Longshoreman Strike Paralyzes East and Gulf Coast Shipping
A large-scale strike has officially begun, bringing ports across the East and Gulf Coasts of the United States to a standstill. The strike, involving around 40,000 longshoremen, is expected to significantly impact the U.S. and European economies, causing disruptions to trade, supply chains, and ultimately consumer prices.
The union’s demands for a substantial pay increase and a ban on automation have put a spotlight on ongoing debates over wages, port efficiency, and the future of automation in the shipping industry.
Negotiations between the longshoremen’s union and port operators broke down over two key demands: a 77% pay increase and a contractual ban on automation at all U.S. ports. Despite a counteroffer of a 50% pay raise, the union rejected the deal, opting instead to strike on October 1.
The stakes are high; a prolonged strike could cripple trade between the U.S. and Europe or the Middle East. However, the union’s resistance to automation has sparked sharp criticism. Bill D’Alessandro of Natural Dog Company, commented on social media that the union’s demands as “a vampire squid on our economy,” arguing that their actions will “absolutely increase the cost of everything from cars to asparagus.”
The disruption is poised to increase consumer prices across the board, affecting goods ranging from vehicles to produce. Supply chain experts predict that the rerouting of perishable goods, such as the 150,000 pounds of asparagus typically shipped by sea, to faster but costlier air freight could raise prices significantly.
According to D’Alessandro, “Air freight is 4X more expensive and will add about 50 cents a pound to the cost of asparagus.” This cost escalation will likely trickle down to consumers, disproportionately impacting lower-income households who already spend a large portion of their income on goods subject to such price hikes.
Given that American ports are significantly less efficient than their global counterparts, the implications of the strike are further magnified. Ports in the U.S. are estimated to be about half as productive as those in places like Rotterdam, Netherlands, where automation has revolutionized the container-handling process.
The automation debate
At the heart of the current conflict lies a key debate: automation. Automation has revolutionized the shipping industry in ports around the world, streamlining operations, cutting costs, and improving efficiency.
For example, Rotterdam, a port city in the Netherlands, employs extensive automation that enables most of its container-handling process to be managed by software and remotely controlled systems. A 2015 study outlined that this has led to significant productivity gains, allowing Rotterdam to handle 12.3 million TEUs (Twenty-foot Equivalent Units) annually—compared to 2.4 million in Oakland, California, with a comparable number of gantry cranes.
In stark contrast, U.S. ports, like those on the East and Gulf Coasts, rely predominantly on manual labor. Human operators control cranes, trucks, and stacking systems, which, though adaptable to unexpected issues, operate at slower speeds and higher costs. Union workers argue that automation would lead to massive job losses, a concern reflected in their demands to ban such systems entirely from U.S. ports.
However, proponents of automation highlight its benefits, including the ability to operate 24/7 shifts, reduce workplace hazards, and cut down on operational costs. While it’s true that transitioning to automated systems carries a high initial cost—estimated at around half a billion dollars—many argue that the long-term gains in efficiency and cost-effectiveness make it a worthwhile investment. Critics of the union’s stance see their resistance as a means of rent-seeking, stifling innovation at the expense of economic growth.
US President Joe Biden has publicly announced that he will not intervene in the dispute between the port operators and the union, thereby allowing the labor strike to proceed without federal interference. This decision has been met with mixed reactions; some see it as a support of workers’ rights to organize and protest, while others argue that it abandons an opportunity to mediate a situation with serious economic implications.
Efficiency vs. Employment
The International Longshoremen’s Association, representing workers on the East and Gulf Coasts, stands in opposition to technological advancements that threaten to eliminate traditional roles. The union fears that automation could lead to job losses of 40-50%, creating significant unemployment among skilled workers who have spent decades in the industry.
The average union worker at these ports currently earns around $147,000 annually, with benefits that add up to $82,000 more per year.
For the ILA, the high pay reflects the demanding, often dangerous nature of the work, and a contractual ban on automation serves to protect their members’ livelihoods. However, critics like D’Alessandro contend that the union’s position hinders overall economic growth and limits the potential to improve port efficiency through technological upgrades.
Port operations, particularly those in the Port Authority of New York and New Jersey, have historically faced allegations of organized crime infiltration. Journalist John Konrad recently raised questions about the ILA’s transparency and financial practices, pointing to the influence of organized crime as a contributing factor in the dynamics of union negotiations and port operations. The situation is further complicated by the ongoing legal battle between New York and New Jersey over the potential dissolution of the Waterfront Commission, a body established to combat such criminal activities.
The strike is already prompting U.S. businesses and international partners to seek alternatives for shipping and supply chains. Some companies are looking to shift cargo to West Coast ports, although these have their own challenges and could become overwhelmed by an influx of redirected shipments. Others are turning to air freight or land-based transportation, both of which come with higher costs and logistical challenges.
While the union stands firm in its demands, port operators are under pressure to restore normal operations as quickly as possible. Any prolonged disruption could lead to losses in billions of dollars, ultimately impacting consumers and businesses alike.
Information for this briefing was found via the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
