The contract covering more than 22,000 workers at 29 U.S. West Coast ports expires late on Friday, dialing up worries that labor disruption could roil the nation’s battered supply chains, stoke inflation and threaten a weakening economy.

The International Longshore and Warehouse Union (ILWU) and the Pacific Maritime Association (PMA) employer group, which declined comment for this report, said in a rare joint statement on June 14 that they were not planning any work stoppages or lockouts that would worsen supply chain logjams.

That matters because when the contract expires at 5 p.m. PDT(0000 GMT Saturday), so does its “no strike” clause, said Peter Tirschwell, vice president of maritime, trade & supply chain at S&P Global Market Intelligence.

History suggests a last-minute extension is not likely. The union in November rejected a one-year contract extension, saying its members had already granted a three-year extension to the current contract.

The National Retail Federation, which represents companies like Walmart WMT.N and Target TGT.N, and the Agriculture Transportation Coalition, which includes citrus, hay and nut exporters, are among the industry groups pressing for a quick agreement.

Meanwhile, wary shippers are not taking any chances. They are routing cargo away from the West Coast to avoid potential labor-related slowdowns, particularly at the nation’s busiest seaport complex at Los Angeles/Long Beach that handle nearly $500 billion in cargo annually. That is driving up their costs and contributing to backups at ports in New York/New Jersey, Savannah and Houston.

Automating the movement of containers at the ports, resulting in fewer jobs, appears to be a key issue in the talks, which have been ongoing since May. While both sides have not identified the issue specifically, they have released dueling studies on the impact of automation and traded barbs in the media.

In an interview with Reuters this week, U.S. Labor Secretary Marty Walsh said he checks in weekly with ILWU and the PMA. They “continually tell me that we’re in a good place. It’s moving forward,” Walsh said.

The last West Coast port labor contract negotiation broke down in 2015 after nine months of talks. Dockworkers stopped work for eight days, a move that gummed up U.S. supply chains and siphoned an estimated $8 billion from the Southern California economy.

U.S. President Joe Biden met with the ILWU and the PMA in Los Angeles on June 10.

Any disruptions at Pacific Coast ports that handle almost 40% of imports to the United States could send transportation costs even higher, exacerbating pressure on a softening economy that is sinking Biden’s approval ratings.

“We’ve never had a White House that is all over these negotiations the way they are now,” Tirschwell said.
Source: Reuters (Reporting by Lisa Baertlein in Los Angeles Editing by Marguerita Choy)