A West Coast port worker union is fighting robots. The stakes for the supply chain are high

The sight last year of dozens of gigantic container vessels anchored for weeks off the coast of Los Angeles rocked the shipping industry and magnified the worldwide disruption of supply chains. Most of the ships, mainly bound from Asia, were waiting to enter the already backed-up ports of Los Angeles and Long Beach and offload tens of thousands of multicolored containers jam-packed with everything from toys to Toyotas. More than 30% of all containerized U.S. maritime imports pass through the two facilities, which together comprise the nation’s largest port complex.

Hoisting that cargo, from ship to shore and onto anxiously awaiting destinations near and far, is the job of dockworkers belonging to the International Longshore and Warehouse Union (ILWU) — and who presently are embroiled in a logjam of their own. The union represents more than 22,000 longshoremen in 29 ports and terminals up and down the West Coast; about 13,000 are employed at 12 ports along Southern California’s San Pedro Bay. Since early May, the ILWU has been deadlocked in contract negotiations with the Pacific Maritime Association (PMA), which represents 70 shipping companies and port and terminal operators.

The current ILWU contract, enacted in 2015, expired on July 1. While talks continue, both sides have at least allayed fears of a potential work slowdown or stoppage — which would only exacerbate the ports’ persistent backlogs — by jointly stating in mid June that “neither party is preparing for a strike or a lockout.”

Typical of labor negotiations, wages are an issue, though ILWU members are among the best-paid union workers in the country, averaging $195,000 a year plus benefits, according to the PMA. More contentious is the matter of automation of container-handling machinery, an emerging trend at ports and terminals throughout the world.

The PMA wants to expand the previously agreed-to use of remotely controlled cranes, which lift containers off of and onto ships and transfer them to and from landside stacks, and yard tractors that shuttle containers around the terminals, including on and off tractor trailers and railcars. The association released a related study in May, claiming that “increasing automation will enable the largest West Coast ports to remain competitive, facilitate both cargo and job growth, and reduce greenhouse-gas emissions to meet stringent local environmental standards.”

A report prepared by the Economic Roundtable and underwritten by the ILWU’s Coast Longshore Division, released on June 30, disputes many of the points in the PMA study, stating in particular that port automation eliminates jobs. “We often think that technology and automation are synonymous with progress, but after looking at evidence from ports around the world, this is not a win-lose issue, but rather a lose-lose issue for both workers and the American public,” said Daniel Flaming, president of the Economic Roundtable and co-author of the report, in an email to CNBC. “Automation of shipping terminals isn’t cost-effective or more productive, but it enables foreign shipping giants to avoid the inconvenience of dealing with American workers and the union that represents them.”

The divergent reports not only document the ongoing ILWU-PMA contract negotiations, but more broadly rehash arguments for and against automation dating back to the dawn of America’s industrial revolution in the late 1700s, when mechanized textile mills opened, purging scores of laborers. Three centuries on, the matter of machines replacing human workers continues to impact most every business sector, from auto manufacturing to zookeeping.

The most rudimentary — and universally adopted — type of automation at seaport and terminal operations is the computerization and digitization of forms, data, record-keeping and other administrative functions. This innovation has supplanted clerks who manually wrote or typed such information, but also has created new IT jobs. Much as electronic medical records have become ubiquitous in the health-care industry, process automation is standard in shipping.

The implementation of automated container-handling and transporting equipment, including operating software and, more recently, augmented reality and virtual reality technologies, is comparatively nascent. In 2020, the United Nations Conference on Trade and Development stated there were 939 container ports in the world. Yet last year, according to a report by the International Transport Forum, only around 53 were automated, representing 4% of the total global container terminal capacity. Most of them have emerged since the 2010s and more than half are located in Asia and Europe.

