The Effect of Port Disruptions on US Economy (Part One)
Posted on Wednesday, July 8th
The US National Association of Manufacturers (NAM) and the US National Retail Federation (NRF) have managed to set a framework for the debate on the effects of lockouts and strikes in US ports on the country's economy after conducting a study on this particular economic topic. According to their calculations, work stoppage costs the US economy as much as 2.5 billion dollars a day. It should be noted that the study had in view work stoppage periods of 5, 10 and 20 days respectively. According to other studies, however, work stoppage costs only reach as high as 1 or 2 billion dollars a day. In the end, though, all studies agree upon one particular aspect, namely that the longer the lockouts and strikes in US ports last, the higher are the costs on the economy.
All ports on the West Coast were closed for two days recently after the Pacific Maritime Association (PMA) signed an exclusive contract with the International Longshore and Warehouse Union (ILWU) and then terminated it out on account of repeated and extended slowdowns being caused by the latter. The slowdowns and congestion that resulted from this two-day work stoppage period led to overall costs of nearly 5 billion dollars.
Fewer and fewer customers for US exporters
A glance at the export of almonds, for instance, would suffice to understand the extent to which port disruptions affect the US economy. As per some specialists, California's production of almonds outplays all its competitors in terms of quality, more precisely in terms of fat content. These almonds are then exported to Japan, where they are used for candy production. Back in 2002, similar conflictual negotiations between the Pacific Maritime Association and the International Longshore and Warehouse Union caused the ports on the West Coast to shut down and therefore all exports of almonds to the Asian continent to be ceased. However, candy production by Japan manufacturers was not ceased. In turn, the Californian exporters were replaced with Turkish ones. This situation proved to affect California's almond exporting activity in the long run, many of the partnerships never being resumed, which draws not only lower economic profits, but also lower employment rates as well as cargo losses.
However, as already mentioned, the inconveniences caused by port disruptions reach far beyond the export of almonds. Many exporters are facing similar problems, being unable to trade with customers abroad because of the impaired activity in ports across the United States. Thus, the number of foreign customers for US exporters is dropping significantly while their reputation as unreliable trading partners is reaching worrying levels as a result of the repeated conflicts between the Pacific Maritime Association and the International Longshore and Warehouse Union. Therefore, it is imperative that the image of US exporters is cleared in order for foreign customers to be lured back. Otherwise, the employment rates, the production rates, the profit rates and therefore the entire US economy will continue to drop.
