A labor contract between shipping companies and West Coast port workers is set to expire Friday, raising fears of a walkout that could exacerbate supply chain disruptions and product shortages.
Both sides have maintained that port workers will continue to process cargo even after the deadline to agree to a new contract passes. Retailers, manufacturers and farmers warn that any kind of work stoppage, which would halt the flow of cargo, would rattle the U.S. economy, which is already beset by rampant inflation and a struggling stock market.
“It wouldn’t take very long for this to have ripple effects throughout the economy if there are any sort of disruptions, so we’re hopeful that the parties will be able to reach a beneficial resolution in relatively short order,” said Jess Dankert, vice president of supply chain at the Retail Industry Leaders Association, whose top members include Target and Walgreens.
The International Longshore & Warehouse Union (ILWU), which represents more than 22,000 workers at 29 West Coast ports, is currently negotiating a new contract with the Pacific Maritime Association (PMA), which represents shippers.
The two parties have said that they are unlikely to reach an agreement before the July 1 deadline, but they insist that workers don’t plan to go on strike as they continue to negotiate a new deal.
“This timing is typical, and cargo operations continue beyond the expiration of the contract,” the ILWU and PMA said in a joint statement earlier this month after meeting with President Biden.
That statement brought some relief to companies that rely on maritime trade to get their products to store shelves, some of which had rerouted cargo away from West Coast ports to account for a potential lockout.
The nation’s busiest ports in Los Angeles and Long Beach have struggled to process record numbers of shipping containers during the coronavirus pandemic, slowing the flow of goods and hiking costs for consumers. They’re bracing for huge demand in July and August.
Corporations have been closely monitoring the labor dispute, concerned that even a brief work stoppage would make port congestion untenable and create enormous backlogs.
West Coast ports process roughly 60 percent of imports from Asia, including billions of dollars in electronics components, toys, school supplies, furniture and clothing. Disruptions would also hurt U.S. exporters, which send billions of dollars in agricultural goods such as soybeans, pork and cotton to Asia, in addition to manufactured products.
The National Association of Manufacturers (NAM) released a study this week estimating that a 15-day port disruption would cost the U.S. economy $7.5 billion in gross domestic product. The report estimated that 41,000 people would lose their jobs, including 6,100 workers in manufacturing and 15,400 in retail trade.
“The disruption would be felt immediately. Manufacturing jobs will be lost if parts and supplies don’t arrive. New equipment, machinery and products can’t be built when ships are backed up and there is no one available to unload and process cargo,” NAM President and CEO Jay Timmons said in a statement.
“Our overseas customers won’t wait for us to fix these disruptions, either,” he added. “They’ll simply find other suppliers, weakening U.S. manufacturing competitiveness in the process.”
Most observers don’t expect the labor dispute to lead to a work stoppage — both sides have acknowledged the key role they play in the U.S. economy — but the situation has already caused companies to shift their plans.
For months, retailers have been speeding up the timing of shipments and redirecting some of their imported goods to East Coast and Gulf Coast ports to mitigate potential disruptions. That’s placed new costs on businesses and created additional congestion at those ports.
“If we can alleviate this one source of economic and operational uncertainty, that would go a long way to improving planability for the future,” Dankert said. “So I think the sooner we can reach a resolution on this, the better.”
The tenuous West Coast port contract negotiations, which began in May, have centered around wages, worker safety and automation.
The union has pointed to ocean carriers’ record-smashing profits during the pandemic, while shippers have insisted that port workers enjoy competitive salaries that average six figures. The ILWU has pushed back on shipping companies’ push to automate port systems over the threat of job losses, while shippers claim that U.S. ports must be modernized to boost efficiency.
Biden and Labor Secretary Marty Walsh met with the two sides last month during a visit to Los Angeles. That led to the joint statement from negotiators ensuring that they won’t allow work stoppages and will continue to work toward a deal.
The White House has hinted that it would step in if contract talks break down, as previous administrations have done to prevent work stoppages at West Coast ports. Biden’s top priority ahead of the November midterm elections is to get supply chains and inflation under control.
Port congestion has made it harder for businesses to access products and saddled them with record transportation costs. That’s helped fuel rampant inflation in the U.S., where consumer prices rose 8.6 percent over the past year, the highest level in four decades.