Large-scale work stoppage initiates along America's Eastern seaboard, posing potential shortages and price increments.
The disruption commencing at midnight will impede the transfer of a multitude of merchandise through the majority of cargo harbors from Maine to Texas. This encompasses bananas, European alcoholic beverages, including beer, wine, and spirits, as well as furniture, clothing, household items, European vehicles, and their related components, vital for the continuity of US manufacturing and employment in those facilities, among numerous other items. It might likewise obstruct US exports currently being distributed through these harbors, affecting sales for American companies.
There exists a substantial gulf between the union's requirements and the agreement proposed by the US Maritime Alliance (USMX). The maritime alliance represents significant shipping lines, all foreign-owned, as well as terminal operators and port authorities.
In an interview with CNN on Tuesday morning, ILA President Harold Daggett stated, "If we have to remain here a month or two months, this world will collapse." His sentiment was, "Go blame them. Don’t blame me, blame them."
On Tuesday afternoon, USMX issued its first public statement regarding the strike, expressing pride in their proposal to the union. "USMX is proud of the wages and benefits we offer to our 25,000 ILA employees, and we wholeheartedly support a collective bargaining process that enables us to negotiate wages, benefits, technology, and worker safety on a daily basis," USMX stated. They have demonstrated their commitment to ending the preventable ILA strike through their current offer of a nearly 50% wage increase, surpassing recent union agreements, addressing inflation, and recognizing the ILA's hard work in maintaining the global economy.
USMX urged the union, which hasn't engaged in face-to-face negotiations with USMX for months, to provide a path for their return to the bargaining table.
Potential shortages
Depending on the strike's duration, it could result in shortages of both consumer and industrial goods, potentially leading to price increases. It may also represent a setback to the economy, which has shown indications of recovery from pandemic-induced supply chain disruptions and subsequent inflation spikes.
The affected ports include the Port of New York and New Jersey, the third-largest port in the US by cargo volume. Additionally, ports specializing in other areas are included.
Port Wilmington in Delaware, described as the nation's leading banana port, handles a substantial share of America's favorite fruit, with 1.2 million metric tons coming in via the affected ports, representing approximately 25% of the nation's banana supply.
Perishable items such as cherries, as well as a high percentage of imported wine, beer, and hard liquor, are transported through these ports. Additionally, raw materials used by US food producers, such as cocoa and sugar, constitute a significant percentage of the affected imports.
Various non-perishable goods, including furniture and appliances, are imported via these ports as well. Retailers have been actively procuring the imports they expect to sell during the holiday season before the strike commenced on October 1.
Many goods cannot be redirected due to the impracticality of using aircraft or transporting them to alternative ports.
Fortunately, most of the holiday goods that retailers stockpile for the season have already been sent through the ports by this time of year. Consequently, the influence of the strike on holiday shopping is likely to be less severe than anticipated.
However, most of these holiday goods can remain in storage, or even in shipping containers, for extended periods. Perishable goods, such as fruits and vegetables, which flow through the ports, may experience scarcity or price increases as soon as next week.
Items like alcohol, furniture, and certain vehicles may have sufficient supply, making scarcities less noticeable for a month or more. The US Department of Agriculture has stated that consumers should not anticipate significant changes to food availability or prices in the near future.
The US Department of Transportation claimed Tuesday that it has been collaborating with shippers, ocean carriers, ports, railroads, and other supply chain partners for months to prepare for a potential strike, aiming to alleviate bottlenecks within the supply chain.
Two hostile parties
This is the first strike at these ports since 1977. The union boasts about 50,000 members covered by the contract, while USMX estimates the number of port-related jobs to be closer to 25,000, with insufficient positions to employ all union members daily.
USMX has accused the union of not approaching negotiations in good faith, claiming that discussions between the two sides haven't taken place in person since June. On Monday, USMX announced they had increased their proposed wage increases to more than 50% across the proposed six-year contract. Daggett admitted to CNN on Wednesday that the union is seeking a $5-an-hour pay increase each year for six years, with top pay determined to rise from $39 an hour to $69. This would equate to a 77% wage increase over the lifetime of the contract.
