Tens of thousands of dockworkers are currently on an indefinite strike at ports across a large part of the US. This strike poses a significant threat to trade and the economy, especially with the upcoming presidential election and the busy holiday shopping season.
This is the first time in nearly 50 years that such a shutdown has occurred. Negotiations have come to a standstill for months and the existing contract between the parties expired on Monday.
The dispute revolves around a comprehensive six-year master contract that encompasses approximately 25,000 port workers engaged in container and roll-on/roll-off operations. This contract is overseen by the US Maritime Alliance (USMX), an organization that represents shipping firms, port associations, and marine terminal operators.
USMX announced on Monday that it has enhanced its offer, aiming to raise wages by nearly 50%. Additionally, the proposal includes tripling employers’ contributions to pension plans and improving health care options.
In a recent statement, Union boss Harold Daggett expressed his support for substantial pay raises for union members. However, he also raised concerns about the potential threats posed by automation.
According to USMX, the union has been accused of refusing to engage in negotiations. USMX has taken the matter to labour regulators and filed a complaint, urging them to compel the union to resume bargaining.
According to Mr. Daggett, the union is pushing for a yearly increase of five dollars per hour throughout the duration of the six-year agreement. He approximated that this would result in an overall raise of about 10% per year.
The ILA has expressed that workers deserve compensation as shipping companies have experienced significant profits amidst the Covid pandemic, while salaries have been impacted by inflation. The ILA has issued a warning, indicating a potential larger strike involving not only the directly affected members but also others, although the exact number of participants remains uncertain.
The strike will have an impact on various items. Imports that are time-sensitive, such as food, will likely be the goods that will be affected initially.
According to the Farm Bureau, the ports in question are responsible for handling approximately 14% of agricultural exports transported by sea and over half of imports. This includes a substantial portion of the trade in bananas and chocolate.
According to Oxford Economics, several sectors will be affected by disruption. These include tin, tobacco, and nicotine industries. Clothing and footwear companies, as well as European car manufacturers that rely on the Port of Baltimore for shipping, will also face negative consequences.
Imports in the US experienced a significant surge during the summer months. Many businesses proactively expedited their shipments to avoid any potential disruptions caused by the strike.
According to Seth Harris, a professor at Northeastern University and a former White House adviser on labor issues, he believes that we may not witness immediate and substantial economic effects. However, if the strike persists for several weeks, we could potentially observe price increases and shortages in goods.
According to Grace Zemmer, an associate US economist at Oxford Economics, the strike could potentially impact over a third of exports and imports. This could result in a significant blow to the US economy, with estimates suggesting a minimum of $4.5 billion lost each week during the strike. However, some experts believe that the economic consequences could be even more severe.
More than 100,000 individuals could potentially be temporarily unemployed as the effects of the strike continue to ripple across various industries.
According to Peter Sand, chief analyst at ocean freight analytics firm Xeneta, this event is a significant trigger that will set off a chain reaction in the coming months. He also cautioned that this stand-off has the potential to increase shipping costs across the board.
According to him, this would negatively impact consumers and businesses that heavily rely on “just-in-time” supply chains for their goods.
As the US election approaches in six weeks, the economy has been experiencing a slowdown, leading to a rise in the unemployment rate.
In 2002, dockworkers on the west coast went on strike for 11 days, prompting Republican President George W. Bush to intervene and open the ports.
The US Chamber of Commerce business group has urged President Biden to take immediate action.
Suzanne P. Clark, president and chief executive of the business group, expressed her concern about the impact of contract disputes on the economy, especially considering the hardships Americans faced during the supply chain backlogs in 2021. She emphasized that it would be unacceptable to subject the economy to further shocks and disruptions caused by delays and shortages of goods.
The ILA’s Mr. Daggett supported Democrat Biden in 2020, but he has since expressed criticism of the president. He specifically mentioned the pressure exerted on west coast dockworkers to reach an agreement last year. In fact, he even had a meeting with Donald Trump in July.
According to William Brucher, a professor of labor studies and employment relations at Rutgers University, while any strike chaos is expected to have a negative impact on Democrats, the consequences of alienating allies in the labor movement so close to the election would be even more detrimental.
Public support for the strikes may face a challenge due to the involvement of Mr. Daggett. Although he was acquitted of any connection to organized crime in a 2004 case by federal prosecutors, an unresolved civil suit remains.
According to Prof Brucher, the image of the dockworkers union, once defined by films like the 1954 classic On the Waterfront, has faded from historical memory. However, he believes that many people today share the same concerns as the dockworkers regarding the cost of living and automation.
According to him, even though public opinion could potentially influence the perception of the ILA, the ultimate decision to go on strike lies with the ILA members themselves. He believes that public opinion will not have a significant impact on their decision-making process.
The employers are more likely to be compelled to return to the negotiating table with a considerably improved offer due to the mounting pressure from a potential strike.