Containerized Capital

Niko Block examines the lockout that shut down Canada’s second-largest port in July

On July 18, president of CUPE Local 375 Daniel Tremblay received a call from Maritime Employers Association (MEA) president Jean Bedard, telling him that he and his 900 fellow longshoremen would be locked out of their jobs the following morning.

On July 6, Bedard had announced his intention to lay off 107 of his employees, prompting the union to stop working overtime hours immediately. In the two weeks that followed, 16 freighters were backlogged in the St-Lawrence seaway after a diesel tanker upstream ran aground and started leaking into the river; the weather got so hot that it caused Montreal’s death rate to spike; and tensions between the union and the MEA were steadily rising.

For Bedard, the decision to lock his employees out was just a matter of numbers.

“The productivity in one week went down 30 to 40 per cent, depending on the terminal,” he says. “At 40 per cent it’s cheaper to close the port than to keep it open.”

But Tremblay was blindsided by the move.

“I was angry,” he says. “I was angry because we were not so far [from reaching a settlement]. We did not have the Grand Canyon to cross. It was only like the street here.”

Beyond the overtime stoppage, the pace of work on the docks was noticably lagging.

“It was very slow on the dock,” says Tremblay, “because they were angry about the employer, so they were making their [own] pressure tactic. But there was no order from the union.”

The night Tremblay received the call from Bedard, however, 450 of the union members had just convened and decided to officially call for a slowdown – but they were pre-empted by the lockout.

Bedard had insisted that his payroll was too large ever since the Port of Montreal’s business plummeted due to the financial crisis, but by July the longshoremen had been working without a contract for a year-and-a-half and negotiations were at an impasse.

When Bedard initially proposed the layoffs, the union balked, insisting that the MEA’s bottom line could be improved by less drastic measures. At least three union heads were kicked out or resigned in the wrangling that ensued, until Tremblay was nominated in September 2009. Tremblay – who in his 20 years at the local was on his fourth contract negotiation – managed to hammer something out by May, but it was voted down by his members. The same thing happened again in June.

“The last contract negotiation was a lot smoother,” he says.

The main sticking points in these negotiations had to do with job and income security. Payment for the equivalent of 40 hours a week was guaranteed to the longshoremen, regardless of the hours they actually worked. In exchange, they had to be available to work eight hours a day for nineteen days straight before their guaranteed two-day break. “When the ship is in we have work; when the ship is not in, we don’t have work,” says Bedard. “I guarantee your salary every year. In exchange you give me your availability. That’s the deal.”

They all had more time off when shipping traffic dropped precipitously due to the recession, but the MEA, adhering to the terms of its expired contract, had to continue forking over the same old wages to the same number of workers.

These contract stipulations are the product of the extraordinary amount of flexibility demanded of labour by the shipping industry. “There’s a schedule, but we can’t really follow that,” says Bedard. “So you can’t set your agenda for the next six months, who is going to work and when. The ship that was supposed to be in today might be late because there was a storm in the Atlantic. Or you’ll have three ships coming in at the same time because they were all blocked off by ice in the river.”

For longshoremen like Tremblay, who operates the docking cranes, not having the ability to make dinner plans throughout the week is a hassle, but it comes with the territory.

“It’s an open-air warehouse at the biggest scale you can possibly imagine,” says MEA labour relations consultant Guillaume Couture as he drives through the port’s western gate after flashing his ID to a security guard.

On the docks, a freighter full of sugar was being unloaded by means of a gigantic metal clamp that deposited what Couture estimated to be 10 tonnes of sugar at a time into a 25-foot funnel. A diagonal shaft then carried the sugar to the top of the seven-storey Lantic sugar refinery on Notre-Dame. Further along, Couture drove past a series of titanic mountains of salt that had just been dropped off from Africa and South America, waiting to be deployed on the icy streets of Montreal this winter.

The containers go on for miles. Steel, food, copper, furniture, wine – everything. “A container we unload here can get to Chicago inside 24 hours,” says Couture. “We don’t know what’s in ‘em, we don’t care what’s in ‘em. If it has to be shipped to Detroit, we’ll do it as fast as we can.” He adds that up to five and six hundred trucks visit each of the port’s seven major terminals every day.

The Port of Montreal sprawls across 25 kilometres of the island’s southeastern shore. Three of its terminals are located at the bottom of Peel, near the Farine Five Roses plant, where you’ll also find storage space for 260,000 tonnes of grain and 15 million barrels of “liquid bulk,” or petroleum. The remaining 12 terminals lie east of the Old Port, where most of the container handling takes place. Following Vancouver, Montreal is the largest port in the country, and the largest inland port in the world, giving it a huge advantage over New York and Halifax in accessing the Midwestern American market. Last year, more than 1.2 million containers carrying over 11 million tonnes of cargo passed through the port.

