Posted on September 25, 2024
With memories of severe supply chain disruptions during the initial phase of the pandemic still vivid, business owners are already dreading a looming strike that threatens to close nearly half of all U.S. commercial ports starting October 1. Though a week remains to avert a walkout, the specter of more turmoil in the import and export trade increases their worries each day — along with growing forecasts of billions in losses.
Around 45,000 members of the International Longshoremen’s Association (ILA) union are preparing to halt work when their current contract expires September 30 unless a new multiyear agreement is signed. With that now looking unlikely, odds are increasing that the 36 East and Gulf Coast ports that handle between 45 percent and 49 percent of all monthly imports to the U.S. will close next Tuesday. That would be bad news for companies whose production relies on supplies from abroad, and also for retailers already preparing for annual year-end holiday consumer-purchasing booms.
Negotiations toward an agreement have been underway for the past year, but positions held by the ILA and the United States Maritime Alliance, which represents management of the ports, remain far apart.
The union is demanding a nearly 80-percent pay increase for East and Gulf Coast longshoremen over a six year-period. It justifies that hefty hike by citing grueling work weeks of up to 100 hours, as well as seeking employees’ share of the huge profits that shipping lines raked in during the pandemic. The union also wants guarantees to limit increased automation at U.S. terminals — a precaution, it says, to avoid the major job losses that the shift to machine handling of cargo generated in ports abroad.
The United States Maritime Alliance, by contrast, is offering a 32 percent wage increase, similar to what West Coast port employees won during negotiations last year.
With talks breaking down more often and compromises scarce over the last few months, many companies advanced their maritime import schedules for getting year-end merchandise supplies way back in spring. Those picked up speed this summer.
According to the National Retail Federation, inflows to U.S. ports have exceeded 2.1 million twenty-foot equivalent units (TEU) since June. Those volumes continued rising in July and August, with September “expected to see 2.31 million TEU — import levels not seen since 2022.”
As part of those advance import plans seeking to beat the October deadline, “an estimated $34 billion in freight [is] en route to these ports on 147 ocean vessels” right now, according to CNBC.
Many importers have also switched their supply-chain structures by shipping to West Coast ports not involved in the conflict.
In August, for example, operators of Southern California’s Port of Long Beach told CNBC they handled 40.4 percent more imports in August compared to the previous year — the highest volume in the terminal’s 113-year history. The neighboring Port of Los Angeles reported a 16 percent rise compared to August 2023.
Despite those adaptations, experts say a port strike will have enormous, expensive consequences for U.S. businesses. A recent estimate by Oxford Economics says it could result in up to $7.5 billion in weekly losses, Bloomberg reported. That’s roughly equivalent to the $1-billion daily cost of an 11-day lockout of West Coast longshoremen in 2002.
And much like that conflict, disruptions from an extended strike would likely take months to sort out. Any business owners doubting that need only think back to the long delivery delays for goods in the earlier periods of the pandemic. At that time, imports hit a bottleneck when container ships previously banned from operating during lockdowns were then backed up as they converged on ports that were swamped with traffic.
In addition to the yawning gap between the ILA’s demands and the United States Maritime Alliance’s counteroffer, November’s elections are complicating discussions further. That’s something both the union and port management to have tried to exploit as their positions harden.
Neither Republican presidential candidate Donald Trump nor his Democratic rival Kamala Harris is keen to get anywhere near the looming strike. On the one hand, both would doubtless like to prevent the considerable economic damage a walkout would inflict — especially with inflation now finally under control and the economy nearing pre-pandemic normality. At the same time, neither Trump nor Harris can afford angering union members whose support both have sought — and which could be critical in swing states.
The same political concerns have led White House officials to tell media that President Joe Biden is not planning on invoking the Taft-Hartley Act, which would impose an 80-day period of normal operations while labor and management reopen talks under mediation.
That, by contrast, was the option Republican President George W. Bush embraced to end the 2002 walkout. However, his re-election campaign was still over year away at that time — and he didn’t have to worry about the inevitably angry reaction from progressive voters for effectively busting up a strike.
