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Tallying Port Dispute's Costs

Many companies managed to escape major losses, but some negative effects could be permanent

November 25, 2002|Evelyn Iritani and Marla Dickerson | Times Staff Writers

So how much did months of labor strife and uncertainty at West Coast ports cost the U.S. economy?

The short answer is that no one really knows. Clearly, the most damage came during the 10-day management lockout that ended Oct. 9. But the labor dispute hobbled cargo movement both before and after the lockout ended, and even now the hangover sends pangs through the economy.

Produce exporters forced to dump stranded fruits and vegetables on the domestic market still are tallying up their losses. Retailers that had popular products stuck at sea are waiting to see if they can make up for lost sales during the holiday season. Truckers continue to burn valuable fuel and time getting in and out of the still-congested waterfront.

"I've gone from making three trips a day to maybe one if I'm lucky," said Rodel Biala, an independent trucker who figures he has lost at least $5,000 in income idling in long lines at the ports of Los Angeles and Long Beach. "I'm just trying to survive right now."

But Biala's quick calculation of his own personal setback isn't so easy to extrapolate across the entire economy. Analysts say it's impossible to gauge the precise overall figure because the effect goes far beyond the 29 West Coast ports, extending across industries and borders.

Certainly, sectors tied closely to the ports, such as trucking, were hit first and worst.

Still, some experts believe that many U.S. companies escaped major losses by stockpiling inventory or diverting cargo through East Coast ports. Other companies were able to largely recover once the ports reopened.

"I bet at the end of the day, when everything is cleared off the docks, the net cost to the economy is relatively small," said Jim Glassman, chief U.S. economist for J.P. Morgan Chase & Co.

What also may never be known is just how close the U.S. economy came to the brink -- when the port backup would have turned from a costly but manageable supply disruption into a trigger for global financial chaos.

The West Coast ports handled about $310 billion in cargo in 2000, 42% of all U.S. waterborne trade, according to a study by the Berkeley Roundtable on the International Economy. Nearly one-third of automobile and truck imports are shipped through the ports of Los Angeles and Long Beach.

In Asia, where cargo piled up on the docks during the dispute, anxious manufacturers already suffering from the weak U.S. economy feared they would have to stop production if the ports remained closed much longer.

"If such a thing reaches a certain scale where the pain is really severe, you have an Asian financial crisis and an economic mess," said Stephen Cohen, co-director of the Berkeley Roundtable. "Maybe 10 days is within a manageable figure, and had it gone on for another 10 days it would not have been manageable."

Few believe that the toll on the U.S. economy will reach $19.4 billion, the damage estimate for a 10-day shutdown contained in a study commissioned by the Pacific Maritime Assn., whose 70 members include shipping lines, terminal operators and stevedoring services. Economists said a shock of that magnitude in an already shaky global economy would have had a noticeable effect on the U.S. stock market, employment data or other key barometers of fiscal health. Yet such ripples never materialized.

Shipping lines, presumably the hardest hit by this dispute, have been cagey about their own losses. Singapore-based APL said the port shutdown cost it $10 million in forgone revenue, wages and route diversion. But the PMA, which shuttered the ports after accusing the longshore union of engaging in costly work slowdowns, declined to provide any accounting for its members.

The Oakland-based Transpacific Stabilization Agreement, a rate-setting group whose 14 shipping lines account for the lion's share of ocean cargo between the U.S. and Asia, has projected that its members will lose a combined $2 billion this year. But a spokesman acknowledged that most of that red ink is related to a sharp drop in shipping rates -- not the labor strife at the docks.

John Martin, whose maritime consulting firm conducted the PMA study, said it was far too early to provide any figures on the economic fallout, though he expected it probably would fall between $4.7 billion and $19.4 billion, the damage range he projected for a shutdown lasting five to 10 days.

Martin said it would take months to ferret out all the hidden costs related to the port shutdown, such as additional borrowing expenses for transportation firms whose financial ratings were downgraded.

Still, he conceded that his earlier projection would have to be revised significantly. For example, he predicted that a shutdown of 10 days or greater would lead to the loss of about 90,600 full-time-equivalent jobs (181.2 million hours) and nearly $693 million in federal, state and local tax revenue.

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