Thousands of port workers in all major east coast ports and Gulf are preparing to go on strike starting early next week, threatening to close trade gates that handle about half of all containerized goods in and out of the United States.
Negotiations between the union representing port workers and a shipping industry group representing terminal operators and ocean carriers have been deadlocked for months, with both sides issuing conflicting statements this week about their willingness to negotiate.
The United States Maritime Alliance (USMX) has filed an unfair labor practices complaint with the National Labor Relations Board requesting “immediate injunctive relief, requiring the union to resume operations.” negotiations, so that we can negotiate an agreement,” the alliance said Thursday.
The NLRB confirmed it had received the unfair labor practice charge, which is being filed by its regional office in Newark, New Jersey. The allegation will appear on the agency’s website in the coming days, after which an investigation would begin.
USMX’s appeal to the NLRB was derided as “another publicity stunt” by the International Longshoremen’s Association (ILA). “Foreign-owned companies, represented by USMX, set up shop in US ports, earn billions of dollars in revenue and profits, take those profits out of the country, and do not adequately compensate the ILA port workforce for their work, “They are engaging in a truly ‘unfair labor practice,'” the union said in a statement released Thursday.
Top Biden administration officials, including Transportation Secretary Pete Buttigieg, Acting Labor Secretary Julie Su and Lael Brainard, director of the National Economic Council, met with members of the USMX on Friday, urging them to negotiate before the contract expires.
Experts say a shutdown could severely hamper the flow of goods and increase shipping costs. Any increase in such spending could be passed on to consumers just as U.S. inflation normalizes, and could even hamper the Federal Reserve when it finally pivots toward lowering interest rates.
This is what you need to know about the labor struggle, which would be the first mass strike in the eastern ports in almost half a century.
What are the key themes in the labor dispute?
The dispute involves a contract covering tens of thousands of people who are threatening to strike at ports from Massachusetts to Texas if a new labor agreement is not reached with the USMX before the current contract expires at midnight on September 30. . A strike would be the first port strike on the east coast since 1977.
A total of 14 ports involving about 25,000 workers could be affected by the strike, according to USMX: Baltimore; Boston; Charleston, South Carolina; Jacksonville, Florida; Miami; Houston; Mobile, Alabama; New Orleans; New York/New Jersey; Norfolk, Virginia; Philadelphia; Savannah, Georgia; Tampa, FL; and Wilmington, Delaware.
But because economic activity at ports affects a variety of businesses, such as warehousing and transportation, the fallout from work stoppages could leave more than 100,000 employees temporarily out of work, according to economists.
Unionized workers in east coast ports and the Gulf Coast earn a base salary of $39 an hour after six years of work. That’s significantly less than their unionized peers on the West Coast, who earn $54.85 an hour, a rate that will increase to $60.85 in 2027, excluding overtime and benefits.
Assuming a 40-hour work week, West Coast dockworkers earn more than $116,000 a year, compared to $81,000 for their Eastern counterparts. The ILA’s initial demands included a 77% pay increase over the six-year contracts, with the labor group arguing that the pay increase would offset rising inflation in the United States in recent years.
The USMX offered what it called an “industry-leading” wage increase in August, but the sides remain far apart.
“Mark my words, we will close you down on October 1 if we don’t get the kind of wages we deserve,” Harold Daggett, president of the ILA, said earlier this month.
However, the differences are not only about salary. To protect workplace safety, the ILA calls for a complete ban on automation of cranes, doors and container movements used in loading or unloading cargo.
The Maritime Alliance said it offered to maintain current contract provisions that prohibit fully automated terminals, while prohibiting the use of semi-automated equipment in a new labor agreement.
Unable to close the gap, the ILA in June suspended negotiations with USMX, saying the use of automated gates to allow trucks to enter ports without ILA labor violated its existing labor agreement.
What impact could a strike have?
Ports that could close in a strike handle more than 68% of all containerized exports in the U.S. and about 56% of containerized imports, according to industry data. Therefore, even a short strike would cause significant disruptions to regional trade flows.
A strike would reduce US economic activity by between $4.5 billion and $7.5 billion for each week it continues, according to analysts at Oxford Economics. The investment research firm estimates it would take up to a month to clear the backlog of shipments building up while ports remain closed.
