Shortly after the closure of the rail network across Canada, a possible attack on U.S. seaports on the East Coast and the Gulf of Mexico threatens to further disrupt supply chains.
The International Longshoremen’s Association (ILA), which represents about 45,000 longshoremen at three dozen seaports from Texas to Maine, has threatened to walk away from their jobs on October 1 if it does not reach an agreement on a new contract with the United States Maritime. Alliance (USMX) of shipping companies.
A work stoppage at the ports could tie up cargo there for weeks or even months, experts warn, with consequences far beyond the US
“An East Coast port strike would be absolutely devastating to our supply chains in North America,” said Fraser Johnson, a professor at Western University’s Ivey Business School who studies supply chain management.
Much of Canada’s imports come through U.S. ports, which on the East Coast can handle much more capacity than the Port of Halifax and the Port of Montreal, Canada’s main shipping points on the Atlantic Ocean.
The Port of New York and New Jersey, the largest port on the East Coast, ships about $300 billion worth of goods annually and moved 7.8 million 20-foot equivalent units (TEU) last year. By comparison, the Port of Montreal handled 1.5 million TEU in 2023 and the Port of Halifax handled just over 546,000.
An economic study by Martin Associates last year estimated the annual value of goods handled at the Port of Montreal at $151.2 billion, while the Port of Halifax does not calculate those dollar values.
Both ports would struggle to accept even a fraction of the goods that normally come through the US, in addition to regular freight traffic, Johnson said.
What would the impact be?
If eastern U.S. ports were to close for even a day, the consequences would be dire.
Analysts at Sea-Intelligence, a Copenhagen-based shipping consultancy, estimated this month that it could take four to six days to clear the backlog after a one-day strike.
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The analysis predicted that a one-week strike in October would not be approved until mid-November, and a two-week strike could mean ports could not return to normal operations until 2025.
Global shipping giant Maersk, a member of the USMX, provided similar estimates an American market update in early August which warned of “significant” increasing delays in the event of a strike.
These backlogs could occur now that supply chains have fully recovered from the four-day closure of Canada’s mainline railways. Although trains began running again on Monday, Canadian National Railway Co. and Canadian Pacific Kansas City Ltd. said a full recovery for freight traffic will take weeks.
As B.C.’s dockworkers went on strike for 13 days in 2023, the Port of Vancouver said last week it took many months to clear that backlog, with delayed shipments and an overburdened infrastructure struggling to restore normality.
The shipping industry has faced other challenges around the world recently, including an ongoing drought at the Panama Canal that forced authorities to reduce the number of ships transiting the crucial trade channel, and attacks on container ships in the Red Sea as a result of the conflict in the Middle East that led to costly diversion routes.
Through it all, inflation has caused transportation and freight costs to skyrocket since the COVID-19 pandemic – and workers want to make sure their wages keep pace.
“These are not normal times,” Johnson said.
The National Retail Federation told Reuters that retailers like Walmart and Target are rushing goods to the US to get ahead of a possible strike and avoid shortages during the holiday shopping season.
West Coast ports are already seeing a surge in traffic that analysts say reflects uncertainty over the East Coast labor dispute — a reversal of what happened last year during difficult contract negotiations for longshoremen in the Western US.
The International Longshore and Warehouse Union (ILWU) ultimately ratified a new six-year contract that includes a 32 percent wage increase over that period, retroactive to 2022, and improved working conditions. The ILA is now aiming for a similar deal.
Willie Adams, international president of the ILWU, said in a letter to ILA President Harold Daggett this month that his union “stands in solidarity” with the ILA. that made the East Coast Union public.
Where are the negotiations now?
Talks between the ILA and USMX broke down over the summer but will resume in the weeks leading up to the strike deadline. Both sides have requested federal mediation and the union has scheduled pay scale meetings for early September.
The ILA has spoken out against what they say is automation posing a threat to port employment. USMX said in early August its latest proposal “retains the existing technology language that has created a framework for modernizing and improving efficiency while protecting jobs and hours – a priority for our members and the ILA,” along with improved wages and benefits.
Daggett has accused the USMX – whose members include global market leaders such as Hapag-Lloyd, MSC and APM Terminals – of making “billions off the backs of dock workers” and appears determined to follow through on strike threats.
“Don’t bother with the maritime unions around the world, we will silence you,” he said at the ILA convention last year.
Daggett earned $855,000 in compensation last year, according to U.S. Department of Labor documents.
Analysts say labor disruptions in Canada’s rail industry and U.S. ports prove the need to make trade operations an essential service across all sectors. Ports are not covered by the US Railway Labor Act, which ensures there is no disruption of railway operations in the event of job action, while Canada has no legislation of its own to do the same.
“It creates problems for shippers, exporters and importers, and ultimately drives up costs when uncertainty exists,” Johnson said.
“Ultimately, these costs are passed on to the consumer.”
– with files from Reuters
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