An Economic Analysis of the 1998 Patrick Dispute

Article excerpt

Introduction

For several weeks straddling Easter of 1998, Patrick stevedores and the Maritime Union of Australia (MUA) became embroiled in an industrial campaign of seemingly epic proportions. The dispute, which received wide media coverage, was accompanied by widespread picketing of the Patrick operations which effectively paralyzed the stevedoring operations of the company. Precipitated by the decision of the company to terminate the services of all stevedoring workers at its container and break-bulk facilities, the dispute lasted a number of weeks and culminated in the re-instatement of the Patrick workers. Subsequently a new enterprise agreement was negotiated between Patrick and the MUA which was then certified by the Australian Industrial Relations Commission.

The purpose of this article is to provide an economic analysis of the dispute. Narratives of the dispute are available elsewhere (see Dabscheck in this volume) and the industrial relations implications have and will continue to be discussed. Rather, this article takes up some of the public policy issues at stake, including an analysis of the factors which led to the dispute and discussion of the likely outcomes of the new negotiated arrangements. Some of the key questions raised are as follows:

* What are the key structural features of the industry?

* What has underpinned the strength of the NWA?

* What are the work arrangements which have characterised the Australian waterfront?

* What are the economic consequences of inefficiency, unreliability and high cost in the stevedoring industry?

* What is the appropriate role of the government in effecting change?

* What are the prospects for long-run efficiency gains at the Australian waterfront?

The stevedoring industry in Australia

The Australian stevedoring industry, certainly in relation to container traffic, is characterised by few players and relative capital intensity. With the introduction of containerisation and the associated need for expensive equipment to move the containers, the Australian stevedoring industry has over the past several decades rationalised to the point that two major companies dominate the container stevedoring industry, viz., Patrick and P&O Ports (formerly known as Conaust). With the bulk of traffic moving across the Port of Melbourne and the Port Botany, these two companies dominate container stevedoring and account for some 95 percent of all container traffic in Australia, even though there are a number of smaller players. Backed by long-term lease arrangements over scarce land granted by the respective port authorities to the companies, it is accurate to describe the Australian container stevedoring industry as a duopoly.

A benchmarking study undertaken by the Productivity Commission (PC 1998a, 138) concluded in relation to the performance of container stevedoring in Australia in the following way.

   Container stevedoring charges, labour and capital productivity and
   timeliness and reliability ... indicate that, overall, Australian
   performance lags significantly behind that achieved in other ports.

   ... [Container] stevedoring chargers were significantly higher at
   Australian container terminals than at any of the overseas
   terminals (except Nagoya).

   The international comparisons of indicators of labour and capital
   productivity indicate scope to improve performance. Although
   average net crane rates have improved since 1989 at Australian
   terminals, they were significantly below those at most of the
   overseas ports examined in this study.

   The data relating to timeliness and reliability, although limited,
   indicated relatively poor performance at key Australian ports.
   Survey data for Australia suggest that about one-fifth of ships
   experience some sort of delay calling at Australian ports ...

Underpinning the stability of the duopolistic industry arrangement has been the restrictions to competition on the input side. …