For the first time in decades, International Longshoremen’s Association dockworkers are staging a port strike along the East Coast and Gulf Coast – which could have severe consequences across the U.S. economy, depending on how long it lasts.
At 12:01 a.m. on Tuesday, Oct. 1, dockworkers began forming picket lines at ports up and down the East Coast and along the Gulf Coast. Tens of thousands of workers are asking for higher wages and more protections in contract negotiations with the United States Marine Alliance (USMX), which represents employers of the longshoremen industry on the affected coasts.
In total, about 36 ports are affected by the strike. Operations have shut down at ports spanning from Maine to Texas.
According to the National Association of Manufacturers, more than three-quarters of coffee, tea, beverage and spirit imports go through East Coast and Gulf Coast ports. A majority of fertilizer, vehicle and medical/surgical instrument exports pass through these ports, as well.
At the center of the port strike is the master contract between ILA and USMX that expired at 12 a.m. Tuesday, Oct. 1. Initially, dockworkers had asked for a 77% increase in wages over the life of the six-year contract. Additionally, the union wants more worker protections from automation, as well as changes to health care and retirement/pension plans.
In the final moments to avoid a port strike on Monday, Sept. 30, USMX offered to give ILA workers a 50% wage increase, to triple employer contribution to retirement plans, to strengthen health care options and to retain current language regarding automation.
ILA rejected that offer and told CNBC the following morning that it would lower its demand to a 61.5% wage increase. However, an official ILA news release issued later states the union is seeking a $5 per hour increase for each of the six years of the new contract, which reverts to the 77% increase for the current top rate of $39 per hour.
“USMX brought on this strike when they decided to hold firm to foreign-owned ocean carriers earning billion-dollar profits at United States ports, but not compensate the American ILA longshore workers who perform the labor that brings them their wealth,” ILA President Harold Daggett said in a statement. “We are prepared to fight as long as necessary, to stay out on strike for whatever period of time it takes, to get the wages and protections against automation our ILA members deserve.”
As of the afternoon of Tuesday, Oct. 1, President Joe Biden had indicated his administration would not intervene in the port strike. A law established by the 1947 Taft-Hartley Act allows the president to intervene in strikes that could affect “national health or safety.” That process could lead to an 80-day stoppage of the strike. The last time the Taft-Harley Act was invoked was in 2002, when then-President George W. Bush used it to intervene in an 11-day strike at 29 West Coast ports involving a dispute with the International Longshore and Warehouse Union.
Effect on freight and the economy
What effect the port strikes will have on freight and the economy as a whole is unclear less than 24 hours after the strike began.
If a deal is struck within a few days, the impact could be minimal. With the threat of a strike known for a few months, shippers had set up contingency plans to mitigate any work stoppage. According to DAT Freight & Analytics, July saw a nearly 14% year-over-year increase in twenty-foot equivalent units entering the United States, and the Port of Long Beach had its strongest month in its 113-year history in August.
David Spencer, vice president of market intelligence at Arrive Logistics, said port truck capacity could be diverted to Hurricane Helene relief efforts in the short term. However, a prolonged port strike could severely disrupt supply chains for fresh foods, auto parts, plastics, furniture and more.
“Ultimately, this strike could become one of the most disruptive freight market events since the COVID-19 pandemic,” Spencer said. “While capacity is sufficient to service current demand, growing import backlogs may create tighter conditions once the strike ends.”
In its monthly U.S. Port/Rail Ramp Freight Index report published on Tuesday, Oct. 1, ITS Logistics also points out that some of the more significant impacts to freight companies will be felt in the immediate aftermath of the port strike rather than during.
“Congestion, lack of equipment, lack of yard space, capacity constrictions and vessel congestion will stress every supply chain,” Paul Brashier, vice president of global supply chain for ITS Logistics, said in a statement. “As was seen during the days leading up to the strike, driver productivity dropped significantly. Drivers that could pull six containers or more per day prior were only able to get one to two containers per day out of the port. Ultimately, shippers should be prepared to add a minimum of three to five times the number of drivers to their current network. It should also be noted that for every 36 hours the ports are closed, port operations will be negatively impacted for one full week.”
The Owner-Operator Independent Drivers Association noted that truck drivers have a long history of sacrificing their time to make up for chronic supply chain inefficiencies, including those deriving from strikes, pandemics and natural disasters. The Association also pointed out that the current port strike highlights the issues truckers face down the supply chain.
“Drivers constantly face downward pressure on their earning potential because their time is not valued by anyone within the supply chain,” OOIDA President Todd Spencer said in a statement. “We encourage a quick resolution to this latest dispute and emphasize the need for specific discussions about how supply chain deficiencies stifle driver compensation, increase loading and unloading delays and hurt highway safety.”
According to the Conference Board, a business research organization consisting of more than 1,000 public and private corporations across the globe, a one-week port strike could cost the U.S. economy nearly $4 billion, or $540 million per day. East Coast and Gulf Coast ports handle more than half of all U.S. container volume and a quarter of annual international trade, totaling about $3 trillion.
“A port strike would paralyze U.S. trade and raise prices at a time when consumers and businesses are starting to feel relief from inflation,” Erin McLaughlin, senior economist at The Conference Board, said in a statement. “There’s no easy Plan B. While shippers have already begun diverting some cargo to the West Coast, capacity for such alternative options (is) limited.” LL
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