Everything to know about the US port strike and its potential impact on the economy
NEWARK – Ever since metal containers revolutionised shipping nearly 70 years ago, dockworkers have fought to defend the vital role they play in global commerce. Yet technological advances continue to threaten the role of manual labor in ports.
On Oct 1, the International Longshoremen’s Association (ILA) – the 47,000-member union that represents the workers in every major Eastern US and Gulf Coast port – went on strike for higher pay and protections from automation. The implications for the world’s biggest economy are dire, and the strike begins just weeks before the US election on Nov 5.
Why are US port workers striking?
The longshoremen – who play a key role in the global supply chain – are negotiating with the United States Maritime Alliance (USMX), a group of shipping lines and terminal operators that employ them to load and unload ships. The ILA wants a bigger pay increase than the 50 per cent raise that the USMX has proposed.
Another big sticking point is automation: USMX has offered to maintain the language in the now-expired contract, but the ILA wants stronger protections that closes loopholes that allow for some of their duties to be done by semi-autonomously.
Who are the main players?
The ILA’s president is Harold Daggett, a third-generation ILA member and a Navy veteran who grew up in Woodside, Queens. He is a tough-talking negotiator who previously helped ink two six-year deals with the USMX; he has talked about taking his campaign against port automation global by threatening to boycott companies that install machines that replace labour, no matter which country they are in.
In the latest round of talks, he is up against David Adam, chief executive officer of the USMX, which represents more than 30 members, such as Maersk, MSC and COSCO. The two sides had previously negotiated 10 straight contracts without a strike.
How is the shipping industry preparing?
Shipping lines including MSC, Maersk and Hapag-Lloyd have alerted customers to the realities of widespread port closures. Companies and consumers should expect delays and higher freight rates in the short run. If the strikes drags on for weeks, they will cancel voyages so that their vessels are not waiting outside harbours indefinitely.
For the companies, it is just the latest in a series of shocks that have disrupted a system designed without much flexibility – a ship that is delayed entering a port by a week will be a week late on its return trip. The end result, in industry parlance, is “less capacity.” But tighter capacity can be a good thing for the carriers because it can allow them to boost the rates they charge.
Bloomberg Intelligence transportation analysts Kenneth Loh and Lindsay Chen said in a recent research note that these latest supply snarls may help the container industry’s earnings into the fourth quarter.
What is the potential economic impact?
Most economists expect the strike will be a non-event if it lasts only a week or two. Delayed shipments will arrive before long and the hit to gross domestic product will be negligible. The forecasts for damage range from US$1 billion (S$1.29 billion) to US$5 billion in lost activity each day – a small fraction of the US$29 trillion US economy.
The problems start to compound, though, if it lasts more than a few weeks and parts and product shortages weigh on industrial production and consumer sentiment. Most automakers indicated they have contingency plans and ample inventories to weather a few weeks of a strike.
What about the politics of a port strike?
For President Joe Biden’s administration, which has the authority to end the strike and order the union back to work under the Taft-Hartley Act, there are not many paths to winning on this issue.
Business groups such as the US Chamber of Commerce and the National Association of Manufacturers have urged him to end the strike before the fallout is too large. The ILA and the Teamsters union, however, have warned the federal government – using colorful language – to stay out of it and let the collective bargaining process work. BLOOMBERG