Brown Bananas, Crowded Ports, Empty Shelves: Possible Outcomes of a Major Port Strike

The Importance of Supply Chains

The smooth functioning of supply chains is crucial for getting products to consumers, whether it's a can of sardines or a screwdriver. Labor is a key component in every link of the supply chain, including the workers who ensure that goods travel smoothly from their origin to their final destination, be it a supermarket, hardware store, or your front door.

Remarkably, 90% of all internationally traded goods are transported by ships at some point. During the peak of the COVID-19 pandemic, supply chain disruptions were hard to ignore. For U.S. ports, congestion was a frequent issue. Demand for goods fluctuated wildly, and shortages of truckers and other freight service providers caused chaos in land-based and maritime transportation networks.

Consumers experienced frustration when they encountered empty shelves and price hikes for items that were suddenly in short supply, such as hand sanitizer, computer equipment, and bleach.

Upcoming Labor Disputes

The International Longshoremen's Association's six-year contract with the East Coast and Gulf Coast ports is set to expire on Sept. 30, 2024, at midnight. If no agreement is reached before this deadline, the 45,000 port workers plan to participate in a strike that would bring ports from Maine to Texas to a standstill.

If the workers go on strike, it would be the first such work stoppage for the East Coast ports since 1977. Labor and management are at odds over wage increases, and the union is also pushing for limits on the use of automation for cranes, gates, and trucks at the ports in the new contract. The union is asking for a 77% pay increase over the next six years and is worried about job losses due to automation.

West Coast dockworkers, who are not on strike, earn much higher regular wages than their East Coast and Gulf Coast counterparts who are preparing for a strike. The West Coast workers earn at least an estimated US$116,000 per year, for a 40-hour work week, compared to the roughly $81,000 that dockworkers at the East Coast and Gulf Coast ports earn, not including overtime pay.

Potential Impact of a Strike

If a strike occurs, as many as 36 ports could be forced to cease operations, blocking almost half of the cargo entering and leaving the U.S. on ships. If the strike lasts just a day, the average consumer may not notice, but businesses would certainly feel the impact. J.P. Morgan estimates that a strike could cost the U.S. economy $5 billion every day. Even a one-day strike could take about five days to straighten out the supply chain.

If a strike lasts a week, the effects would quickly become apparent to most consumers. Some shipping companies have already started rerouting their cargo to the West Coast. Even if there's no strike at all, costs will rise and warehouses could run out of space.

The impact on everything from bananas and cherries to chocolate, meat, fish, and cheese could be severe, and the shipping disruption could also affect trade in some prescription drugs if the strike lasts at least a week. If the strike were to last a month or more, supplies needed by factories could be in short supply, numerous consumer products would not be delivered, workers would be laid off, U.S. exports might get stuck rather than shipped to their destinations, and inflation might increase again.

Effects on Fresh Produce

Research on supply chain disruptions and the effects of various transportation disruptions, including delays, quantifies the impact on the quality of fresh produce. Bananas, the most-consumed fresh fruit in the U.S., are a case in point. Many of the bananas sold in the U.S. are grown in Ecuador, Guatemala, and Costa Rica, and about 75% of them arrive at ports on the East and Gulf coasts. Long delays will mean shippers will be trying to sell mushy brown bananas to consumers who might reject them. Alternatively, banana growers may opt to find other markets. It's reasonable to expect to find fewer bananas and much higher prices – possibly of a lower quality.

If there's a port strike, tons of fresh produce, including bananas, that would arrive after Oct. 1 would end up having to be discarded. This is unfortunate, given the rising food insecurity rate in the U.S.

Government Intervention

More than 170 trade groups are urging the Biden administration to intervene at the last minute to avoid a strike. The government can invoke the 1947 Taft-Hartley Act, which allows the president to ask a court to order an 80-day cooling-off period when public health or safety is at risk. However, President Joe Biden reportedly does not plan to invoke it – even as he urges the two sides to settle their differences.

Bottom Line

The potential impact of a major port strike is vast and far-reaching, affecting everything from the availability of fresh produce to the cost of goods and the functioning of factories. As consumers, it's crucial to understand these potential implications and prepare accordingly. What are your thoughts on this matter? Feel free to share this article with your friends and consider signing up for the Daily Briefing, which is delivered every day at 6pm.