Potential Port Strike Threatens U.S. Economy
The fiscal cliff isn’t the only big cloud hanging over retailers already faced with what looks like a disappointing holiday season. A potential strike by almost 15,000 dock workers at 14 ports from Boston to Houston beginning on Sunday may derail retailers’ spring selling too.
Even though a federal mediator on Monday called for a meeting of the International Longshoremen’s Association, representing the dock workers, and the U.S. Maritime Alliance, representing the shipping operators, ahead of the Dec. 29 contract expiration, it’s not clear when and where the two parties would do that in the next few days, said Jonathan Gold, who heads supply chain and customs policy issues at the National Retail Federation.
The two parties are in disagreement over container royalties, or the supplemental payments made to the workers based on the weight of containers that come through the ports, Gold said.
The 14 ports along the East Coast and Gulf Coast handle about 6.5 million import containers annually, or 40% of imports to the U.S., including things from shoes and clothing to furniture and home goods from Central and South America, Europe, the Middle East and Africa, Gold said.
The Port of New York and New Jersey is the largest port on the East Coast and the second largest in the country after the Ports of Los Angeles and Long Beach combined, where an eight-day strike ended earlier this month, Gold said.
An East Coast strike “would have a significant impact on everybody through the supply chain,” Gold said in the interview. “Retailers are starting to bring in their spring merchandise. Easter shoes to patio furniture could be impacted.”
If a strike takes place, it would be the first time since 1977 that East Coast dock workers will have walked off their jobs. A 10-day strike on the West Coast in 2002 cost the U.S. economy $1 billion a day and disrupted operations for six months before things returned to normal, Gold said.
NRF last week led a group of over 100 trade associations representing manufacturers, farmers, wholesalers and retailers including Wal-Mart Stores Inc., Target Corp., Best Buy Co. and Gap Inc. in sending a letter to President Obama that urged “immediate action” from the administration. Gold said the White House hasn’t given any official response.
A prolonged strike in these “ports would create tremendous supply-chain challenges for the hardline retailers” in his coverage universe, wrote Raymond James analyst Dan Wewer recently, adding the potential strike is a “new important risk factor.” “The breadth of the shutdown would not leave any alternative ports on the East Coast for the receipt of imported product. In turn, the retailers could face a problem of excess inventories — but out of stock shelves at the store level.”