The much-anticipated labor strike at ports along the East and Gulf coasts has begun, and the impact is a bit anticlimactic — for now.
Retailers, manufacturers and other shippers have been building inventory for a while and have mapped out alternative entry points for their goods at West Coast ports. Besides enduring a barrage of news reports of the pending chaos, consumers won’t be affected immediately. The International Longshoremen’s Association, which represents about 45,000 port workers, and the US Maritime Alliance, aren’t close to an agreement.
The calm before the storm won’t last long. Inventories will be whittled down, and the temporary solution of transporting goods from the West Coast across the country by rail and truck will become saturated. There’s just no way to handle all the volume that would flow through ports from Maine to Texas, a massive stretch of coastline that’s home to about half of the US’ busiest ports.
While store shelves and e-commerce deliveries won’t be emptied or halted immediately, a prolonged strike will begin to bite well before the Nov. 5 presidential election. The political pressure will be mounting day by day for President Joe Biden to intervene. Apart from the behind-the-scenes pressure the White House will exert on both sides, the big gun the president wields to resolve a labor dispute is the Taft-Hartley Act, which would force port workers to return to the job during an 80-day cooling-off period while the two sides return to the bargaining table.
It’s a blunt tool that Biden has said he won’t use. Forcing the port workers off the picket line and back to their jobs would undercut his reputation as a pro-labor president. The fallout would likely spill over to Vice President Kamala Harris and her campaign to defeat Donald Trump for the presidency.
On the other hand, a lingering port strike will hurt the economy and consumers. The supply chain is interconnected, and the impacts will ripple out wider and wider as the strike drags on. Even after a deal is reached, it will take time to unwind the backlog of freight.
The Biden administration — and Harris in particular — will be the target for blame. It will be impossible for the president to shield her from that criticism. The pressure will mount, and Biden will eventually be forced to intervene. The longer he holds out, the more supply chains and the economy will be damaged. The more time the ports are closed, the weaker Biden will be perceived when he gives in to the economic realities. If there ever was a no-win situation, this is it.
Counting on the union and the alliance to work out the impasse in just a few days is not a strategy. The two sides are far apart on several issues, including wages, health benefits, cameras in the workplace and the adoption of new technology. The union broke off talks in June and, amid mutual recriminations, no progress has been made since then. The alliance last week filed a unfair labor practice charge with the National Labor Relations Board.
Biden should act decisively and quickly to intervene.
Critics will complain that Biden is siding with the large foreign port terminal operators and ocean carriers such as AP Moller-Maersk A/S and Cosco Shipping Holdings Co. The reality is that these international companies benefit from the disruption. They will charge more to divert freight to other ports where they operate and will make up for any losses when the ports reopen and they process the backlog of freight. Investors know this and have pushed up the shares of Maersk by about 12% in the last month while those of Cosco have jumped about 22%.
The union contends talks broke down because of corporate greed. Ironically, the strike helps these large corporations. Winners from the strike include the large US railroads and trucking companies, which will have to haul cargo across the country to reach destinations in the east.
The employers should provide a chunky raise for port workers, whose pay has been eroded by inflation, and the union should back down on stifling new technology to resolve the impasse. If they can’t reach an agreement within a handful of days, Biden should step in. This isn’t an easy decision. The last time a president invoked the Taft-Hartley Act to resolve a port strike was in 2002, when President Bush intervened in less than two weeks to end a West Coast port strike. Before that, President Nixon used this blunt tool to end a strike in 1971.
It may be a no-win situation, but allowing a festering strike to hurt the economy and consumers is a much worse outcome than Biden alienating his labor supporters.
Biden may take a hit to his legacy as a pro-labor president. His legacy would be damaged much more if he gives Trump a leg up on his way to winning the presidency.
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