Possible rail and port strikes threaten supply chain recovery

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Two huge labor disputes, in the railroads and in the ports, threaten to re-entangle supply chains in the United States. And the White House is pushing to avert catastrophe, engaged on a level not seen in decades.

Why is this important: The economic stakes are colossal. A shutdown of the national rail system could cost $2 billion a day, according to an industry estimate, and we’ve already seen what safeguarded ports do to the economy. Politically, any work stoppage would spell disaster for a pro-Labour White House determined to get inflation under control and avoid bottlenecks.

  • “The shutdown of our freight rail system is an unacceptable outcome for our economy and the American people,” a White House official said in a statement to Axios over the weekend. “The administration has been actively engaged, pushing for a resolution. All parties need to stay at the table, resolve outstanding issues and come to an agreement.”
  • Driving the news: Over the weekend, negotiations continued between the country’s largest freight rail companies – including Berkshire Hathaway’s BNSF, Union Pacific and CSX – and the majority of unions representing approximately 115,000 workers. They are rushing to meet the Friday deadline, when a “cooling off period” has passed and workers could strike.
  • Meanwhile: West Coast port workers are in negotiations for a new contract; the last expired in June.

Zoom out: The freight railway “serves nearly all agricultural, industrial, wholesale, retail and resource-based sectors of the economy,” the industry trade group explains in a document.

  • If the rails stop, it would be up to the country’s trucking system to take over – that would be expensive and there’s not enough capacity to handle all the extra stuff.
  • For example, a single trailer on a freight train can hold 2,000 UPS packages, notes the trade group. 75% of new cars are being moved onto rails – at a time when the automotive supply chain is just getting back on its wheels.
  • The American Trucking Associations, a trade group, is urging Congress to intervene if negotiations fail, Reuters reported.

  • Separately, an 11-day port lockout in 2002 cost the US economy $11 billion at the time, the New York Times recently noted.

Zoom out: In the modern era, the White House typically stays out of union negotiations — perhaps simply stepping in at the last moment to help the parties reach a resolution. But the Biden administration is working differently in these disputes — and not just because this president has been so vocal in his support for unions.

  • “The supply chain crisis has put ports and railroads on the radar screen,” says Geraldine Knatz, who served as executive director of the Port of Los Angeles from 2006 to 2014.
  • The White House in May appointed a “port czar” to oversee the supply chain. It’s not something that happened “in my time,” says Knatz, now a professor of politics and engineering at USC.

What to watch: There’s this looming Friday deadline. In the longer term, there is also a slight possibility of a shipping node on the nation’s highways.

  • UPS and its workers’ union will begin negotiating a new contract next year, raising the possibility of further transportation turbulence in 2023.
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