Supply chains are under threat once again, as a critical west coast dockworkers union contract expired on Friday, and the union and the U.S. West Coast Ports look to come to a new agreement.
Although there is no contract extension in place, it has been agreed operations at the docks will continue as per normal for now, while the Pacific Maritime Association (PMA) and the International Longshore & Warehouse Union (ILWU) look to hash out a contract.
In a joint statement, the two parties said, “While there will be no contract extension, cargo will keep moving, and normal operations will continue at the ports until an agreement can be reached… Both sides understand the strategic importance of the ports to the local, regional and US economies, and are mindful of the need to finalize a new coast-wide contract as soon as possible to ensure continuing confidence in the West Coast.”
Both sides will be hesitant to disrupt port operations because of the potential cost to the nation which would result.
A study done in 2014 by the National Association of Manufactures (NAM) and the National Retail Federation (NRF) found that stopping dock operations for just five days would have a cost the U.S. economy over $1.9 billion dollars. Since the study was done, inflation has devalued the currency considerably, meaning the cost would certainly be much, much higher today.
Larry Parker, a logistics expert at the Dr. Wallace Boston School of Business at American Public University System said in an interview, “We’ve outsourced as far as we can to places that can provide the product at a lowest production price. What we’re starting to experience now is the results of the increasing supply costs or supply chain costs.”
The deal for the last ILWU contract in 2015 required nine months of negotiations. It was extended in 2019 for three years, however in November of 2021, the union declined an extension offer, favoring negotiating a whole new contract.
In light of the precarious nature of the economy, and its sensitivity to any supply chain disruptions, their position now is certainly stronger. In addition the union cites President Joe Biden’s pro-union stance, and a growing series of victories unions have been enjoying from Amazon to Starbucks, as reasons they are confident now is the time to negotiate a deal.
Issues they are working around in the negotiation reportedly include employee benefits, avoiding work disruptions, safety issues, the rate of implementation of automation technology that will replace workers, and ESG regulations. Automation technology promises to be particularly contentious, as the Ports argue it would increase efficiency and reduce costs, while the unions argue it will eliminate jobs and open the port up to cyber attacks by foreign actors.
Larry Parker notes, “For every robotic or every system that removes a worker from the supply chain process, that’s reduction in hours and reduction in needed workforce longterm.”
He added that it is possible we will see some work slowdowns as negotiations drag on, and that could produce, “more of the backed up cargo until it can be redirected. We won’t come to a complete stop because there’s other ports in the United States.”
