Is it game over for U.S. East Coast port employers?
That was the initial feeling when President-elect Donald Trump publicly backed the International Longshoremen’s Association in its bitter fight to keep container automation technology out of Eastern Seaboard and Gulf Coast ports.
Trump, who’s made a habit of ruling by social media fiat, doubled down a few days later by reposting a Facebook post by ILA Executive Vice President Dennis Daggett describing the meeting at Trump’s Mar-a-Lago residence which included his father, ILA President Harold Daggett.
How long could the United States Maritime Alliance representing marine terminal operators and ocean carriers resist that kind of pressure?
For perspective, it only took Trump’s threats of tariffs to see how fast Mexico and Canada fell in line.
While new President Claudia Scheinbaum initially threatened to levy her own tariffs on U.S. goods, that now seems unlikely as Mexico can’t afford a trade war with its largest trading partner given the weak peso.
In Canada the province of Ontario made noises about tariffs, and suspending the sale of electricity to the U.S. But that seems to have gone by the boards, as we say at the hockey rink, when Justin Trudeau’s federal government announced $900 million for border security, as well as a massive bust of fentanyl smugglers moving thousands of potentially lethal doses into the U.S. Bingo, more preconditions set by Trump.
(Trudeau and his party have their own problems, polling in the 20s amid lagging post-pandemic economic growth and stubborn labor unrest ranging from ports and railroads to Canada Post.)
Until the ILA this month broke off contract talks by revealing specifically that it was semiautomated container cranes holding up a new coastwise contract covering tens of thousands of union workers from Maine to Texas, the USMX was content to issue mildly worded releases that only referenced automation technology. But no longer.
By any measure, ocean carriers have enjoyed a spectacular year. While global markets tread water, a chugging American economy underpinned by resilient consumer demand has fueled record import volumes through U.S. container gateways, particularly of shipments from China. Diversions away from the Red Sea due to attacks on vessels by Yemen-based Houthi rebels and around the Horn of Africa lengthened voyages to Europe, the Mediterranean and the U.S., soaking up capacity and raising shipping freight rates to the point where carriers saw their bottom lines swell by the billions.
While there were some diversions to the other ports during the three-day ILA strike in October, it’s not as if importers (and exporters) have a reasonable alternative to ocean shipping. Airfreight is expensive and can’t accommodate the volume and variety of transocean goods including agricultural products or vehicles, the latter also under the ILA’s purview.
To be sure, executives have been reluctant to step up and be the public face of the foreign-based ocean carriers during negotiations, hurting their efforts at effective messaging. The ILA has shouted over and over how automation will eliminate union jobs. Employers say port automation is needed to make East Coast hubs more efficient, creating more union jobs to manage greater container volumes.
But carriers still have cards to play. While the Houthis this week signaled a remarkable shift regarding the Red Sea amid fast-changing events in the region, it will probably be months until carriers and their underwriters feel comfortable returning to the area, and only after the rebels stand down. They’ll also want to hold on to those higher rates through the contract-making season, and into 2025 when new vessels and new alliances are expected to further change supply chain dynamics.
So, call the likelihood of another port strike strong, but as before, short-lived. As President Joe Biden did before him, Trump won’t block a work stoppage. It was acting Labor Secretary Julie Su who brokered an end to the walkout, a 62% pay raise for the union and extension of the current contract through Jan. 15.
The smart money plays both sides against the middle. Trump can allow the ILA to walk out for a week or less — that’s when ships really begin to queue up — then swoop in to help hammer out an agreement under which the union accepts a watered-down proposal to test automation in exchange for the pledge to create more jobs. Trump gets a win, box handling continues, and longtime ILA President Harold Daggett gets a going-away gift as he hands over the union reins to his son.
But today, with bargaining stalled and the extension deadline approaching, there doesn’t seem to be a Julie Su on hand since it will be months until Trump’s Cabinet picks are confirmed. While the Taft-Hartley Act gives the president the power to order an end to a strike if it endangers U.S. safety, as President George W. Bush did to end a lockout of West Coast dockworkers in 2002, it’s hard to envision Trump forcing the ILA back to work.
Find more articles by Stuart Chirls here.
Related coverage:
Reserve before it’s too late! Houthis mull Red Sea security webinar