Port Strike Could Leave Huge Economic Impact Through 2013
Tina Benitez-Eves -- Gifts & Dec, August 31, 2012
WASHINGTON - The potential for a labor strike at East Coast and Gulf Coast ports is becoming more probable since dockworkers walked away from contract negotiations this week. Talks between the International Longshoremen's Association (ILA) and the United States Maritime Alliance (USMX) continue to deteriorate as a September 30 deadline nears. A fall strike at the onset of the all-important fourth quarter holiday season could leave a lasting scar on the U.S. economy through 2013, according to some experts.
Not only would an ILA strike affect 14 East and Gulf Coast ports, but it would have a significant, and negative, impact on fourth quarter holiday retail sales, import and export businesses throughout the United States, and the U.S. economy as a whole moving into 2013, according to Jonathan Gold, vice president, supply chain and customers policy, National Retail Federation (NRF). He noted that 95 percent of all container shipments to the East Coast are handled through the 14 ports.
"The long-term effect on the economy could be pretty bad," Gold told Gifts and Decorative Accessories. "It could be significant. Obviously, it doesn't just impact retailers it impacts any business who is involved in importing and exporting through the East and Gulf Coast ports."
He added, "If we look back to what happened in 2002 on the West Coast where you had a 10-day lock-out, you had a cost to the U.S. economy of a billion dollars a day, and it took six months for the system to recover from the back log that was created."
This week, the NRF sent a second letter to Harold Daggett, president, ILA, and James Capo, chairman and CEO, USMX, urging them to reach some new contract negotiations. This week's NRF letter, sent on August 27, still urged the ILA and USMX to reach an agreement and implored the parties that making retailers divert cargo in a matter of days will have a huge impact on sales for those expecting product for the crucial holiday season.
"We understand and recognize that there are tough issues that need to be resolved," Matthew Shay, president and CEO, NRF, said in the letter. "The issue will only be resolved, however, by agreeing to stay at the negotiating table until a final deal is reached. Failure to reach agreement will lead to supply chain disruptions which could seriously harm the U.S. economy."
Shay also stated that a lack of agreement could drive shippers away from East and Gulf Coast ports in a similar fashion to the 2002 West Coast ports lockout. That strike involved more than 10,500 dockworkers on the West Coast and 87 shipping companies, left a huge impact on the U.S. economy, according to Gold, who reiterated that a 2012 strike would have a similar impact.
The Retail Industry Leaders Association (RILA) also addressed the the ILA and USMX. In its letter, RILA reiterated that a strike would disrupt commerce during the peak shipping season for holiday imports and that any shippers already have implemented contingency plans by shipping early or diverting cargo to other coasts.
"We understand the negotiations themselves have many complicated components that need to be addressed, but we're also aware of the potential short- and long-term consequences that will occur if cargo is diverted from the East and Gulf Coast ports," said Sandy Kennedy, president, RILA, in the letter. "The negative impact a strike would have on retailers and our overall economy cannot be overstated."
The proposed contract addresses the introduction of new technology at terminals and at off-pier facilities along the East and Gulf Coast ports, which could leave dockworkers out of a job. The proposed contract also addresses well wage and benefit issues affecting ILA members.
In June, the ILA and USMX began negotiations to discuss the terms of a new wage scale contract to replace the current agreement, which expires September 30. No agreement was reached during the three-day meeting, and when talks resumed in Delray Beach, FL on July 18, the ILA and USMX reported progress in reaching a settlement that would satisfy both parties. The ILA and USMX resumed three additional days of negotiations last week to replace the current contract, but ILA dockworkers walked away from talks on Wednesday following the USMX's insistence to negotiate on terminal efficiency improvements.
Some retailers have already authorized contingency plans to ensure that holiday merchandise will reach store shelves in time, according to Shay. "We are facing a critical time. Now that there is a real risk of disruption, most retailers using the East and Gulf Coast ports will be forced to executive contingency plans within the next week to meet in-store holiday deadlines," he said. "These plans carry great expense but they are necessary to avoid disruptions that will add costly delays to our members' supply chains."
While the NRF hasn't compiled its 2012 holiday sales forecast, there's a positive outlook for the Q4 season, as long as there are no disruptions to shipping. "From what we're seeing throughout the year, if sales continue to increase, to be steady and strong, we're expecting a good holiday season," said Gold. "We've seen our port tracker as well, and we're expected to see a growth in the port activity. Obviously a strike or lockout would have a significant impact on that."
No continuation of talks between the ILA and USMX is scheduled at this time. "At this point nothing is scheduled," said Gold. "There is an open invitation from the USMX to the ILA to return to the table, but that offer has not been accepted. The ideal outcome would be for both sides to return to the table and bargain and not have any kind of disruptions, either a strike or a lock out."
The ILA and USMX were contacted; the USMX has declined comment at this time.