How Much Port Disruptions Hurt the Economy & Options Shippers Have
2.5 billion dollars a day.
That huge dollar amount is what long-term work stoppages at the ports cost the U.S. economy according to a study commissioned by the National Association of Manufacturers (NAM) and the National Retail Federation (NRF).
Robyn M. Boerstling, Director of Transportation and Infrastructure Policy for NAM, said the study researched what work stoppages for 5, 10, and 20 day periods would cost the country when sharing the $2.5 billion figure on Manufacturing Talk Radio.
I’ve seen other estimates in the 1-2 billion dollar a day range. It appears that the longer the ports are closed, the larger the daily costs grow.
Over this last weekend, February 7th-8th, West Coast ports were shutdown as the Pacific Maritime Association (PMA) locked out the International Longshore & Warehouse Union (ILWU) after offering an “all-in” contract to the union that the PMA complains has been orchestrating slowdowns for months.
Two days is not exactly a “long-term” work shortage but after months of slowdowns, walk-offs, and congestion, it wouldn’t be surprising if the cost to the economy of this mini-lockout is close to $5 billion.
U.S. Exporters Are Permanently Losing Customers
Consider almonds. Peter Friedmann, Executive Director of the Agriculture Transportation Coalition and “Our Man in DC” shared a story, on Manufacturing Talk Radio, about California almonds that exemplifies the long-term effects port disruptions have.
California produces great almonds—the best in the world in terms of fat content said Friedmann. Candy makers in Japan depended on those almonds, importing large quantities of them from California for their candy production.
But then the West Coast ports were shutdown in 2002 because of stalled contract negotiations between the PMA and ILWU and California almond exporters were unable to get their almonds to their Japanese customers.
Those candy producers in Japan did not stop making candy with almonds; they started importing almonds from Turkey.
“12 years later, many of those Japanese candy makers are still using the Turkish almonds and they have not come back to the United States and they never will,” said Friedmann. “That’s lost U.S. exports, lost employment here in the United States, lost cargo through the port–in that case Oakland–and lost jobs for the longshoremen.”
The same thing is happening to many U.S. exporters now. Shippers can’t get their products to foreign customers because of congestion, slowdowns, walk-offs, and lockouts. The result is foreign customers are lost as U.S. exports are made unreliable by battles between the PMA and ILWU.
Once foreign customers are lost, the odds are not good that the U.S. manufacturers and shippers will get them back. It’s a permanent loss. One that affects companies, jobs, livelihood—the U.S. economy!
Shippers’ Options During Unreliability of West Coast Ports
Larger U.S. shippers are able to keep foreign customers by exporting via air freight instead of ocean freight. For many, the increased shipping cost means operating at a loss while riding out the negotiations between the PMA and ILWU that have been going on for nine months.
For smaller shippers, this is not an affordable option and they may be (some already have been) forced to shut their doors.
Other options for U.S. exporters is to send their ocean freight cargo out via different routes through different ports. This also presents an increase in costs that not all exporters can afford (importers also are using this same strategy if they can manage it).
This can mean transporting West Coast products all the way to East Coast ports in order to ship them out on longer routes to Asian markets.
Rerouting from West Coast to East Coast can only work on a limited scale as East Coast ports cannot absorb all the cargo shipped through West Coast ports.
Rerouting cargo through other ports does not always mean U.S. ports. Canadian and Mexican ports are getting a portion of cargo traffic that normally goes through West Coast ports. This option makes the most fiscal sense for many U.S. shippers but is also lost money and jobs for the U.S. economy.
Unreliability at West Coast ports means that many shippers who find more reliable shipping options will not come back.
No one is winning in this battle, PMA and ILWU. There’s more permanent damage being done by your war than mentioned above. That includes damage to your ports, PMA, and to your jobs, ILWU. But that’s a blog for another day…
Shippers, Universal Cargo Management is here to help you keep your imports and exports moving, even in these difficult times.