Retail Industry Leaders Association Inc.

09/04/2024 | News release | Distributed by Public on 09/04/2024 10:09

The Looming Port Strike: What It Means for the U.S. Economy

The Looming Port Strike: What It Means for the U.S. Economy

With just 61 days remaining until the election and a mere 26 days until the current port labor contract expires on September 30, the potential for a strike by the International Longshoremen's Association (ILA) looms large. The East Coast and Gulf Coast ports, vital gateways for international trade, are at the center of this brewing storm. The importance of keeping these ports operational cannot be overstated, especially as the peak holiday season approaches. A disruption in cargo movements would have profound consequences for retailers, manufacturers, and consumers across the country.


The Critical Role of East and Gulf Coast Ports

East Coast and Gulf Coast ports are essential arteries in the U.S. supply chain. They facilitate the movement of goods and materials that support numerous industries, providing livelihoods for countless workers and bolstering the overall economic well-being of the nation. The contract covers 6 of the 10 busiest U.S. ports, handling over 13 million containers each year. In a given month, these ports represent as much as 56% of inbound containers. As the contract expiration date draws near, the uncertainty surrounding the negotiations has already started to impact cargo flows, with many companies implementing contingency plans including shifting their shipments away from these ports, or changing production or shipping timelines. This shift is exacerbated by ongoing threats in the Red Sea and the capacity concerns in the Panama Canal, both of which add to the complexity of global trade routes.

What Happens if the Port Workers Strike?

A strike by port workers would have immediate and far-reaching consequences. The first and most obvious impact would be the halting of cargo movement through these critical ports, leading to delays, increased shipping costs, and potential shortages of goods. Retailers, already gearing up for the holiday season, could face significant disruptions during one of the most critical sales periods of the year. Manufacturers relying on just-in-time delivery of raw materials might see their production schedules thrown into chaos, affecting not just their bottom lines but also the broader economy. Agricultural exporters are particularly exposed due to the potential for spoilage and the necessity of timely shipments.

In addition to these immediate effects, a prolonged strike will have significant ripple effects throughout North American and global supply chains. Analysts have estimated that each day of work stoppage would require five days to clear the resulting backlog-at a critical point of peak shipping season and coinciding with the arrival of increased volumes preceding China's Golden Week holiday. Each day of a strike increases congestion in U.S. ports, which quickly extends into trucking and rail networks, and loaded ships anchored offshore. This, in turn, affects operations at ports around the world as ship schedules slip and equipment is dislocated.

Potential Government Intervention

Given the critical nature of these ports, it is possible that the U.S. government will step in to help the ILA and the United States Maritime Alliance (USMX) reach a deal. The Biden administration has shown its willingness to be active in labor negotiations, as they did to avoid a rail strike in 2022. However, ILA leadership has already stated that it doesn't want the government's help, preferring to negotiate independently. This stance, coupled with the upcoming U.S. presidential election, complicates the likelihood and timing of any government intervention.

The government has fewer tools at its disposal than in the case of the railway labor negotiations. While that dispute fell under the Railway Labor Act (1926), port labor negotiations fall under the National Labor Relations Act, which does not give the President the ability to involve the FMCS-the agency whose help was crucial in resolving ILA-USMX negotiations in 2012. If the government does not intervene before a potential strike begins, it would almost certainly be pressured to step in afterward. A complete stoppage of the East and Gulf Coast ports would be devastating to the economy, and the Biden administration would likely feel compelled to act to mitigate the damage.

What is the Taft-Hartley Act?

In such a scenario, one might wonder what recourse the government has to intervene. This is where the Taft-Hartley Act comes into play. Enacted in 1947, the Taft-Hartley Act is a federal law that restricts the activities and power of labor unions. Unlike with U.S. railroad strikes, the President or Congress cannot impose a contract on dockworkers unless new legislation has been passed first, which is highly unlikely. However, if a port strike is deemed by a presidentially-appointed board of inquiry to endanger national health or safety, the President can request a court order for an 80-day cooling-off period under the Taft-Hartley Act. This action would temporarily pause the strike while negotiations continued, providing a window to resolve the dispute.

When Was the Last Time a President Invoked Taft-Hartley?

The last time a president invoked the Taft-Hartley Act was in 2002, during the West Coast port lockout. After 11 days of stoppage, President George W. Bush used the Act to order an 80-day cooling-off period, during which the ports were reopened, and negotiations continued for another 45 days before reaching a resolution. The invocation of Taft-Hartley was seen as a necessary step to protect the U.S. economy, which was being severely impacted by the shutdown of some of the nation's busiest ports. Before that, the most recent use had been by President Nixon in 1971.

Will President Biden Invoke Taft-Hartley?

Given the criticality of East Coast and Gulf Coast ports to the U.S. economy, President Biden may indeed consider invoking the Taft-Hartley Act if the ILA follows through on its threat to strike. Biden has demonstrated a willingness to intervene in labor disputes, particularly when national interests are at stake, as seen in his administration's involvement in recent railroad labor negotiations. However, any decision to invoke Taft-Hartley would likely weigh the potential political ramifications, particularly given the proximity of the election. Both the Harris and Trump campaigns are focusing on securing union votes, which will likely influence the outcome. The decision will ultimately hinge on balancing the national economy against union interests.

ILA President Daggett has firmly insisted on no intervention from the administration, and Biden, known for his pro-labor stance, may seek to exhaust all other avenues of negotiation before considering this option. His goal will be to balance the needs of the economy with his commitment to supporting union rights. An action by a Democratic White House to intervene significantly in labor disputes could shift voter sentiment and impact the administration's standing with both labor unions and business interests as the election draws near.

Conclusion: A Crucial Moment for U.S. Trade

As the clock ticks down to both the election and the contract expiration, the stakes could not be higher. The potential for a strike at East Coast and Gulf Coast ports represents a crucial juncture for U.S. trade and the overall economy. The ripple effects of such a strike would be felt across industries, affecting not just businesses but also consumers. While the Taft-Hartley Act provides a potential mechanism for government intervention, the hope is that negotiations will lead to a resolution before such drastic measures become necessary. As we approach the peak holiday season, the stability of our supply chains is more critical than ever to maintain economic growth and ensure that American businesses can meet consumer demand.

Tags

  • Supply Chain
  • Workforce
  • Labor and Employment
  • Public Policy