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US strike threat casts shadow over economy

BRAD PLUMER AND MICHAEL A FLETCHER
Last updated 15:14 28/12/2012

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Thousands of US dockworkers from Baltimore to Houston are threatening to go on strike this Sunday over their pay, a move that could throttle an array of key ports and disrupt commerce at a critical juncture for the economy.

Nearly half of the nation's ocean-bound container traffic runs through the 14 threatened ports on the East Coast and Gulf Coast, and a work stoppage would crimp imports of household goods, clothing and frozen foods, among others. The biggest hub, in the New York area, handled US$208 billion ($254 billion) worth of goods last year.

A widespread strike by the International Longshoremen's Association, the first in decades, could put the White House in a bind. Scores of businesses have urged President Barack Obama to do whatever it takes to prevent the ports from closing - including using emergency powers under a 1947 law to intervene. But such action by the president could alienate union allies.

"For organised labour, that tends to be the nuclear option," said Harley Shaiken, a labour expert at University of California at Berkeley. "That would not be received well at all."

This weekend's deadline over the dockworkers' contract has hardly garnered the same attention as the "fiscal cliff", a series of tax increases and federal spending cuts that are set to take effect next week and would likely threaten the economy's fragile recovery.

But some analysts say a prolonged shutdown of shipping ports might be just as damaging to companies.

"This is truly a 'container cliff' in the making," warned Jonathan Gold, the National Retail Federation's vice president for supply chain and customs policy.

For months, negotiations have dragged on between the dockworkers' union and the US Maritime Alliance, which represents shippers and port operators. The fight has focused on how to divvy up container royalties, which have long been used to augment worker wages and benefits.

Estimates vary widely on how much damage the strike by 14,500 workers would cause. Business groups have put the cost at US$1b a day. But some academics say such numbers are inflated, noting that a work stoppage might not be as catastrophic now that the Christmas shopping season is over. Much of the cost depends on how long the strike lasts.

But few question the influence of the dockworkers, who operate the cranes, hoists and winches that move the containers and therefore wield enormous control over the operations of the ports, which include Boston; New York-New Jersey; Charleston, South Carolina; Savannah, Georgia.; Miami; and Hampton Roads, Virginia.

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The looming strike would not affect all cargo. Workers will still handle US mail, military cargo, perishable goods such as fruits and vegetables, as well as "break bulk" goods such as cars, wood products and steel, according to a strike-preparations memo from the ILA.

The effects of a work stoppage would be uneven. US grain exporters, for instance, are already reeling from both the recent slowdown in China and low water levels on the Mississippi that are bogging down barge traffic. An East Coast and Gulf Coast port shutdown could hamper grain exports further.

In past port shutdowns, companies have stocked up on extra goods ahead of an anticipated labour dispute, while others turned to rail or airplanes. Air freight surged during a lockout of a separate group of unionised dockworkers at the Los Angeles-Long Beach port in 2002.

Nevertheless, more than 100 business groups wrote to Obama last week, pressing him to use his emergency powers under the 1947 Taft-Hartley Act to step in and avert a strike. President George W Bush used these powers in 2002 to end the West Coast lockout.

"Failure to reach an agreement resulting in a coast wide shutdown will have serious economy-wide impacts," the letter said.

Although the ILA did not respond to requests for comment, labour unions have often frowned on federal intervention in contract disputes. And observers think Obama could be reluctant to step in - even Bush, who had a less-friendly relationship with labour, let the 2002 lockout drag on for 11 days before invoking Taft-Hartley.

The US Maritime Alliance and the White House did not respond to requests for comment.

In earlier news briefings, White House officials have urged the two sides to reach an agreement while refraining to say how they would handle a coast-wide strike.

A protracted stoppage would be tough to ignore, analysts said, not least with the fiscal cliff and looming debt-ceiling showdown weighing heavily on the economy.

This strike, said Berkeley's Shaiken, "is about the last thing the president wants right now".

- Bloomberg/Washington Post

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