By Zack Colman - 12/28/12 11:00 AM EST
Unionized dockworkers along the East and Gulf coasts are threatening to begin a 14-port strike this weekend that could choke the flow of goods into the United States and drain billions of dollars from the economy.
Businesses have been sounding the alarm for weeks about the potential strike and are urging President Obama to invoke powers under the Taft-Hartley Act to ensure that the ports remain open.
The White House on Thursday urged the two sides to reach an agreement "as quickly as possible" and said it is monitoring the situation closely.
Industry groups say presidential action is needed because a shutdown of the U.S. Maritime Alliance ports would ripple through the fragile economy.
“It will likely take weeks for the ports as well as trucking and rail services to return to normal operations. Manufacturers can ill afford a strike when they area already facing the burden of the fiscal cliff and so much economic uncertainty,” said Robyn Boerstling, director of transportation and infrastructure policy with the National Association of Manufacturers (NAM).
Amaya Tune, a spokeswoman with AFL-CIO, said the dockworkers would only go on strike as a last resort.
The outcome of the negotiations is a paramount concern for the retail and agriculture industries, which could see huge disruptions in their supply chains if the ports go dark. The ports that would be affected stretch from Boston down the coast to Houston.
The central sticking point in the talks is a royalty that the Maritime Alliance has paid the longshoremen since the 1960s. The fee was instituted to help offset the wages that were lost as the shipping industry transitioned to larger containers and fewer ships.
The Maritime Alliance says the time has come to cap the fees to reflect the downsizing of the workforce since the ’60s. It says the payments are "another form of compensation for ILA workers, who are among the nation's most highly compensated."
The longshoremen argue the fees are a vital supplement to their wages during slow shipping seasons and are resisting proposals to reduce them.
Businesses have watched the dispute unfold nervously, fearing a repeat of the port strike that crippled shipping routes 10 years ago.
"This could significantly impact the recovery,” said Jonathan Gold, the vice president of supply chain and customs policy with the National Retail Federation (NRF). “Look at what happened in 2002, when the shutdown on West Coast cost $1 billion a day and it took six months to recover. And that was in a much more stable economy.”
In a letter sent five days before Christmas, the NRF and dozens of other industry groups pleaded with Obama to take “immediate action” to prevent a strike. They cited the precedent that was set in 2002, when President George W. Bush invoked Taft-Hartley to end an 11-day lockout at 29 West Coast ports.
But whether Obama would attempt to intervene — and potentially cross his union supporters, who gave him critical backing during the campaign— remains to be seen.
Boerstling of NAM said Obama should wield Taft-Hartley because the buildup to a port strike has already taken a toll on U.S. producers.
"Some manufacturers have advanced their monthly export volumes, others have diverted cargo, and some have increased inventories —all at a substantial cost," Boerstling said.
Economists and industry group have yet to put a specific price tag on a Maritime strike, but Gold and Boerstling pointed to the 2002 shutdown — which cost the economy about $1 billion per day — as a comparable scenario.
But Chris Christopher, senior principal economist with consultancy IHS Global Insight, said the economy could absorb the blow of a port strike — up to a point.
"There is a little room for slack there as long as the strike doesn’t last too long, if it does in fact happen,” Christopher said.
He said retailers have more than enough inventory after a disappointing holiday shopping season, while manufacturers are churning at a slow pace due to the weak global economy.
The impact on the agriculture industry could be more immediate, however.
A shutdown of East and Gulf coast ports would hold up the $4.5 billion to $5 billion worth of agriculture exports that is typically shipped through them in January, Veronica Nigh, an economist with the American Farm Bureau Federation, told The Hill.
Nigh said export markets account for about 30 percent of the production value for agriculture. And unlike retailers, the perishable products sold by agriculture cannot simply be rerouted to ports in the West, she said.
She said missing the delivery deadlines could hurt America’s farmers for years to come.
“Folks definitely plan long term, and relationships are incredibly important in export markets. Any sort of disruption, buyers are going to think about that long term,” Nigh said.