Time running out to avoid crippling US port strike

By Chris Isidore and Vanessa Yurkevich, CNN

New York (CNN) — Time is running out to avoid a work stoppage at ports along the entire East and Gulf Coasts in what could become the most disruptive strike to the US economy in decades.

Members of the International Longshoremen’s Association are set to go on strike at 12:01 am ET Tuesday at three dozen facilities spread across 14 port authorities. There were few signs that a deal could be reached by the deadline set by the ILA and the United States Maritime Alliance, which uses the acronym USMX. But in a Monday evening statement, USMX said it requested an extension over the current contract and increased its offer, lifting wages nearly 50 percent over the life of the contract, and said both sides moved off their previous positions.

The maritime alliance represents the major shipping lines, all of which are foreign owned; as well as terminal operators and port authorities.

That offer of a 50% wage increase by USMX was deemed “unacceptable” by the union earlier today. However, the union’s demand on wages came down from their previous ask of a five dollars an hour annual increase in pay, said a source familiar with the negotiations.

The strike, which would be the first at these ports since 1977, could stop the flow of a wide variety of goods over the docks of almost all the cargo ports from Maine to Texas. This includes everything from bananas to European beer, wine and liquor, along with furniture, clothing, household goods and European autos, as well as parts needed to keep US factories operating and American workers in those plants on the job. It also could stop US exports now flowing through those ports, hurting sales for American companies.

Depending on the length of the strike, there could be shortages of consumer and industrial goods, which could then lead to price hikes. It would mark a setback to the economy, which has shown signs of recovery from pandemic-induced supply chain disruptions that resulted in a spike in inflation.

While the union says there are about 50,000 members covered by the contract, the USMX puts the number of port jobs closer to 25,000, with not enough jobs for all the workers in the union to work every day.

What could be in short supply

The ports involved include the Port of New York and New Jersey, the nation’s third-largest port by volume of cargo handled. But it also includes ports with other specialties.

Port Wilmington in Delaware describes itself as the nation’s leading banana port, bringing in a large share of America’s favorite fruit. According to the American Farm Bureau, 1.2 million metric tons of bananas go through the ports that could be on strike next week, representing about one quarter of the nation’s bananas.

Other perishable items, such as cherries, also move through the ports, as do a large percentage of imported wine, beer and hard liquor. Raw materials used by US food producers, such as cocoa and sugar, also move through the ports.

And many non-perishable goods, such as furniture and appliances, also move through the ports. Retailers have been rushing in recent months to get the imported products they expect to sell during the holiday season delivered to them before the October 1 strike deadline.

The Port of Baltimore, which was briefly shut down in March after the collapse of the Key Bridge, handles the nation’s largest volume of auto imports.

A one-week strike would cost the US economy about $2.1 billion according to an estimate Monday from the Anderson Economic Group, a Michigan research firm with expertise in estimating the cost of strikes and other disruptions. Most of that would be a $1.5 billion loss in value of some of the goods that wouldn’t be delivered on time, such as perishable goods. Transportation companies, including ship lines and ports, would lose $400 million, while striking workers and those who might be temporarily laid off, would lose $200 million in wages.

Losses would start to accelerate the longer the strike continued said Patrick Anderson, the president of AEG, “a strike lasting longer than a week will begin to impact retailers and manufacturers as supply chain movement grinds to a halt.” But he said estimates of $1 billion a day in losses are exaggerated, especially considering the preparations many shippers had made in advance of the strike deadline. To hit those numbers “you’d have to sink the ships.”

“A strike at the port delays trade, but does not destroy it,” he said.

The union has pledged to continue to handling military cargo even during a strike and said passenger ships won’t be affected. Oil tankers and ships carrying liquified natural gas usually go to other facilities that are not affected by the strike, as do bulk ships carrying things like grain. But almost all the other ports along the two coasts could be affected.

What the two sides want

The USMX claims the union is refusing to negotiate in good faith and says the two sides have not met in person since June.

