As the International Longshore and Warehouse Union and their employers continue negotiations on a new contract to replace their current agreement, which expires next Monday, retailers and manufacturers are warning a strike or other disruption in West Coast port operations would have "significant and widespread" economic impact.
A new study, performed for the National Association of Manufacturers and the National Retail Federation by economists at the Interindustry Forecasting Project at the University of Maryland, contended that the economic repercussions of a port closure would grow with time
— from $1.9 billion per day if the strike lasted five days to $2.5 billion a day if it lasted 20 days.
Those estimates are higher than some numbers that were cited during and after the 10-day shutdown of West Coast ports in 2002, but such estimates have been criticized by those who have looked at them closely. Reviewing them, Peter Hall, a professor at Simon Fraser University, in a 2004 paper, wrote that "estimated economic losses were vastly overinflated."
While the nervousness about the contract talks between the ILWU and the Pacific Maritime Association is growing as next Monday's deadline approaches, but both sides have said for months that they expect the contract talks to extend into July. Both employers and the ILWU have been respecting a self-imposed press blackout, but to date talks are said to be centered on issues having to do with healthcare, including the cost of a tax under the Affordable Care Act on high cost health plans.
"Even though a labor agreement is not expected to be reached by the June 30 deadline, the ILWU and PMA must remain at the negotiating table, without engaging in disruptions, because the economic consequences of an intractable and prolonged dispute are too severe to ignore," said the NRF/NAM study.
"West Coast ports are a critical artery of the nation’s transportation infrastructure and essential for the seamless flow of imports and exports— cargo moving through West Coast ports represents an economic value of 12.5 percent of U.S. GDP," it says.
Gauging the effect of a shutdown of the 30 West Coast ports along the continental United States (Alaska and Hawaii not
included), the study said, "A widespread interruption of this magnitude would negatively affect economic activity and jobs through three main channels: export loss, import delay and higher costs, and reduced purchasing power for consumers."
It found that the loss of exports "would directly lessen output and employment of exporting industries, and the loss would indirectly reduce activity in their supply chains. The higher costs and delay for imports "would also reduce GDP and employment by throwing sand in the gears of productive activities. An important characteristic of competitive and modern supply chains is the orchestrated and speedy integration of goods, services and information. An interruption to flows within these highly sophisticated supply chains can be particularly costly to manufacturers and retailers, especially as time passes during a protracted dispute," it said.
"Finally," it continued, "because consumers would be saddled with higher costs for their products, overall household purchasing power would be diminished."
The study projects that a 5-day stoppage would: reduce GDP by $1.9 billion a day; disrupt 73,000 jobs; and cost the average household $81 in purchasing power. A stoppage lasting 10-day stoppage would reduce GDP by $2.1 billion a day; disrupt 169,000 jobs; and cost the average household $170 in purchasing power. Finally, the report found that a 20-day stoppage would reduce GDP by $2.5 billion a day; disrupt 405,000 jobs; and cost the average household $366 in purchasing power.