Supply chains wait as unionized dockworkers and the shipping operators at the U.S. West Coast ports negotiate a new labor contract after the previous contract expired on Friday.
"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 between the Pacific Maritime Association (PMA) and the International Longshore & Warehouse Union (ILWU)," the two sides said in a joint statement ahead of the 8:00 PM ET expiration of the current contract. "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."
Negotiations can exceed deadlines without seriously disrupting operations. The alternative would be costly: Data commissioned in 2014 by the National Association of Manufactures (NAM) and the National Retail Federation (NRF) estimated that port operations stopping for five days would cost the U.S. economy $1.9 billion — a sum that would certainly be higher nowadays amid elevated inflation and supply chain disruptions.
"We've outsourced as far as we can to places that can provide the product at a lowest production price," Larry Parker, a logistics expert at the Dr. Wallace Boston School of Business at American Public University System, told Yahoo Finance. "What we're starting to experience now is the results of the increasing supply costs or supply chain costs."
The expiring ILWU contract was signed in 2015 after nine months of negotiations. In 2019, the ILWU agreed to a three-year extension that increased wages, maintained health benefits, and increased pensions. In November 2021, the ILWU declined an offer to extend the contract, noting that they had not been at the negotiating table since the contract was signed in 2015.
The current talks, which began on May 10 in San Francisco, are unfolding at a moment when the U.S. labor movement has shown leverage amid election victories at dozens of Starbucks (SBUX) locations and “the most pro-union president leading the most pro-union administration in American history.”
Negotiation topics include avoiding work disruptions, offering best-in-class employee benefits, safety protocols, technology to drive efficiency in ports, and ESG regulations. The PMA is also committed to introducing automated systems to its marine terminals, which the ILWU argues would eliminate jobs and create a greater cybersecurity risk for port operations.
"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," Parker said.
He added that delayed PMA-ILWU negotiations could lead to "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."
Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter @daniromerotv