- The Washington Times - Tuesday, October 1, 2002

A labor dispute that has shut down West Coast ports and could cost the nation $1 billion per day is shaping up as good for business along the East Coast.
Ports in Maryland and Virginia said their business started picking up this summer as contract negotiations between the International Longshore and Warehouse Union, and the Pacific Maritime Association, which represents shipping lines and terminal operators, became more threatening.
"We think there has been some anticipation of this lockout and strike because our rail business has increased noticeably in the last two or three months," said Rick Knapp, assistant general manager of Virginia International Terminals, the nonprofit company that operates Virginia's ports.
Unless resolved quickly, the shutdown could empty shelves in stores and malls, and quickly shutter factory production lines across the United States and in Mexico, economists say.
"The collateral damage is huge," said Stephen Cohen, a regional planning professor at the University of California at Berkeley. "We've never had anything like this. This affects the entire economy."
The Pacific Maritime Association ordered the lockout Sunday at 29 West Coast ports until the union agrees to extend a labor contract that expired July 1. Meanwhile, hundreds of millions of dollars of goods are sitting idle on docks or ships moored off the coast at a time when importers are trying to build their inventories of Christmas gifts and farmers are trying to export their harvests.
The West Coast ports handle about one-third of all U.S. trade, worth about $300 billion a year.
East Coast transportation companies are noticing an increase in business, as a portion of that trade already is being diverted around the tip of South America to Eastern ports. The shutdown of West Coast ports must last at least one more week before the increase becomes significant, the companies say.
While both sides met in San Francisco yesterday, the Bush administration gave no indication it would intervene immediately.
"If it goes on for even a short period of time, it's a problem for the economy," said White House spokesman Ari Fleischer. "We're monitoring it carefully."
The president could order an end to the stoppage under the Taft-Hartley Act, which gives the president the right to intervene in labor disputes when they threaten the nation's economy. President Carter was the last president to invoke the authority in an unsuccessful attempt to end a coal strike in 1978.
Both sides are scheduled to meet with federal mediators in Washington on Thursday.
A five-day shutdown would cost the economy about $4.7 billion in lost wages and revenue, according to a Martin Associates study conducted for the Pacific Maritime Association.
"It's just massive," said John Martin, president of Martin Associates, a Lancaster, Pa., economic consulting firm.
The problems would snowball quickly, his study said, with a 10-day shutdown costing the country $19.4 billion.
American manufacturers increasingly rely on imported components and materials, and the dependence of giant retailers, such as Wal-Mart and Target, on imported merchandise has soared. The containers West Coast ports handle include computers, automobiles, meat, toys, furniture and clothes.
Factories and retailers are more vulnerable than ever to supply disruptions. Cargo no longer sits in warehouses as it once did. Containers are moved from the ships directly to distribution centers tied to the ports, where they are broken down, repacked and sent to final destinations within hours instead of days or weeks.
West Coast consumers, who purchase about half the goods imported through their ports, would be the first to notice shortages and higher prices as supplies diminish.
Although shippers and their customers have been building up inventories in anticipation of the West Coast ports shutdown, retailers estimate that every day of delay at a port can back up supplies for a week.
Bill Wanamaker, American Trucking Association spokesman, said higher prices would be a "simple consequence of supply and demand" if ports are shut down for a long time.
"As supplies of some commodities currently on the shelves disappear, they will not be made up in the supply chain," he said. "Some prices could increase."
Other price increases would be passed on by Asian shippers forced to bear the added expense of sending cargo ships around the tip of South America to reach East Coast and Gulf Coast ports.
"The question is how much of the overflow can sustain the additional expense to be shipped around entire continents," Mr. Wanamaker said.
Most cargo ships are too big to fit through the Panama Canal.
A recent increase in business at Maryland and Virginia ports indicates some Asian shippers are willing to pay for the longer voyages.
Judy Scioli, spokeswoman for the Port of Baltimore, said she noticed business increases recently but was uncertain how much of it was diverted from the West Coast.
East Coast railroads are seeing similar business increases.
"We're seeing that there is an uptick on the East Coast," said Dan Murphy, spokesman for CSX Transportation, the largest railroad company in the East. "The greatest part of our business is westbound from the imports in the East. Those imports have been heavy for some time now, partially as a result of importers recognizing the threat of a shutdown."
Some of the business is for shipments to West Coast destinations that otherwise would have been unloaded at Long Beach, Calif.; Los Angeles; Seattle; or other Western ports and driven a short distance to final destinations. Shippers pay by the mile.
"Transcontinental is a good move for us," Mr. Murphy said.
Farmers who are in the middle of their fall grain-shipping season to Asia and the west coast of Latin America would be hurt by a prolonged shutdown.
"The more perishable the agricultural product, the greater the risk of losing that product," Mr. Wanamaker said.
Warehouses that store perishable products expressed similar concern about the shutdown.
"It could have a huge impact," said Benjamin Milk, vice president of the International Association of Refrigerated Warehouses.
This article is based in part on wire service reports.

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