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Feb.09, 2015

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ECONOMIST: PORT CONGESTION IS BIGGEST THREAT TO TRADE TO WALTER KEMMSIES, the biggest threat to global trade isn't protectionism, war or terror- ism, disease, natural disasters or any of the usual triggers for economic catastrophe. Instead, try mounting congestion at global ports and the crumbling infrastructure surrounding them. He sees the situation at congested U.S. ports, especially on the West Coast, as a harbinger of a crisis importers and exporters worldwide will face in years to come. As the world population and middle class grow rapidly, congestion could cause a global economic crisis. "That's my big fear for global trade," Kemmsies, chief econo- mist for engineering firm Moffatt & Nichol, said at the SMC3 2015 JumpStart Conference in January. The U.N., he noted, projects the size of the global middle class will more than double in the next 15 years, to 4.9 billion people in 2030. "If we actually get that many people — almost 5 billion — in the global middle class, our industry is going to completely collapse. The congestion will be that severe," Kemmsies said. The U.N. forecasts that world popula- tion will reach 8.3 billion by 2030. As the world population grows and freight demand increases, congestion caused by poor infrastructure will have a more noticeable and directly measurable impact on the world economy and trade, he said. ILWU, PMA REACH TENTATIVE CHASSIS DEAL A TENTATIVE AGREEMENT on what had been the major roadblock to reaching a new waterfront contract at U.S. West Coast ports has been reached. Negotiators for the Pacific Maritime Asso- ciation and the International Longshore and Warehouse Union say they have reached a deal on chassis maintenance and repair, but have released no further information. It is believed, however, that the ILWU mechanics will have the jurisdiction to inspect every chassis before it leaves the terminal. This hasn't been an issue in the past because shipping lines owned almost all of the chassis, and the carriers are members of the PMA. However, carriers in recent years sold their chassis to equipment-leasing companies, which aren't members of the PMA, and have no contrac- tual relationship with the ILWU. Hundreds of longshoremen are mechanics, and their jobs would be threatened if the ILWU lost jurisdiction over chassis M&R. Inspecting each chassis, however, gives longshore- men significant leverage over employers. The ILWU last fall, for example, increased the intensity of its inspections, at times instructing truck drivers to exit their cabs while the inspection occurred. This added costly time to the truckers' visits to the terminals and contributed to congestion at the facilities. Because the chassis-leasing companies now own the assets, and are financially responsible if an accident occurs and injury or death results, the leasing companies also must take M&R responsibili- ties seriously, which raises the question of why an additional inspection for roadability is needed at the marine terminals. Wages, pensions and the length of a new contract appear to be the three major remaining issues on the table. In the past, wages and pensions were normally resolved quickly. When the talks began last spring, the most important issue mentioned publicly was the Cadillac tax in the Affordable Health Care Act, also known as Obamacare, that is set to take effect on Jan. 1, 2018. The provision will levy a tax on high-end medical plans, such as the ILWU's, with the revenue to be used to subsidize workers who do not have access to affordable health care plans. The PMA and ILWU in late August announced that negotiators had reached a tentative agreement on health care, leading most observers to conclude the new contract would run for three years, through June 30, 2017, and the Cadillac tax issue would be left for future negotiations. However, employers are known to want as long a period of certainty on the waterfront as possible, and the last two contracts have run for six years, a practice begun after the 10-day employer lockout in 2002. If the term of the contract still must be negotiated, it's possible some type of financial agreement on the cost of medical care has been reached. Spotlight 6 THE JOURNAL OF COMMERCE www.joc.com FEBRUARY 9.2015 6 THE JOURNAL OF COMMERCE www.joc.com Hundreds of longshoremen are mechanics, and their jobs would be threatened if the ILWU lost jurisdiction over chassis M&R. "If we actually get that many people — almost 5 billion — in the global middle class, our industry is going to completely collapse."

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