There is a distinction between fully and semi-automated terminals. Fully automated refers to the various equipment that handles containers, principally cranes and yard tractors. They don’t require human operators onboard, and instead are remotely operated by humans in control towers, monitoring screens and cameras. Although dockworkers may be needed to manually secure a crane’s hooks to a container or a container to a truck chassis or railcar. A semi-automated terminal generally has remote-controlled cranes and human-driven yard tractors.

In 1993, the Dutch port complex in Rotterdam became the first to introduce machine automation and has since become the model for a fully automated terminal. Today, several of the busiest foreign ports in the world have some degree of machine automation, including those in Shanghai, Singapore, Antwerp and Hamburg.

Operators in the U.S. have been slower to automate, for numerous reasons, but union resistance remains a primary one. In its 2002 contract, after the PMA authorized a 10-day lockout, the ILWU agreed to computerized process automation. In 2008, in exchange for a nearly $900-million addition to its pension fund and other retirement benefits, the union agreed that operators, at their discretion, could implement machine automation.

The West Coast longshoremen also have a significant financial safety net. The current labor contract includes a pay-guarantee plan that ensures up to 40 hours of weekly income if an eligible ILWU member is unable to obtain full-time work for any reason, including automation. This weekly income is guaranteed until retirement.

In 2016, the TraPac terminal in Los Angeles became the first U.S. port to fully automate. More recently, a portion of the APM Terminal facility in Los Angeles and the Long Beach Container Terminal (LBCT) also were fully automated. 

In this latest round of talks, the ILWU is asking operators to hold off on further automation in the San Pedro Bay ports. Its objections are laid out in the Economic Roundtable report, and are countered in the PMA’s. To date, neither side has conceded, and have mutually initiated a media blackout during negotiations.

Meanwhile, there are three semi-automated ports on the Eastern Seaboard — two in Norfolk, Virginia, and one at the Port of New York and New Jersey terminal in Bayonne, New Jersey. Dockworkers at those facilities are members of the International Longshoremen’s Association (ILA), which represents nearly 65,000 members at ports along the East Coast and Gulf of Mexico. The ILA is not part of the ILWU negotiations, but is similarly opposed to further automation.

It is perfectly normal for the dockworkers’ unions to protect the jobs of their members. “A conservative analysis of job loss shows that automation eliminated 572 full-time-equivalent jobs annually at LBCT and TraPac in 2020 and 2021,” the ILWU-funded study said.

Likewise, port and terminal operators want to boost efficiency and productivity through automation, especially at high-volume ports that have limited future cargo capacities and where truckers are frustrated by long wait times to load and unload containers. Operators contend that job losses can be offset by reskilling and upskilling current workers to run automated systems, leading to increased pay and improved safety. In fact, the PMA is building a 20,000-square-foot training center for ILWU workers. Plus, new tech-related jobs, such as data analysts and software developers, will need to be filled.

“The fear that automation will hurt union workers is understandable, but it’s not the case that it leads to a big loss in jobs,” said Michael Nacht, a professor of public policy at the University of California Berkeley and co-author of the PMA report. “A direct comparison of the data shows the same number of workers at automated and non-automated facilities,” he said, citing separate reports on automation from McKinsey and Company and the Massachusetts Institute of Technology.

On the other hand, not every port is a candidate for automation, in terms of cost-benefit analyses. Up-front capital expenditures can run into the billions for new equipment and infrastructure, whether retrofitting an existing terminal or building a new one from scratch. And depending on the geographic location of the port, the type cargo it handles and the volume of containers moving in and out, improving manually operated systems might be more cost-effective.

Automation, across all global industries, has historically proven to be an inexorable force, so its expansion at ports and terminals over the next five to 10 years seems inevitable. “One thing that the Covid-19 pandemic revealed is how fragile some of the supply chains are in and out of the ports,” said an executive for a terminal operations company, who requested anonymity because of relationships with unions and operators. “For us to be responsible service providers, we need to find more resilience, and automation can do that. Hopefully we can find our way through [the ILWU-PMA contract negotiations] collectively and make things better for everybody. That would be a good outcome.”