The transportation industry is often considered to be the backbone and lifeline to the economic growth of any country. An efficient transport system is strategic to the growth and sustenance of an economy. The United States Marine Alliance and the International Longshoremen’s Association are some of the big players in this shipping industry with over 15,000 members working in deep sea ports. Labor strikes have always been a reason for concern in the shipping industry, as they cause a lot of inconvenience to the transport system. Even though the laborers have rights that are always considered, respected and protected, when they strike, they end up hurting the economy. One such case is the recent crippling strike by Los Angeles port clerks. At a cost of $1 billion dollars in unprocessed cargo per day, it proved to be yet another blow to an already ailing U.S. economy.
Agriculture is one of those vital sectors in any economy that largely depends on a flexible transport system. It therefore needs a consistent, high-urban and international demand that is well supported by a high volume transport system. As a result of freight strikes, import and export of agricultural goods are hampered, and losses that go with it are usually soaring. An estimated 75% exporters of agricultural products incurred losses during the LA strike as they had to pay for extra storage time at the harbors. Moreover, as the strike continued the exporters suffered more loss due to the deterioration of the goods stored.
Exporters face a monumental challenge when freight strikes take place. Strikes may cause some goods not to be delivered, or lead to late delivery of other goods to overseas retailers, wholesalers and importers. This could jeopardize their sales agreement. Like in the case of LA, exporters of wine had to pay fines for being out of stock for listed products at supermarkets. Exporting farmers ended up losing their supply contacts as they were unable to deliver their products to their customers. An estimated $12.26 billion were lost by exporters during that week when the shipping industry in LA was paralyzed. This was about 4% of total annual revenue generated by the port.
Although records show that few people lost their jobs, in the fruit industries some people had to be let off their duties. Approximately 10,000 people lost their jobs within the same week. The impact was high on fruit farms and in packaging facilities, as most of the supply chain came to a standstill. The wine industry was also affected as almost 35% of casual laborers who used to load containers were shed off due to reduced amount of work. However, these people may be recalled in coming seasons.
Due to strikes, the marketing industries were affected too as a result of a decline in the advertising revenue. In LA for instance, the retailers had their cargo stuck at the port, and they could not advertise their merchandise since they did not have it in stock. The Washington Post, for example, lost over $2 billion in advertising revenue both on television station and its Newsweek Magazine.
Even though the strike lasted only one week, the effects on General Motors Corporation were considerable. Transportation of manufactured vehicles to overseas countries was hindered. This caused a 12% decline in sales made by GM. Projections made indicated that the effects are going to be even more in the near future as they wait for the situation at the port to get better. There was an approximated total loss of $5 billion on imports of seafood. Los Angeles, on the other hand, lost over $13 billion that would have been collected in form of taxes at the port. Also some large ships were redirected to other ports for docking. This gave their competitors an added advantage.
The New York and New Jersey Ports Authority plays a vital role in the economic growth of the Eastern Coast. It has the ability to generate 280,000 jobs and $48 billion in revenue. The Authority has done a lot to develop marine infrastructure at the ports. With the recent threats of strikes, it is feared that any threat or disruption in the port will have negative impacts on the position of the port and moreover, to thousands of local, regional and international jobs.
Currently, the shipping industry is yet again on the trying to deal with an impending strike on the East Coast and Gulf region ports. Three days of negotiations between The International Longshoremen’s Association (ILA) and their employers ended without a labor agreement to replace the one expiring on December 29th. Talks aimed at working out a new master contract with employers, represented by the US Maritime Alliance (USMX), resumed on Tuesday, December 18th. Unfortunately the negotiations for a new contract between the International Longshoremen’s Association (ILA), and employers represented by the US Maritime Alliance (USMX) abruptly broke off yesterday, Tuesday afternoon. While both sides are open to further talks to get a new contract signed, each is unwilling to a few of the proposed concessions. With the possibility of no agreement reached by December 29th, a plan for a strike action should be formulated; where possible arrangements to book and deliver cargo ahead of potential port closures should be made. Space and equipment is already becoming tight leading up to the potential labor threat. Drayage operators are also becoming scarce as they are already committed for moves due to the holidays.
It is remarkably clear that transport services affect all sectors of an economy, and when there is disruption, the whole economy suffers. Strikes in the transport industry have a whopping negative impact on traders and the economy as a whole. Traders suffer impacts of labor strikes in different ways in terms of financial loss, terminated contracts and the extra costs they incur like fines. Moreover, some people end up losing their jobs.
In the current business environment where global competition is high, labor strikes should be avoided to ensure importers and exporters do not risk their contracts and establish more productive international relations. A long term solution should be sought to prevent such incidences from occurring in the future, hence ports should be classified as essential facilities, making it illegal to go on strike.