On the Waterfront

If an American economic sneeze gives the world a cold, does a shutdown of America's West Coast ports mean Asia is about to come down with pneumonia? Thanks to an executive injunction by President George W. Bush ordering a temporary end to a 10-day U.S. dockworker lockout, the region avoided a trip to the emergency room. But it will take months before shipping traffic disrupted by the port shutdown returns to normal, and the economic threat will linger.

The labor dispute posed major problems for Asian companies. Exports to West Coast ports account for about 5% of Asia's total GDP; between $1 billion and $2 billion worth of cargo sets out across the Pacific every autumn day as American retailers stock shelves for the upcoming holiday shopping season. For export-driven economies, the West Coast crisis was immediately con-tagious. First to feel the effects was the shipping industry, whose intricate schedules quickly plunged into chaos. Manufacturers' supply chains were the next to buckle. Honda, for example, halted production at its U.S. auto plants due to a shortage of parts, while suppliers to Sony and Dell were forced to ship critical components by air, an expensive stop-gap solution. Thousands of cars en route to the U.S. were among many Asian exports stuck idling offshore on cargo vessels or parked on Hong Kong and Singapore docks.

Ports on both sides of the Pacific have now started clearing out huge backlogs of goods. Shipping companies estimate that schedules will still be affected two months from now. It could have been worse, analysts say. A disruption lasting 30 days would trigger a regional recession. A remaining concern: Bush's injunction bought an 80-day respite. But if the labor dispute is still not resolved in that time, another shutdown could strike early next year—threatening to reinfect Asia with a nasty case of the economic flu.