US port strike crippling US bakers

The US economy is teetering on the brink of a major disruption as the indefinite strike by dockworkers on the East and Gulf Coast ports enters its second week.

On Thursday (October 2), the American Bakers Association (ABA) joined 296 other business groups to urgently call on President Biden to take decisive action to halt the strike and mitigate the economic fallout. This unified plea comes in a letter urging the administration to use its authority under the Taft-Hartley Act to end the walkout and restore operations at the ports while negotiations between port operators and longshore workers continue.

ABA president and CEO Eric Dell highlighted the critical need for intervention: “Each day that container ports on the East and Gulf coasts remain closed costs the US economy billions of dollars, with severe repercussions for the commercial baking sector and American consumers.”

For commercial bakers, these disruptions threaten the entire supply chain, affecting raw ingredient imports and exports of finished baked goods, ultimately leading to higher prices and shortages on grocery store shelves.

Baking industry at risk

With port closures halting the movement of $2.1bn in daily trade, the baking industry isn’t the only sector feeling the heat. Across various industries, businesses face mounting costs and uncertainty as products remain stranded on ships or in warehouses, unable to reach their destinations.

However, Eric Dell emphasized the stakes are particularly high for the baking sector, as disruptions now could lead to long-term ramifications.

The baking industry relies heavily on the timely importation of ingredients such as wheat, sugar and cocoa. As the holiday season approaches, the potential for supply chain delays could cripple commercial bakeries trying to meet increased demand.

“A prolonged strike means fewer raw materials for baking, leading to increased costs, reduced production and ultimately, higher prices for consumers,” he said.

“The baking industry is an essential part of the US food supply chain and we need the government to intervene before the situation becomes unmanageable.”

Economic consequences

The economic ripple effect of the strike is already being felt, with analysts estimating a reduction in US GDP by as much as $5bn per day if the strike continues.

A report from Oxford Economics warns that GDP growth could slow by $4.5bn to $7.5bn per week if the situation remains unresolved. These figures translate into real losses for American businesses, with the potential for job losses in industries dependent on port operations.

According to the National Association of Manufacturers, up to 105,000 jobs could be affected if the strike drags on.

For bakers, the problem is twofold: ingredients stuck in transit and increased costs for alternative transportation methods. Shipments rerouted through air freight or other ports incur higher costs, which could trickle down to consumers in the form of higher prices for baked goods. The just-in-time nature of modern supply chains, particularly in food production, makes the baking industry highly vulnerable to even short-term disruptions.

“Time-sensitive products, such as flour and other essential baking ingredients, are at risk of spoilage or delays, putting added pressure on bakeries across the nation,” said Dell.

Calls for presidential intervention

While President Biden has the power to invoke the Taft-Hartley Act – which would impose an 80-day cooling-off period and force the striking dockworkers back to work – his administration has so far refrained from taking this step.

The White House has maintained that both parties must negotiate in good faith, though the pressure to intervene is mounting as the economic impact grows. Business groups like the US Chamber of Commerce have echoed the ABA’s call for intervention, warning of a return to the supply chain chaos experienced during the pandemic.

The International Longshoremen’s Association (ILA) – the union representing the striking dockworkers – remains steadfast in its demands for higher wages, better pensions and protection against automation.

Talks between the ILA and the U.S. Maritime Alliance (USMX) – which represents port operators and shipping companies – have been deadlocked for months. With both sides at an impasse, the risk of prolonged disruptions looms large.

The ABA’s call to action underscores the urgency. If the situation is not resolved quickly, the economic consequences could be severe, potentially dampening holiday sales and slowing economic recovery just as businesses were beginning to recover from pandemic-era disruptions.

“The consequences of inaction are simply too great,” said Dell.

“We urge President Biden to intervene immediately and ensure that the ports are reopened. The US economy and American consumers depend on it.”