Trading Places

Biden will wish to avoid a strike and its damaging economic consequences , and that gives the ILA leverage .

By Peter Tirschwell

As dockworkers along the US East and Gulf coasts negotiate local port agreements ahead of a mid-May deadline set by their union president , management sources are divided on the risk of disruption as the Sept . 30 expiration of the current contract approaches . Opinions range from believing a deal will get done with no disruption to a view that a threat of a strike exists .

International Longshoremen ’ s Association ( ILA ) President Harold Daggett last November announced that union rank-and-file would not work beyond the contract expiration if a deal were not in place , threatening what would be the first strike along the East and Gulf coasts since 1977 .

The risk of that happening stems from the union believing it is entitled to a fair share of ocean carriers ’ pandemic windfall of over $ 400 billion in total industry profits , as estimated by analyst John McCown . Daggett said he aims to achieve “ the greatest master contract in our union ’ s history ,” and he expects carriers to “ deliver a landmark compensation package .”

But carriers see a changed market since the pandemic . Their profits plunged an estimated 88 % industry-wide last year and were in loss-making territory by the fourth quarter of last year , McCown said . Carriers ’ fortunes have improved slightly since late last year , when 6 % to 7 % of global capacity was absorbed due to vessel diversions following the attacks on shipping in the Red Sea , while import volumes have steadily recovered since last fall .

Beneficial cargo owners ( BCOs ) can take comfort in the view of some management sources contacted recently by the Journal of Commerce who believe there is interest on both sides to reach a deal ahead of the contract expiration without disruption . Some carriers say they are seeing some diversions to the West Coast ahead of potential labor disruption , but not a lot .

“ We feel labor will get a new contract ... but not ... give a reason to shippers to consider diverting cargo ,” said the head of logistics for a household goods retailer . “ We have always felt East Coast labor is more commercially minded .”

But the sanguine view is not unanimous . Some sources remain in wait-and-see mode until the union reveals its latest wage increase demands upon resumption of “ big table ” — i . e ., coastwide — discussions that will occur once local agreements are wrapped up or unresolved issues are kicked up to the big table .

Some observers see warning signs , such as wage increase demands by the union , which might be too high for ocean carriers who dominate the United States Maritime Alliance ( USMX ) management group to accept .

Presidential politics

A hint as to how things may unfold can be seen in the ILA ’ s negative reaction to the International Longshore and Warehouse Union ( ILWU ) negotiations last year . Management sources have said the ILA in its negotiations with the USMX would benchmark its wage increase demands against what the ILWU achieved . In the deal ratified last August , retroactive to 2022 , the ILWU secured a 32 % increase over the life of the contract , which expires July 1 , 2028 .

But Daggett expressed dissatisfaction with that result , which he sees as having been forced on the ILWU by the Biden administration . “ When the ILWU was going through talks , you ’ d think he would have picked on the foreign companies out there that are setting up automation and getting rid of American jobs , but he didn ’ t do that ,” Daggett told a November meeting of ILA locals in Nashville , as reported by the Journal of Commerce . “ He went after the ILWU , telling them to get this contract signed .”

The implication is clear : Whereas the ILWU allowed acting Labor Secretary Julie Su to facilitate a deal , Daggett will be less receptive to pressure from Washington , and according to sources , he has said as much privately .

The ILA supported Biden in 2020 but has yet to make an endorsement . The election will surely be in the mix . Biden will wish to avoid a strike and its damaging economic consequences , and that gives the ILA leverage . Last year , Daggett was reelected to a fourth term as ILA president , a term lasting though 2027 , meaning the next contract could be his last . With automation a non-issue , sources say , it will come down to the contract he brings home to his rank-and-file . So far , little of that has rattled BCOs . The fact that only short-lived walkouts have occurred over the past nearly half-century has given them the confidence to reroute large volumes of cargo away from the US West Coast , where labor disruption has accompanied every negotiation since the late 1990s .

Some large BCOs tell the Journal of Commerce that based on the East Coast track record of labor peace , they have faith a deal will get done without disruption , eliminating the need to divert cargo as a precautionary measure .

email : peter . tirschwell @ spglobal . com

46 Journal of Commerce | May 6 , 2024 www . joc . com