U.S. importers and exporters are bracing themselves for the possibility of a strike — or, at the very least, a damaging worker slowdown — by dockworkers at West Coast ports, as management and labor seek accord on a new longshore contract.

The current agreement expires on July 1, and talks between the International Longshore and Warehouse Union (ILWU) and Pacific Maritime Association (PMA), the latter representing marine terminal operators, are soon to get underway. But progress could be stalled over certain troublesome issues, most notably automation.

This is the first time that the two sides have sat down at the bargaining table to hammer out a new contract in nearly eight years, thanks to a three-year extension of the current one, which was supposed to expire in 2019. Those talks didn’t go well, commencing in 2014 and dragging into 2015, with ILWU members staging a lengthy work slowdown to protest the delay. 

Now, of course, severe delays in the movement of containers through West Coast ports, especially the hubs of Los Angeles and Long Beach, are an everyday occurrence. But the culprit this time isn’t labor dissatisfaction; it’s COVID-19 and the toll that the virus has taken on staffing levels, factory closures in Asia and intermodal equipment shortages, along with the huge volumes of cargo being offloaded from mega-containerships.

Another labor action could bring West Coast port activity to a virtual halt, with serious consequences for the U.S. economy. But if history is any indication, the possibility of further disruption is strong. Every set of contract negotiations between the ILWU and PMA over the past 20 years has been marred by some degree of acrimony; in addition to the union’s multiple slowdowns, management locked out workers for 10 days in 2002.

The current contract will be expiring just as the peak season for importing holiday merchandise begins. “I don’t believe we will have this congestion and backlog resolved by that time,” says Brian Whitlock, a senior director analyst with Gartner. “The effect is going to be compounding.”

The major issue will be automation, Whitlock predicts. In the Pacific Coast labor contract negotiated in 2002, management won the right to automate marine terminals without union interference, in exchange for big boosts in wages and benefits. (In fact, union concessions on cargo-handling automation date all the way back to the Mechanization and Modernization Agreement of 1960.) Union leaders have said in the past that the terminals never took full advantage of their right to automate, dragging their feet on installing labor-saving technology. But that state of affairs is likely to change now. With West Coast ports losing market share over the past 10 years to facilities on the East and Gulf coasts, operators are desperate to boost productivity. “Employers understand that they have to be more efficient, and must meet clean air standards by 2030,” Whitlock says. “They need to invest in new equipment.”

The money is there. Ocean carriers, who operate West Coast marine terminals through subsidiaries, are flush with cash, thanks to their ability to push up freight rates in a time of constrained capacity. (Constrained, in many cases, by their own actions, as they cancel large numbers of sailings in order to keep capacity tight.) They’re eager to use their dominant position to make long-term improvements at the terminals, while minimizing the number of humans needed to run operations. “They have a lot more options, given the profitability they have,” Whitlock says.

Automation is currently in place at just three of the 13 container terminals at the Los Angeles/Long Beach port complex, according to Gartner, with plans for a fourth. Expect the ILWU to push back against that trend, Whitlock says, despite the concessionary terms of the previous contract. In fact, the ILWU could demand a walking back of language permitting automation — much like the ban contained in the current contract for East and Gulf coast dockworkers. At the very least, the union might insist on playing a bigger role in decisions on where and how much to automate. Whitlock says the longshore union stands to lose between 40% and 90& of its membership if terminals are allowed to realize the full potential of automation.

In the battle between management and longshore labor, the next few months will reveal who holds the power. Whitlock says growing public awareness of the importance of global supply chains, coupled with President Biden’s pro-union sentiment, could tip the balance in favor of the ILWU. But Biden could also be under pressure to order dockworkers back to work, citing their essential role in the health of the U.S. economy.

In the meantime, Whitlock says, importers and exporters need to be preparing for any eventuality, whether that means bringing goods into the country earlier this year than planned (a move that could trigger even greater short-term congestion), diverting cargoes to alternative ports, or even resorting to air freight. “All of those solutions are going to be leveraged by every shipper,” he says. “And that’s going to impact capacity and pricing in a big way.”