Just as U.S. policymakers shift their focus from curbing inflation to shoring up the labor market, the economy is facing a jolt that threatens the kind of supply chain disruption and consumer discontent that swept through the pandemic — and potentially puts your daily dose of bananas at risk. This time, the shock comes just weeks before a razor-sharp election. Some 45,000 longshoremen at major ports on the East Coast and the Gulf are threatening to strike on October 1.
Following a stalemate in negotiations in June, industry officials believe a strike is inevitable, with shipping companies and port operators beginning to issue notices to customers and draw up contingency plans. The ports involved handle more than half of all containerized goods shipped to and from the United States.
According to one estimate, a one-week strike could cost the economy up to US$7.5 billion.Millions of boxes of specialized goods such as bananas, plywood and cars could be affected, although power terminals would not be affected. If a strike occurs, the flow of consumer goods, factory components and certain vehicles would be paralyzed.disrupting auto supply chains and other manufacturing networks in battleground states.
Chilled fruit imports and fresh meat exports would suffer spoilage and diversion, leading to shortages and higher prices. Analysts warn that the domino effect would spread around the world, as port congestion would choke off transport capacity and drive up freight rates.
Why is the strike called?
The two sides remain deeply at odds. The union is demanding a raise of close to 80% over six years, arguing that workers deserve a share of the profits made by foreign-owned container carriers during the pandemicHarold Daggett, head of the International Dockworkers’ Association, said that “a sleeping giant is set to roar on Tuesday, October 1, 2024 if a new Framework Agreement is not signed.”
Terminal operators and ocean carriers, represented by the U.S. Maritime Alliance, said in August that their offer included an “industry-leading” wage increase, close to the 32 percent that West Coast longshoremen won last summer.
But there is another, even thornier issue at stake. Daggett is calling for more restrictive language on automation, arguing that certain companies are using technology that violates the current contract.
Automation Fight’s offer
USMX is sticking with the technology language in the current contract, which its members see as a concession in a global context where automation is widely used at the world’s largest facilities, including in China, the Netherlands and the UAE.
“It is disappointing that we have reached this point where the ILA is unwilling to reopen dialogue unless all of its demands are met,” the USMX said in a statement last week. With just over a week to go until the deadline, the stalemate risks turning into a game of chicken that threatens an economy suffering from a sharp slowdown in job growth amid persistent inflation concerns. It would also test the White House’s willingness to get involved in the final month of a campaign aimed at winning union votes. Retailers, trade groups and House lawmakers are calling on the administration to help with negotiations and intervene in the event of a strike.
The union has warned the White House not to intervene. It has refrained from endorsing a presidential candidate, though, according to Daggett, former President Donald Trump “pledged to support the ILA in its opposition to automated terminals” during a meeting at Mar-a-Lago last fall. Neither Trump nor Vice President Kamala Harris have brought the strike threat to public attention.
Automotive Industry Jason Miller, a supply chain expert at Michigan State University, assessed the goods that are most dependent on the affected ports and found that car parts would be particularly affected, potentially putting manufacturers in swing states like Michigan and Georgia in a bind.
Stellantis NV, which is facing its own strike threat, has a stockpiled inventory thanks to slowing sales, although supply chain issues could hamper production of certain models. According to Miller, foreign automakers would also be affected. South Korean parts imports come mostly through the East and Gulf coasts, feeding Hyundai Motor and Kia plants in Alabama, Georgia and, to a lesser extent, Michigan..
BMW, the largest exporter of cars to the U.S., ships about 60 percent of its production out of South Carolina. The German company also imports all of the engines and transmissions it uses in U.S.-made gasoline vehicles, as well as some high-end models.
A Bananageddon?
The impact on everyday essentials would be felt most quickly on items that cannot be stored. Americans consume more bananas per capita than any other fresh fruit, and according to Miller, two-thirds of them are unloaded at East and Gulf Coast ports. As a key distribution center for Dole Fresh Fruit Co. and Chiquita Fresh North America, Port Wilmington, Delaware, is the nation’s No. 1 gateway for bananas and a gateway for a host of other fruits: grapes from Chile, clementines from Morocco, pears from Argentina and kiwis from New Zealand.
Any fruit that arrives after Oct. 1 will be “doomed to the garbage can” if dockworkers pull out, says produce importer Peter Kopke Sr. “And all the people who have invested in that business will lose a fortune.”
Kopke’s imports — mostly citrus and grapes these days — come in mostly through Wilmington and Philadelphia, and end up in stores like Walmart, Costco Wholesale and Target across the country. For consumers, the price of fruit would rise in one or two weeks and “many small, privately owned businesses could be forced out of business,” he said.Gabriela D’Arrigo, a marketing executive at produce distributor D’Arrigo New York, said that if imports were halted, “we would go out of the West Coast/LA, and then truck it in” if necessary – showing the kind of disruption a strike would entail.
The union is scheduled to meet on Tuesday to discuss details of how certain products would be treated during a strike, including the possibility that some shipments would continue to be unloaded.according to an ILA spokesman, who declined to comment on whether bananas or other fresh fruit were at risk. The food products affected go beyond fruit. Exports of chilled beef and pork – one of the most profitable food products – are particularly vulnerable.
The protein supply chain cannot be stopped
“Calves and hogs continue to grow,” said Peter Friedmann, executive director of the Agricultural Transportation Coalition. “Frozen products can be stored in cold storage, but those fill up quickly,” and when that happens, farmers are forced to sell their products on the domestic market, causing prices to plummet.
“As we saw during the previous Covid crisis, some farmers simply stop producing,” Friedmann says. “Ultimately, President Joe Biden could invoke the Taft-Hartley Act, which would force workers back to work during a ‘cooling-off period,’ though that could jeopardize union support for Harris ahead of Election Day.
The Biden-Harris administration has never invoked the Taft-Hartley Act to end a strike and is not considering doing so now, a White House official said last week..
In terms of broader economic repercussions, the backlog from a one-week strike would take at least four weeks to clear and would have an impact of between $4.5 billion and $7.5 billion, according to Grace Zwemmer of Oxford Economics. Zwemmer expects the backlog to be recovered once the strike is resolved and ports process the backlog.