“We remain prepared to bargain at any time, but both sides must come to the table if we are going to reach a deal, and there is no indication that the ILA is interested in negotiating at this time,” the management group said last week in a statement,

The USMX has offered upwards of 40% in wage increases over the six-year contract, according to a person with knowledge of negotiations. The ILA is not publicly discussing its demands but it is reportedly asking for annual pay hikes that would result in raises totaling 77% through the life of the contract, with top pay climbing from $39 an hour to $69.

The union says it has continued to talk with the USMX, just not in face-to-face negotiations. It said management knows what it is demanding in order to get a deal done and that any strike will be management’s fault, not the union’s. It said its demands are reasonable given the level of profits in the shipping industry.

“My ILA members are not going to accept these insulting offers that are a joke considering the work my ILA longshore workers perform, and the billion dollar profits the companies make off the backs of their labor,” Harold Daggett, the ILA’s international president and chief negotiator, said in a recent statement.

Shipping rates soared during and immediately after the pandemic, as supply chains snarled and demand surged. Industry profits topped $400 billion from 2020–2023, which is believed to be more than the industry had previously made in total since containerization started in 1957, according to analyst John McCown.

The Biden administration, which is eager to avoid a strike, was in touch with both sides over the weekend urging them to reach an agreement, according to White House spokesperson Robyn Patterson. Her statement seemed to suggest it was putting more pressure on USMX to move towards the union’s demand.

“This weekend, senior officials have been in touch with USMX representatives urging them to come to a fair agreement fairly and quickly – one that reflects the success of the companies,” she said. “Senior officials have also been in touch with the ILA to deliver the same message.

And senior White House officials met virtually with representatives for the United States Maritime Alliance on Monday afternoon, a White House official said, hours before the midnight deadline.

Business watch and worry

Stuck on the sidelines and watching with great concern are businesses that depend on the movement of goods.

More than 200 business groups sent a letter to the White House last week asking the Biden administration to step in to prevent a strike, saying the country relies on moving both imports and exports through these ports.

“The last thing the supply chain, companies and employees… need is a strike or other disruptions because of an ongoing labor negotiation,” read the letter.

Some of those urging government action to block or quickly end a strike say the recent damage causes by Hurricane Helene is another reason not to have ports shut down. Senator Tim Scott of South Carolina, citing the hurricane damage, asked the ILA to take that into consideration and delay any walkout. So did Matthew Shay, CEO of the National Retail Federation.

“Particularly with what’s happening in the Southeast with the hurricane, the worst possible time to shut these ports on the East Coast (is) when these people are in dire circumstances and need relief,” he told CNN Monday.

But few if any relief supplies would be arriving via ship. The only cargo ships that call on the East Coast ports are bringing goods from other countries, not from other US cities, under US maritime law. Those ships, owned and operated by foreign carriers, are not allowed to move goods between two different US cities. A ship is a much slower way to move goods to the affected areas than truck or rail.

Still, the US Chamber of Commerce sent a follow-up letter Monday urging President Joe Biden to exercise powers under what is known as the Taft-Hartley Act, which became law in 1947, to keep the ports open and longshore workers on the job. President George W. Bush applied the act in 2002 to halt an 11-day lockout ofS union members at West Coast ports.

Acting Labor Secretary Julie Su, Transportation Secretary Peter Buttigieg and Lael Brainard, director of the National Economic Council, met with representatives of the USMX to push for the management group to work towards a deal to avoid the strike. The ILA was also invited to that meeting but declined to attend, a source with knowledge told CNN. Union leadership had publicly stated it did not want any federal mediators or Labor Department officials trying to broker a new contract.

But Biden said he is not weighing using the Taft-Hartley Act.

“No,” Biden told reporters Sunday. “Because it’s collective bargaining, and I don’t believe in Taft-Hartley.”

It’s also not clear if simply ordering the union members back to work would actually get the cargo moving over the docks.

There are numerous ways the workers can slow the flow of freight while strictly following rules in the contract. In a video posted in early September, the ILA’s Daggett said if members were forced back to work, they would likely only move a small fraction of their normal cargo volumes.

“Do you think when (members) go back to work, that those men are going to go to work on that pier?” he said on the video message. “It’s going to cost the companies money to pay their salaries, while it goes from 30 moves an hour to maybe eight.”

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CNN’s Arlette Saenz contributed to this report.