The ILA East Coast Port Strike Is Over…for Now

On October 3, the membership of the International Longshoreman’s Association (ILA) suspended its strike and agreed to extend its current contract for another 90 days. The union and the U.S. Maritime Alliance (USMA), which represents the ports, have tentatively agreed to a 62% pay increase over the next six years, with the hope of reaching similar agreements on health and retirement benefits as well as on the use of technology in improving the efficiency and safety of America’s ports.

The Market

Why are Americans, especially American politicians, so concerned regarding the outcome of this labor dispute?

According to the International Monetary Fund, the Gross Domestic Product (GDP) of the world in 2024 will total just over $109 trillion. In 2024, based on IMF data and U.S. government estimates, the U.S. economy will generate just under $28.8 trillion of that, or 26.3% of the world’s GDP, achieving this with just under 4% of the world’s population.

In 2023, the U.S. economy was the world’s second-largest exporter, exporting just over $3 trillion in products, with our largest recipients being Canada, Mexico, China, Japan, and the United Kingdom. Key American exports in 2023 included oil; the U.S. is the world’s largest exporter of refined petroleum, as well as other petroleum products. Other noted exports included liquefied natural gas (LNG), machinery, computers, electronic equipment, aerospace and defense products, motor vehicles, pharmaceuticals, and agricultural products. The U.S. trailed only China in 2023 as the world’s top exporter.

As Number One importer, America is at risk from the ILA

At the same time, America was the world’s Number One importer in 2023, purchasing just over $3.8 trillion of goods from around the world, according to the Department of Commerce. Major U.S. imports include machinery, organic chemicals, plastics, rubber, furniture, leather products, and a wide variety of transportation products and equipment. Alarming to many Americans is a 2020 Commerce Department report noting that just over 80% of equipment used to expand and/or maintain the U.S. power grid was imported from outside of the country in 2019. The top countries from whom the United States imported products in 2023 were China, Canada, Mexico, Germany, and Japan.

The Next 90 Days

After months of negotiating and a three-day strike, clearer heads prevailed. The ILA agreed to a 15-percentage-point reduction in its previously ironclad demand for a 77% pay increase over six years. The USMA found the funds to boost its original proposal – a generous offer of 50% over six years – and arrive at a compromise, with both sides settling on the 62% tentative agreement. So, a longshoreman currently making $100,000 a year will be earning $162,000 in six years, an amount most Americans only dream of today. Annualized, the increase is roughly 10.33% (four times current inflation rates).

The ILA argued that the significant pay increase request was largely due to the 20% rise in inflation since 2021 as well as concerns about future inflation. The issues remaining to be settled by January 2025 to avoid a resumption of the strike will be harder to resolve. First, the ILA wants substantial health and pension benefit increases indexed to inflation at a rate to be determined. Second, and even stickier, is how much technology can be introduced to American ports over the next six years. Current world-class technology – such as complex trolleys and cranes, which began showing up more than a decade ago in the ports of Rotterdam and Shanghai – are still not found in American ports. The use of cutting-edge scanning and AI technology to improve material handling is also absent in American ports, further crippling our ability to reduce costs and product pricing.

Inflation and Technology

It is our opinion that after only three days, Americans were growing tired of the ILA strike against the USMA. Most of us recognize how important American ports are to the economy.

Despite President Biden and Vice President Harris’s contrarian position, Americans are realizing anew the truth of Nobel Laureate Milton Friedman’s observation: “Inflation is and always will be a monetary phenomenon.” Inflation is caused by government overspending and expansion of the money supply, not by corporate price gouging and the rich. Government needs to control itself, thus lowering the level of inflation. This would allow for more reasonable wage increases and a more viable economy for all.

Finally, all Americans – whether salaried or hourly – should be free to pursue the best wages, health-care benefits, and pension benefits that they can obtain, doing so in the free and open market in which they compete. However, this condition does not pertain in American ports, where the ILA holds a near monopoly position. And the ILA’s East Coast port strike may have a sequel, depending on whether a new six-year ILA contract is finalized in 90 days, and what impact it has on consumers.

The ILA can’t keep out the machines

At root, machines and technology are beneficial to society. America’s economic success has been driven by the creation of new technology, more and better jobs, new and better goods and services, and a lower cost of living. What would have happened if American buggy manufacturers were able to write the rules and prevent the introduction of new technologies and the commercialization of the automobile?

In 1908, Henry Ford introduced the Ford Model T for $850, at a time when an average worker’s annual income was $520. Numerous groups warned against automobiles, with the loudest voices coming from horse-drawn cart and carriage manufacturers. Fortunately, the free market prevailed. In 1908, there were 8,000 automobiles on the road, 144 miles of paved road, and the speed limit in most major cities was 10 miles per hour. Today, there are more than 296 million automobiles, light trucks, and SUVs registered in America, with an average of more than two per household. A base level Ford Escape costs $27,995, about half the average annual American income of roughly $59,000. It includes heat, air conditioning, windshield wipers, and anti-lock brakes . . . items only dreamed of in 1908.

Conclusion

Thankfully, we did not prevent the mass introduction of the automobile. Where would America be today if we were still the economy of yesteryear?

Higher wages and benefits for longshoremen will drive up prices for U.S. imports and exports unless they are offset by lower corporate profits and/or technology. Just remember, lower corporate profits affect all stockholders – and that includes the rate of return on millions of American pensions and IRAs. Thwarting the introduction of new technology in our ports also lessens the likelihood that American companies and workers will build the next generation of high-end, cutting-edge port technology such as trolleys and cranes. And our burgeoning Artificial Intelligence technologies will have one less new market, and one less set of new customers to expand their services to. Is this what we really want?

This article was originally published by RealClearPolitics and made available via RealClearWire.