“If a ship leaves Antwerp, Belgium, to come to Montreal,” says Bedard, “he’s closer to Chicago and the Midwest and Toronto – the big markets. That’s what Montreal is good at.”

About half of the cargo the port handles is either entering or exiting the US, and the whole operation accounts for approximately 70 per cent of the consumer goods that go to Ontario and Quebec. When the lockout struck, ships already en route were forced to dock in Halifax, which didn’t have enough capacity to keep things running on schedule, while others charted for New York. A handful of boats already in the seaway simply dropped anchor – adding to the backlog created by the oil spill – and hoped for a quick resolution to the dispute.

Adverse effects made themselves known immediately. The Quebec Trucking Association said it feared layoffs would ensue shortly if the situation didn’t resolve itself, as did North America’s largest manufacturer of newsprint, AbitibiBowater Inc. Wal-Mart emphasized that “if the shutdown is not resolved quickly, it will have a serious impact on all businesses who rely on the Port of Montreal.” The Gazette ran an editorial stating, “Too much is at stake to allow this labour dispute to hold the province ransom.”

The union’s ability to hold the province “ransom” has doubtlessly played a role in its overall success in bargaining with its employer. (The average longshoreman earns upwards of $80,000 a year.) But if the strike revealed the “strength of the working class,” as put it, it also demonstrated the federal government’s alacrity in protecting these flows of capital. Labour minister Lisa Raitt immediately issued a press release expressing her “disappointment” with the dispute. “I urge the parties to resume bargaining and reach a negotiated agreement as soon as possible,” it read. Two days later, amidst a chorus of demands for immediate intervention, transport minister John Baird followed suit. “We’re tremendously concerned about the impact, not just in the Montreal area but indeed southern Ontario and southern Quebec, the manufacturing sector, the auto sector, which is still in a fragile state of recovery,” said Baird. Though the government never intervened, aside from its appointment of two mediators, both parties got the message.

“At the time [Bedard] decided to put a lockout, I think it was because he wanted the government to apply a law or something to be in the way of negotiation,” says Tremblay. “About two months before the lockout we were talking with people at the government to say don’t [interfere] in our negotiation. Let us make it like the [Labour] Code says, and I think Lisa Raitt listened to us.”

Perhaps even more urgently affected by the lockout than Wal-Mart was the island of Newfoundland, and premier Danny Williams’s office had good reason to ask Ottawa to step in. One hundred per cent of the food, pharmaceuticals, toilet paper and countless other products that arrive in St. Johns pass through Montreal first. Raitt deferred the question to the Canadian Industrial Relations Board (CIRB), which quickly began moving towards deeming Newfoundland’s cargo an essential service.

“That was fucking crazy,” laughs Tremblay. “They said that they’ve only got inventory for about ten days, so if they don’t have the stock they will have to shut down some companies.” In August, the CIRB determined that loading shipments to Newfoundland is an essential service, but the specifics – in particular how many men need to stay on the docks – have yet to be determined. The longshoremen aren’t particularly enthusiastic about having their hands tied.

“To us [Newfoundland shipping company] Oceanex is not an essential service, because they can do business in Trois-Rivières, they can do it in Sorel, they can do it in Quebec – so it’s only a logistic problem for the company.”

Tremblay is primarily concerned here about the potential for managerial abuses of the Labour Code.

A labour dispute at the Port of Vancouver last year led to management there pushing for the classification of docking work as an essential service across the board, which would paralyze the union’s ability to strike.

“In the west coast, the employer there doesn’t want to negotiate with the [longshoremen],” says Tremblay. “He wants to have a new reglementation and he’s pushing very hard there…so that if [they] don’t reach an agreement, they’re going to have to go to arbitration, and that’s very bad. We need to do what Canadians have always done – negotiate. It’s normal here. We’re normally a democratic country.”

Bedard points out that the government has intervened in each of the Vancouver port’s major labour disputes in recent memory. In Montreal, on the other hand, “we’ve always managed to find a solution and negotiate a solution,” he says.

He adds, however, that he thinks the government should amend the Labour Code to impose a deadline of some sort to otherwise-interminable negotiations. Bedard himself was in charge of negotiating a collective agreement with the union in Trois-Rivières, but infighting within the union stymied the process and it ended up lasting 14 years.

“Vancouver is going for forced arbitration. Maybe that’s the solution, but at the moment there is none so you end up with an open-ended system.”

The MEA’s exclusive source of revenue is a $3 fee on every tonne of cargo that passes in or out of the port. As president, Bedard is accountable to a board of directors that includes representatives of many of the world’s largest shipping and loading companies, like Hapag-Lloyd, Hanjin Shipping Co., and Maersk – as well as exclusively local operations like Montreal Gateway Terminals (MGT) Partnerships.

The association was judicially mandated as the representative of each of the longshoremen’s employers in the early 1970s. This was largely due to the near-constant labour disputes between the handful of unions and the various shipping companies operating at the port. Income and job security have been mainstays of the union’s contracts ever since.

