A looming strike at East Coast ports could disrupt shipments. Here’s what you need to know

Thousands of dock workers in every major East Coast and Gulf Port are preparing to strike as early as next week, threatening to close trade gates that handle about half of all goods shipped in containers to and from the United States.

Negotiations between the union representing dockworkers and a shipping industry group representing terminal operators and shipping carriers have been deadlocked for months, with both sides this week issuing conflicting statements on their willingness to negotiate.

The United States Shipping Alliance (USMX) has filed an unfair labor practice complaint with the National Labor Relations Board seeking “an immediate injunction – requiring the union to return to negotiations – so that we can negotiate a settlement” , the alliance said Thursday.

The NLRB confirmed it received the unfair labor practice charge, which is filed by its regional office in Newark, New Jersey. The accusation will appear on the agency’s website in the coming days, after which an investigation is expected to begin.

The USMX’s call to the NLRB was derided as “another publicity stunt” by the International Longshoremen’s Association (ILA). “Foreign companies, represented by the USMX, are setting up shop at U.S. ports, earning billions of dollars in revenue and profits, taking those profits out of the country, and failing to adequately compensate the workforce ILA longshoremen for their work. 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 National Economic Council Director Lael Brainard, met with USMX members on Friday, urging them to negotiate before the expiration of the contract.

Experts say a stop could seriously hamper the movement of goods and increase shipping costs. Any increase in this spending could be passed on to consumers just as U.S. inflation normalizes, and even potentially hobble the Federal Reserve as it finally moves toward drop in interest rates.

Here’s what you need to know about the union fight, which would constitute the first mass work stoppage in Eastern ports in nearly half a century.

What are the main issues 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 with USMX is not reached before the current contract expires on September 30 at midnight. strike since 1977.

In total, 14 ports involving some 25,000 workers could be affected by the strike, according to the USMX: Baltimore; Boston; Charleston, South Carolina; Jacksonville, Florida; Miami; Houston; Mobile, Ala.; New Orleans; New York/New Jersey; Norfolk, Virginia; Philadelphia; Savannah, Georgia; Tampa, Florida; and Wilmington, Delaware.

But because economic activity at ports affects a range of activities, such as warehousing and transportation, the consequences of the work stoppages could temporarily put more than 100,000 employees out of work, economists say.

Union workers at ports on the East Coast and Gulf Coast earn a base wage of $39 an hour after six years on the job. 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 port workers earn more than $116,000 per year, compared to $81,000 for their Eastern counterparts. The ILA’s initial demands included a 77% wage increase over a six-year contract, with the union group arguing that the wage increase would offset the surge in U.S. inflation in recent years.

The USMX proposed what it called an “industry-leading” wage increase in August, but the parties remain far apart.

“Get this, we’ll shut them down on October 1 if we don’t get the kind of wages we deserve,” ILA President Harold Daggett said earlier this month.

But the differences are not just about salaries. To protect job security, the ILA requires a complete ban on automation of cranes, doors and container movements used when loading or unloading goods.

The Maritime Alliance said it proposed maintaining provisions in the current contract prohibiting fully automated terminals, while also prohibiting the use of semi-automated equipment in a new labor agreement.

Unable to bridge the gap, the ILA in June suspended negotiations with the USMX, claiming that the use of automated gates to allow trucks to enter ports without ILA manpower violated its employment agreement in force.

What impact could a strike have?

Ports that could close in the event of a strike handle more than 68% of all U.S. containerized exports and about 56% of containerized imports, according to industry data. Thus, even a short-term strike would cause significant disruptions to regional trade flows.

According to analysts at Oxford Economics, a strike would reduce U.S. economic activity by $4.5 billion to $7.5 billion per week. The investment research firm estimates it could take up to a month to clear the backlog of shipments that are 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 a strike were to last more than about a month, some businesses could face shortages of spare parts and other inputs. Many of the raw materials that go into a range of products pass through East Coast and Gulf ports, such as cotton, lumber 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, interrupting the flow of both consumer goods and industrial parts destined for factories. Fresh meat and other refrigerated foods could spoil, leading to shortages and increased prices.

“I think everyone is a little nervous about it,” said Mia Ginter, director of North America shipping at CH Robinson, a logistics company. “This time the rhetoric with the ILA is at a level we have never 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 consider any temporary weakness, but it might be difficult to separate the noise from the signal. Therefore, the strike would increase the chances of another 50 basis point cut in November,” Grace Zwemmer said. , associate economist in the United States. , Oxford Economics, wrote in a research note Thursday.

How are businesses preparing?

In contrast, consumers likely won’t notice a shortage of products in stores during the holiday season because most products are already stored in warehouses after being transported.

Jonathan Chappel, managing director of transportation at Evercore ISI, an investment research firm, said a strike would not mean “Santa doesn’t show up.”

Imports to U.S. ports are up 10% from last year, indicating that some goods were shipped in anticipation of a strike, according to Ben Nolan, a transportation analyst at the Bank of America. Stifel investment.

“Many retailers have already taken steps to mitigate the potential impact of a strike by bringing in product sooner or moving product to the West Coast,” said Jonathan Gold, vice president of supply chain. and customs policy at the National Retail Federation.

However, given the complexity and interconnectivity 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 would continue to handle all military cargo in the event of a strike, and that they would also continue to operate cruise ships so as not to inconvenience “the tens of thousands of Americans who have booked their trips in advance.

Can there be a political solution?

If a strike was 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 is in contact with the parties, there are currently no plans to become involved in negotiations.

“We have never invoked Taft-Hartley to break a strike and have no plans to do so at this time,” the White House told CBS News.

In contrast, the Biden administration has intervened in recent years to resolve potentially disruptive labor disputes.

In 2022, Mr. Biden and Congress intervened to prevent a railroad strike, with the president signing a law crafted by lawmakers to force a tentative agreement on dozens of unions representing 115,000 workers. And in 2023, Acting Labor Secretary Julie Su played a key role in brokering a deal to avoid a strike and negotiate a new labor agreement for West Coast dockworkers.

The union’s influence is also stronger as the presidential election approaches, as candidates vie for the Labor vote, and visions of clogged ports and product shortages during the pandemic still linger on minds voters.

“If there was ever a time when workers can get what they want,” Stifel’s Nolan said, “it’s now.”

Some observers believe that, when the time comes, Mr. Biden would act to prevent the walkout.

The U.S. government is unlikely to intervene as quickly as Canada in a labor dispute that disrupted the country’s rail traffic last month, when the The Canadian government ordered the railroads must begin binding arbitration less than a day later, noted Zwemmer of Oxford Economics.

“However, if the strike lasts several weeks, the chances of government participation in the negotiations will increase, especially as the presidential election approaches,” said the economist.

“A potential strike at East Coast and Gulf ports is unlikely to trigger major economic disruption as we strongly suspect that as the election approaches and despite prior denials, President Biden would have little no choice but to intervene and invoke labor legislation,” wrote analysts at Capital Economics.

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