a West Coast strike. But the port's main container cargo terminal has room for a surge, port officials said. "I think the infrastructure could handle it," said Samuel Azzarello, manager for logistics for the Maryland Port Administration.

At worst, economists estimate, a strike could disrupt consumer spending - the main force behind the nation's economic strength - and cost the U.S. economy $1 billion a day.

"A lot of people have said this would devastate the Los Angeles economy, because we have the nation's largest port complex," said Jack Kyser, chief economist for the Los Angeles County Economic Development Corp. "We would feel the pain, but the pain would ripple out to the rest of the country fairly quickly."

Industry analysts say any strike would probably be short. If that's the case, analysts say, the economy could withstand the blow because retailers have boosted inventories in anticipation of a possible labor dispute.

As evidence, analysts note a 26 percent increase in imports last month at the port of Los Angeles. Some of the increase has been attributed to retailers' stocking up in light of labor situation.

Much of the discomfort could come in the form of inflation. The cost of goods is being affected by the falling value of the dollar. Increased transportation costs, a shortage of goods and other effects of a strike by dock workers would add to inflationary pressures, said Steven G. Cochrane, senior economist at Economy.com.

But Cochrane and others are optimistic that the economic impact of a strike would be minor and contained. "I think it's something we can absorb," Cochrane said. "I think the economy will adjust, and I don't expect the strike would last a real long time."

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