Disputes also exist between the union and management regarding the implementation of automation in the ports, which the union believes could result in job losses. USMX asserts it is offering to preserve the existing contract language on automation usage.
“They have language in there now that’s not strong enough,” Daggett told CNN. “Because what happens is they come in with new technology ... and that means the trucks are coming in and they’re already checked in somewhere else and not using the checkers in the ILA.”
"If there weren't restrictions stopping certain automation at the ports, Daggett declared he wouldn't revisit the negotiation table.
"It's not right," Daggett voiced out. "And if we don't stand our ground now, they might trample us, and we're not going to let that happen."
The union affirmed that they've still been in contact with the USMX, just not in face-to-face discussions. Prior to the strike, they claimed that management knows exactly what it requires to seal the deal, and any strike would be management's fault, not the union's. They argued that their demands are justifiable given the profitability in the shipping sector.
Shipping rates skyrocketed during and post-pandemic, with supply chains muddled and demand escalating. The sector made over $400 billion between 2020 and 2023, surpassing the industry's total earnings since containerization began in 1957, as per analyst John McCown.
"Ever since Covid, they've been making billions and billions of dollars," Daggett mentioned. "But they don't want to share it. They'd rather have a fully automated terminal right here on the East Coast to earn more profits."
Companies feeling uneasy
Businesses relying on goods transportation are watching this situation with panic.
Over 200 business organizations sent a letter to the White House last week requesting the Biden administration to intervene to avoid a strike, asserting that the nation depends on these ports for the movement of both imports and exports.
"The last thing the supply chain, companies, and employees need is a strike or disruptions due to ongoing labor negotiations," the letter noted.
The US Chamber of Commerce sent a follow-up letter on Monday, urging President Biden to utilize powers under the Taft-Hartley Act, which was passed in 1947, to keep the ports functioning and longshore workers employed. President George W. Bush employed the act in 2002 to halt an 11-day lockout of union members at West Coast ports.
However, Biden told reporters recently that he has no intention of using the powers at his disposal under the Taft-Hartley Act.
"No," Biden stated. "Because it's collective bargaining, and I don't believe in Taft-Hartley."
The White House announced in a statement Tuesday that President Biden and Vice President Kamala Harris are closely monitoring the situation, but they believe in collective bargaining – not an executive order – as the ideal method to resolve the situation.
"The President has directed his team to convey his message directly to both parties that they need to be at the table and negotiating in good faith – fairly and swiftly," a White House spokesperson said in a statement. "Senior White House and Administration officials continue to work around the clock to get both sides to continue negotiating towards a resolution."
However, the White House also noted that the president is “assessing ways to address potential impacts” of the port strike, “if necessary.”
Daggett commended the Biden administration's efforts, particularly Acting Secretary of Labor Julie Su, whom he called "first-rate." “She’s kicking down doors. She’s trying to prevent this. She’s trying to get us fair negotiations,” Daggett said. “It’s the companies that don’t want to sit and be fair. That’s why we’re out here fighting for our livelihood.”
Even if the Biden administration ended the strike, it’s unclear if merely ordering the union members back to work would reinstate the normal freight flow over the docks.
The workers have numerous ways to slow down the cargo transport while adhering to the rules in the existing contract. In a video posted early September, the ILA's Daggett said that if members were forced back to work, they would likely only manage a small fraction of their typical cargo volumes.
“Do you think when (members) go back to work, that those men are going to go to work on that pier?” he said in the video message. “It’s going to cost the companies money to pay their salaries, while it goes from 30 moves an hour to maybe eight.”
The shipping lines are aware of the problem with having Biden order the union back to work, said Peter Tirschwell, vice president of global intelligence and analytics at S&P Global Market Intelligence and chairman of the TPM shipping conference.
“A senior ocean carrier guy told me yesterday, ‘If they are forced back to work, they can make life miserable for everybody,’” he told CNN last week."
The potential longer duration of the strike could significantly impact US businesses, potentially leading to a shortage of various goods and subsequent price increases in the business sector. This situation could negatively affect the US manufacturing sector, whose continuity relies on the smooth delivery of goods through cargo harbors.
The ongoing strike could also adversely impact American companies that are currently distributing their exports through affected harborts, leading to potential sales losses.
