Breaking: Thousands of port workers strike, threatening supply chains

Shipping ports across the East and Gulf coasts have been brought to a screeching halt due to a strike imposed by the union representing tens of thousands U.S. dockworkers. 

Driving the news: The port strike—which affects 36 ports spanning Boston to Houston—stems from failed negotiations between the International Longshoremen’s Association (ILA) and the United States Maritime Alliance (USMX), which represents ocean carriers and port operators.

Why it matters: This is the first port strike on the East Coast since 1977, and it threatens to disrupt supply chains, increase prices, and cause shortages of everything from auto parts to bananas as the U.S. heads into the holidays and a presidential election year. The automotive industry, in particular, is facing potential delays in the shipment of foreign cars and parts needed for U.S. manufacturing, which could leave dealer lots empty and push more consumers into an already competitive used car market.

The demands: The dockworkers union is seeking a $5-an-hour pay increase each year over the six years of a six-year agreement, which would increase the top hourly wage from $39 to $69, by the end of the contract.

• It’s unclear as to how both parties can come to an agreement about the automation of dock work, given the level of the ILA’s concerns about workers being replaced by machines, amid the wider adoption of technology in shipping that is already taking place at other ports.    

• An ILA spokesperson compares the automation of dock work to when the Detroit Three automakers decided to install robotic welders, painters, upholsterers, machinists, assemblers and other robots into production, as detailed in a scathing ILA-issued essay about automation. 

Zeroing in: The strike is expected to cost the U.S. economy between $3.7 billion and $5 billion a day, according to various estimates from JPMorgan. Oxford Economics estimates up to 105,000 other workers in industries such as warehousing and transportation could be temporarily out of a job due to the disruption.

Key players: In addition to the International Longshoremen’s Association and the United States Maritime Alliance, more than 200 business groups impacted by the strike have been urging the Biden Administration to get involved to help resolve the matter.

Follow the money: Many companies saw the strike coming and tried to mitigate the fallout by rerouting shipments to the West Coast or shipping goods early to avoid chaos. 

• While this may have worked in the short term, the automotive industry is still vulnerable due to a lot of reliance on a just-in-time inventory model. 

• Some suppliers have resorted to expensive air freight to keep production lines moving.

The big picture: The Biden Administration faces a tough decision—intervene and risk backlash from labor supporters, or let the strike drag on and risk the ire of voters over rising prices and supply chain disruptions. If the strike continues for more than a week, analysts expect the president to consider invoking the 1947 Taft-Hartley law to impose an 80-day cooling-off period that would suspend the strike.

What’s next: A prolonged strike could lead to further production slowdowns and temporary layoffs, just as the automotive industry is still recovering from the impacts of the pandemic. With billions of dollars at stake, the pressure is on both sides to come to a resolution before the disruption spirals into a broader economic crisis.

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