Explainer on port strikes economic harm

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Dockworkers at the Port of Montreal, as well as every major port on the United States’ East and Gulf Coasts went on strike this week, sending ripple effects through the North American economy. The Financial Post’s Denise Paglinawan explains what we know about the work stoppages and their potential impact on both sides of the border.

Which ports are closed due to strikes?

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Workers at two of the four terminals in the Port of Montreal, Viau and Maisonneuve, operated by Termont Montreal Inc., began a three-day strike on Monday, Sept. 30 at 7 a.m. The Maritime Employers Association, which represents companies in the maritime transportation industry in Québec and Ontario, said the strike started after mediated contract negotiations “did not bear fruit.”

More than 1,200 dockworkers, represented by the Montreal Longshoremen’s Union, are currently off the job. About 350 members of the Canadian Union of Public Employees (CUPE) Local 375 are also part of the job action. The strike is expected to last until Thursday, Oct. 3 at 6:59 a.m.

A day after the work stoppage in Montreal, a much bigger strike commenced in the U.S.: at the stroke of midnight on Tuesday, Oct. 1, approximately 47,000 dockworkers with the largest maritime union in North America, the International Longshoremen’s Association (ILA), hit the picket lines.

The U.S. strike halts operations at East and Gulf Coast trade gateways, affecting every major container port from Houston to Miami, as well as the Port of New York and New Jersey, the United States’ busiest Atlantic hub for international commerce.

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Why are the workers on strike?

On Sept. 26, the Montreal dockworkers rejected their employer’s offer and voted in favour of strike action. The parties had their last round of bargaining in 2021, which also resulted in strike action — until the federal government imposed forced arbitration and legislated employees back to work. Montreal’s longshore workers have been without a collective agreement since Dec. 31.

CUPE says all of the same issues from three years ago have resurfaced. The port workers are reportedly seeking annual wage increases of 20 per cent, to keep pace with the rising cost of living, as well as better work-life balance, the union said.

Meanwhile, the U.S. longshore workers are demanding a 77 per cent wage increase, or $5 an hour for each of the six years of their new master contract with United States Maritime Alliance (USMX). USMX represents a group of foreign-owned ocean carriers and terminal operators at U.S. East and Gulf Coast ports. The wage demand would raise the workers’ base hourly rate from US$39 to US$69.

“ILA dedicated longshore workers continue to be crippled by inflation due to USMX’s unfair wage packages,” the union said.

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The dispute is not only about pay. The longshore workers’ union is also seeking a total ban on potentially job-reducing automation of cranes, gates and container movements used in loading or unloading of freight. ILA president Harold Daggett said the workers want “absolute airtight language that there will be no automation or semi-automation.”

How much cargo goes through the Port of Montreal terminals?

The two terminals shut down by dockworkers at the Port of Montreal handle 41 per cent of container traffic at Canada’s second-largest port.

The Montreal Port Authority said the work stoppage deprives companies in Quebec and Canada of that handling capacity on the St. Lawrence “at a crucial time,” when both import and export holiday cargo must transit through the Port of Montreal. It said any delay not only entails costs for companies using port services, but also puts $90.7 million of economic activity at risk for each day of interruption.

How much cargo do the East and Gulf Coast terminals handle, and what types?

The combined 36 East and Gulf Coast ports handle approximately 57 per cent of U.S. container volume.

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The Conference Board, a New York-based think tank, estimates that a week-long strike at the East and Gulf Coast ports would cost the U.S. economy US$3.78 billion, or US$540 million per day. Altogether, these facilities handle a quarter of the U.S.’s annual international trade — totalling about US$3 trillion, it said.

Oxford Economics estimates that the East Coast and Gulf Coast strike would reduce U.S. GDP by US$4.5 to US$7.5 billion, or 0.1 per cent annualized, for every week that it continues. The coastal ports predominately handle the import and export of raw materials, including tin, copper, cotton, wood and base metals that are involved in manufacturing processes.

Around 80 per cent of tobacco and nicotine trade will also be affected, with more than half of those imports and exports going through the Ports of Norfolk and Miami. Only 32 per cent of vehicles and auto parts are imported though the ports, which is less significant than other product categories but would still spell trouble for European auto producers, according to Oxford Economics.

TD economist Admir Kolaj said if the strike is prolonged, aside from the transportation sector, retail and manufacturing are two key industries that will be negatively impacted, due to either a shortage of goods or delays from rerouted shipments.

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What will the economic impact be for Canada and the U.S.?

The Maritime Employers Association said the labour disputes are affecting the Quebec and Canadian economies, as well as Canada’s reputation as a reliable and resilient trading partner. “The Canadian supply chain is already fragile,” it said in a statement. “Any work stoppage at the Port of Montreal has major consequences.”

The association said there had already been a significant drop in cargo at the Port of Montreal as a result of the uncertainty in negotiations, posing serious financial challenges for the companies. It said the amount of cargo handled by Montreal longshore workers had dropped 24 per cent since 2022.

In an email, the Canadian Chamber of Commerce said it is deeply concerned about the strike in Montreal. It cited a 2021 Transport Canada study that looked at the effects of a full shutdown of the port and estimated the net losses to Canadian GDP could reach $40 million in the first week, then quickly rise to $100 million.

Federal labour minister Steven MacKinnon noted on Friday that “the Port of Montreal is critical to our supply chains.”

— With files from Canadian Press and Bloomberg.

• Email: dpaglinawan@postmedia.com

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