Although West Coast terminals could absorb some of the cargo diverted from eastern ports, they couldn’t handle it all, nor could the U.S. rail system, experts say.
If the strike persists for more than about a month, some companies could face shortages of parts and other supplies. Much of the raw materials used in a number of products flow through the east coast ports and from the Gulf, such as cotton, wood and copper. The automotive and pharmaceutical industries, which maintain low inventories, could be affected, while port closures in Miami and Norfolk could affect tobacco companies.
Additionally, a strike could hamper shipments of products such as bananas, manufacturing components and plywood, disrupting the flow of both consumer goods and industrial parts to factories. Fresh meat and other refrigerated foods could spoil, causing shortages and rising prices.
“I think everyone is a little nervous about it,” said Mia Ginter, director of North American ocean shipping for CH Robinson, a logistics company. “The rhetoric this time with the ILA is at a level we haven’t seen before.”
The labor dispute also comes at a time when the Federal Reserve is closely monitoring the labor market for signs of weakening.
“In principle, the Fed should look through any temporary weakness, but it could be difficult to separate the noise from the signal. Therefore, the strike would increase the odds of another 50 basis point cut in November,” wrote Grace Zwemmer, associate U.S. economist at Oxford Economics, in a research note Thursday.
How are companies preparing?
In contrast, consumers would likely not notice shortages of store products during the holiday shopping season, as most products are already housed in warehouses after being transported in advance.
Jonathan Chappel, senior managing director of transportation at Evercore ISI, an investment research firm, said a strike would not mean “Santa won’t show up.”
Imports to U.S. ports are 10% above where they were last year, indicating that some cargo has been sent pending a strike, according to Ben Nolan, a transportation analyst at investment bank Stifel. .
“Many retailers have already taken steps to mitigate the potential impact of a strike by bringing in products earlier or moving products to the West Coast,” said Jonathan Gold, vice president of supply chain and customs policy at the National Retail Federation.
Still, given the complexity and interconnectedness of global supply chains, “even a minor disruption would have a negative impact and cause delays at a critical time for both retailers and consumers,” he added.
The ILA said Wednesday that its members will continue to handle all military cargo in the event of a strike, and will also continue to work on passenger cruises so as not to inconvenience “the tens of thousands of Americans who have booked trips in advance.”
Could there be a political solution?
If a strike were deemed to threaten health or national security, under the Taft-Hartley Act, President Joe Biden could seek a court order for an 80-day cooling-off period.
Although a Biden administration official told CBS News that the U.S. Department of Labor is monitoring the situation and has been in contact with the parties, there are currently no plans to engage in talks.
“We have never invoked Taft-Hartley to break a strike and are not considering doing so now,” the White House told CBS News.
By contrast, the Biden administration has intervened in recent years to resolve potentially disruptive labor disputes.
In 2022, Biden and Congress intervened to prevent a railroad strike, and the president signed legislation crafted by lawmakers to impose a tentative agreement on dozens of unions representing 115,000 workers. And in 2023, acting Secretary of Labor Julie Su played a key role in negotiating an agreement to avoid a strike and negotiate a new labor agreement for West Coast dockworkers.
The union’s influence is also strongest ahead of the presidential election, as candidates compete for the Labor vote, and with visions of clogged ports and product shortages during the pandemic still on voters’ minds.
“If there was ever a time when workers can get what they want,” said Stifel’s Nolan, “it’s right now.”
Some observers believe that when push comes to shove, Biden would act to prevent the strike.
The U.S. government is unlikely to intervene as quickly as Canada did in a labor dispute that shut down the country’s rail traffic last month, when the Canadian government ordered railroads to enter binding arbitration less than a day later. said Zwemmer of Oxford Economics.
“However, if the strike lasts several weeks, the chances of the government getting involved in negotiations will increase, especially with the presidential elections quickly approaching,” the economist said.
“It is unlikely that the possible strike in the east coast ports and Gulf crisis will trigger major economic disruption because we strongly suspect that, so close to the election and despite early denials, President Biden would have no choice but to intervene and invoke back-to-work legislation,” Capital Economics analysts wrote. .
