US Ports Threatened with Election Strikes

As U.S. policymakers shift their focus from curbing inflation to shoring up the job market, the economy is facing a shock that threatens to disrupt supply chains and unsettle consumers on a pandemic scale — and potentially put your daily banana intake at risk.

This time the shock comes just weeks before the crucial elections.

About 45,000 dock workers at every major port on the East Coast and Gulf Coast are threatening to strike Oct. 1. With talks at an impasse since June, industry officials believe a strike is inevitable, and ocean carriers and port operators have begun sending warnings to customers and developing contingency plans.

The affected trade gateways handle more than half of all containerized goods shipped to and from the United States. Estimates suggest the week-long strike could cost the economy as much as $7.5 billion. Millions of boxes of specialized cargo, such as bananas, plywood and cars, could be affected, although energy terminals would not be affected.

If the strike goes ahead, the flow of consumer goods, factory components and some vehicles will be blocked, disrupting auto supply chains and other production networks in battleground states. Imports of refrigerated fruit and exports of fresh meat will be disrupted and diverted, leading to shortages and higher prices.

Analysts warn that the domino effect will spread around the world as port congestion restricts shipping capacity and raises freight rates.

The two sides remain far apart. The union is demanding a nearly 80 percent pay raise over six years, arguing that workers deserve a share of the profits foreign container companies have made during the pandemic. Unwilling to set such a precedent — and with some reserves in the bank — the companies could wait it out longer than usual.

“If a new framework agreement is not reached, the sleeping giant will be ready to roar on Tuesday, October 1, 2024,” Harold Daggett, the staunch leader of the International Longshoremen’s Association, said in a Sept. 17 statement.

Terminal operators and ocean carriers, represented by the United States Maritime Alliance, or USMX, said in August that their offer included an “industry-leading” pay increase — similar to the 32% that West Coast longshoremen received last summer.

But there’s another, even more difficult issue to resolve. Daggett is pushing for more restrictive language on automation, saying some companies are using the technology in violation of the current agreement.

Fighting against automation

USMX’s offer preserves the technology provisions in the current agreement, which company members see as a concession amid a global landscape in which automation is widely used in some of the world’s largest plants, including in China, the Netherlands and the United Arab Emirates.

“We are disappointed that we have reached a point where the ILA is unwilling to resume dialogue until all of its demands are met,” USMX said in a statement last week.

With less than a week to go before the deadline, the stalemate risks turning into a game of “cigar,” threatening an economy grappling with a sharp slowdown in job growth and lingering concerns about inflation.

It would also test the White House’s willingness to engage 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 negotiate — and intervene in the event of a strike.

The union warned the White House against getting involved. It withdrew its support for the presidential candidate, but, 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 raised the threat of a strike with the public.

Automotive industry

Jason Miller, a supply chain expert at Michigan State University, assessed the goods most dependent on the affected ports and found that auto parts would be hit especially hard. That could put automakers in swing states like Michigan and Georgia in a tough spot.

Stellantis NV, which is facing its own strike threat, has stockpiled thanks to slow sales, although supply chain issues could still hamper production of individual models. The company did not respond to a request for comment.

Miller says foreign automakers will also feel the effects. South Korea’s parts imports come mostly through the East and West Coasts, feeding Hyundai Motor Co. and Kia Corp. plants in Alabama, Georgia and, to a lesser extent, Michigan.

BMW AG, the leading U.S. auto exporter, ships about 60% of its production from South Carolina. The German company also imports all the engines and transmissions it uses in U.S. gas-powered vehicles, as well as some high-end models.

Banana domain?

The impact on everyday necessities would come most quickly for items that can’t be hoarded. Americans eat more bananas per person than any other fresh fruit, and Miller says two-thirds of them are unloaded at ports on the East and West Coasts.

As a major distribution center for Dole Fresh Fruit Co. and Chiquita Fresh North America, the Port of Wilmington, Delaware, is the nation’s largest gateway for bananas and an import point for a range of other fruits — grapes from Chile, tangerines from Morocco, pears from Argentina and kiwis from New Zealand.

If left on the quayside too long they would spoil or incur higher costs due to delays and additional cooling requirements.

“Any fruit that arrives after Oct. 1 will be doomed to be thrown in the trash” if dock workers leave their homes, said produce importer Peter Kopke Sr. “And all the people who invested in this business will lose a fortune.”

Kopke’s imports — mostly citrus and grapes these days — come mostly through Wilmington and Philadelphia, ending up in stores like Walmart Inc., Costco Wholesale Corp. and Target Corp. across the country. The price of the fruit would go up for consumers within a week or two, and “a lot of small, privately owned businesses could be forced to close,” he said.

Gabriela D’Arrigo, marketing director for agricultural distributor D’Arrigo New York, said that if imports stopped, “we would be coming out of the West Coast/Los Angeles and trucking in product” if we had to — showing the disruption a strike would entail.

An ILA spokesman said the union is scheduled to meet Tuesday to discuss details about how some goods will be treated during the strike, including whether some deliveries will continue to be unloaded. The spokesman declined to comment on whether bananas or other fresh fruit are at risk.

The affected foods extend beyond fruit. Refrigerated beef and pork exports—some of the most profitable food commodities—are particularly at risk.

“Closed”

“The protein supply chain is unstoppable: calves, pigs are still growing,” said Peter Friedmann, executive director of the Agriculture Transportation Coalition. “Frozen products can be stored in cold storage, but they will quickly fill to the brim.”

When that happens, farmers are forced to market their produce domestically, causing prices to plummet. “As we saw during the previous COVID-19 crisis, some farmers will simply stop producing,” Friedmann said. “They will go bankrupt.”

President Joe Biden may eventually invoke the Taft-Hartley Act, which would force workers to return 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 break the strike and is not considering doing so now, a White House official said last week.

In terms of the broader economic impact, the backlog from the weeklong strike will take at least four weeks to clear and generate a loss of $4.5 billion to $7.5 billion, according to Grace Zwemmer of Oxford Economics. She expects the burden to be cleared once the strike ends and ports process any backlog.

But by then the elections will be over.