“We needed to settle [on] something,” says Tremblay, “because for the Canadian economy we needed to fix all those strikes and lockouts at that time. It was mostly strikes.” Tremblay’s father worked at the docks when he decided to abandon his day job as a photographer for Journal de Montreal and became a longshoreman himself.

But the early 70s was also a pivotal moment for the industry worldwide. Shipping was growing rapidly at the time, especially given the recent introduction of standard containerization – a key innovation in the development of global trade.

“When I began here we were working a lot with our arms,” recalls Tremblay. “Now it’s only machines.”

The industry has steadily grown more flexible and more lucrative ever since. According to MGT, shipping has grown three times faster than GDP since the early 1990s. One firm called Drewry Shipping Consultants estimates that global container flow will rise by 7.2 per cent per year on average between 2009 and 2015. (This figure lags noticeably behind the double-digit growth the industry saw in the early years of the last decade.)
Large-scale projects to increase shipping and port capacity are almost perpetually underway around the globe. New York’s container terminal – which competes directly with Montreal – recently announced plans to double its service capacity. The Panama Canal likewise plans to double its capacity by 2014 – a development that will open up ports in the Southeastern US to ships from China, which typically only dock on the west coast before their cargo is carted east by rail and truck.

The recent recession was in fact the first time the industry had seen a net decline. “Container shipping is not a very old business,” notes Bedard. “It’s what, 40 years old? Fifty at the most? I would say [2008-2009] was a huge slump, when you lose 20 per cent of the business. And we didn’t do worse than the other ports.”

In recent years, the industry’s rapid growth has garnered billions of dollars in investment capital, breaking up the traditional vertically-integrated business model of the past. “The big difference is that ten years ago the major player in Montreal, the major shipping line, was CP ships,” says Bedard. “CP ships owned the biggest terminal in Montreal, so it was their ships unloading on their terminal; then they would put the containers on their rail cars, on their railways.”

The first major investment fund to move into the Canadian ports, he says, was the Ontario Teachers Pension Plan (OTPP) – the largest pension fund in Canada with over $87 billion in net assets – which in 2007 established Global Container Terminals Inc. (GCT). GCT now handles 70 per cent of the containerized flow through Vancouver’s port in addition to ten per cent at the ports of New York and New Jersey.

Morgan Stanley, awash with more money than it knew what to do with at the time, followed suit the same year after hiring one of the OTPP’s investment managers. The investment bank bought an 80 per cent share in the MGT, which operates the terminals that had once belonged to CP. And this was right on the heels of the acquisition of other terminals in Vancouver and Halifax by an Australian investment bank.

What this expanded growth and diversification in the industry means for longshoremen, as far as Bedard is concerned, is that the union no longer has the same leverage it once did, because Montreal can no longer monopolize any shipping routes whatsoever.

“Montreal was CP’s only port of call in North America,” says Bedard. “So if the union went on strike they would virtually close off North America to CP ships. So for a long time, the union felt that they had some bargaining power because of that. All that’s changed in the last ten years. The biggest terminal in Montreal is now owned by Morgan Stanley. The lines that call Montreal, one is Chinese, one is Danish, one is German, and one is from Geneva. They all have terminals either in Halifax or in New York. So if Montreal is not a good place to come, or if it is too expensive, or the longshoremen don’t want to play the game, they’ll just do like the birds and flock off to their terminals in Halifax and somewhere else, that’s all.”

In terms of traffic volume, the port has weathered the rise of the Canadian dollar in the past decade relatively well, but it has inevitably affected its competitiveness.

“It’s much more volatile a business than it used to be,” says Bedard. “The liners can go anywhere. The decision is made in Hong Kong or Stockholm or Hamburg. They don’t care about the place where the container will be unloaded, whether it’s Savannah Georgia, or Boston or Halifax. These are just names for them.”

By the July 23, Tremblay and Bedard were both anxious to open the port and resume negotiations – and both hoped they would progress faster that the glacial pace that had characterized talks up until that point. Bedard simply wanted an end to the work-to-rule tactics; the union simply wanted an end to the lockout; and the business world breathed a sigh of relief when work resumed that weekend.

The union voted on the new contract proposal last Thursday, and approved it. It encompasses severance packages for 50 employees – mainly older ones – in addition to a pay-raise of between 1.5 and 2.5 per cent, and a bit of finagling with job and income security that gives the MEA more options in case of a future slowdown in business. Their pensions won’t be affected.

“It’s a start,” says Bedard, noting that container traffic in Montreal has bounced back approximately to 2006 levels, which to a certain degree has helped ease some of the tensions between the MEA and the union local.

“These guys are business men,” shrugs Tremblay. “I’ve got a good relationship with [Bedard] and everyone there – also the board. Yesterday I was with the CEO of Morgan Stanley. I’m going to take a glass of wine with him in New York in maybe two weeks.”