Labor resolution paves way for big changes at ports. (Deal of the Year - Dockworkers Pact).

A clannish union battling a shrouded industry. One side wants to maintain its high wages and organizational clout while the other looks to enhance productivity by using more machines and fewer workers. At stake are jobs, profits and the world's cargo transportation network.

The months-long impasse between ship companies and the International Longshore and Warehouse Union led to a 10-day lockout last fall of West Coast ports--and with it, economic dislocation and White House intervention through the Taft-Hartley Act. Finally, a federal mediator led both sides to a tentative six-year contract.

In other words, a very big deal--the Business Journal's biggest deal of the year. There were others of considerable significance for Los Angeles: Northrop acquiring TRW, a new contract for Hollywood's biggest union, a new downtown redevelopment zone and a restructured Disney board.

But international trade employs 287,000 in Los Angeles County--not including the many industries indirectly affected--so the prospect of an extended work slowdown or stoppage carried significant consequences for the local economy.

As it was, more than 100 ships sat outside the ports of Los Angeles and Long Beach during the lockout as manufacturers, distributors and retailers either made alternative arrangements to move goods or just hoped for the best. It took weeks to unclog the resulting backup--illustrating how delicately calibrated global trade has become.

All told, the economic damage from the 10-day lockout was less severe than originally forecast. The Pacific Maritime Association, which represents about 80 shipping lines and terminal operators, placed the cost at $20 billion, but others estimated the loss at closer to $5 billion. One example of the revisionist numbers: Early into the lockout, Dole Foods predicted a loss of $2.4 million but the figure was later revised to the $250,000 to $500,000 range.

But economists generally agreed that losses would have sharply escalated had the lockout gone much longer.

As typical in labor negotiations, both sides can claim victory: the union gets improved health benefits, fatter pensions and guaranteed job security, while the ship companies are allowed to install equipment that makes the process of loading and unloading cargo more efficient. With container traffic moving through West Coast ports expected to double over the next decade, more advanced operations are considered critical to meet that demand.

Then there's the six-year term of the contract--as opposed to the usual three-year pacts--that provide the union with secure benefits for an extended period (especially helpful with the cost of health care going up), while giving ship companies a longer period of union peace.

"It's a landmark deal for both sides," said Steve Sugerman a consultant for the PMA. "It provides a detailed road map to modernize the ports. It also provides security for members of the union for years to come."

In the end, timing and pragmatism brought together the two sides. A cooling-off period invoked by President Bush under the Taft-Hartley Act was coming to an end in December and there were growing concerns that either Congress or the courts might intervene in a new contract.

For the union, an all-Republican Congress--along with a Republican president--added to the incentive of coming to terms before the end of the year. For the ship companies, a decision by the Justice Department not to pursue claims that the union was engaging in deliberate slowdowns signaled the administration's reluctance to keep intervening in the dispute.

"The settlement had to be forced," said Susanne Trimbath, research economist at the Milken Institute. "I don't think one side won and one side lost."

While ratification of the new contract appears likely (the ILWU's 10,500 members will be voting through next week), it could be months or even years before the linchpin of the accord--introducing technology at the ports--gets played out.

Under terms of the proposed contract, the shipping lines will be allowed to implement computerized container tracking and work assignment systems, as well as optical scanners and remote cameras that record license plate and container numbers. This will speed up the time it takes for drivers to enter and leave the ports.

The technology will mean the elimination of 400 maritime clerk positions, but since all union members have been guaranteed a job on the docks for life, those workers will be retrained for other work when the technology is up and running. But that could take years.

"Any labor agreement represents a compromise," said Peter Olney, associate director of the University of California Institute for Labor and Employment. "But on balance, given the forces arrayed against the union--the billionaire ship companies and the Bush administration--the union came out of this in good shape."