Your Guide to the 'Container Cliff': How a Dockworker Strike Hurts the Economy

Fifteen major ports, including the ports in surrounding New York harbor, will grind to a halt on Sunday if a deal can't be reached. So what are they fighting over? And what does that mean for industry?

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Fifteen major ports, including the port surrounding New York harbor, will grind to a halt on Sunday if a deal can't be reached with the East Coast's biggest dockworkers' union. The labor contract between the International Longshoremens' Association and a conglomerate of shipping companies expires on Saturday night, and if no contract is agreed to, 4,500 workers will walk off the job, potentially crippling all maritime shipping from Maine to Texas with a disastrous "container cliff." (Yes, they're calling it that.)

If the workers do decide to strike, it would be the first work stoppage by the Longshoremen since 1977 and would include the Port Authority of New York and New Jersey, as well port workers in Boston, Baltimore, Miami, New Orleans, and Houston. The only saving grace is that it would happen after an already sluggish holiday season and not at the heart of the shipping year.

So what are they fighting over? The crux of the conflict is "container royalties," which is a fee that shipping companies pay to every dock worker based on the total weight of the cargo that comes through the port. As The Wall Street Journal explains, the royalties were implemented in the 1960s as a way to protect worker salaries when the rise of larger containers meant fewer ships were needed to bring in all the cargo (and also fewer people needed to unload them.) However, in 2012 the volume of cargo is at all-time highs, while the number of workers has decreased because of automation. That means huge royalty figures being distributed among fewer people to solve a problem that ended a long time ago. (The average annual payment in Savannah, Georgia, was $36,000 last year.) That's lead the shipping companies (the United States Maritime Alliance) to ask for a cap on the payments.

Naturally, the language emerging from the dispute sounds suspiciously like the talk you're hearing from all the other deadlines due in the next few days. A vice-president at the National Retail Federation says, "We cannot afford to continue to kick the can down the road" while others cite the unemployment rate and China's growth as reasons to avert a shutdown. (Never forget "the clock is ticking.") Technically, the president could even use his executive powers to intervene, declaring the strike a national emergency and forcing them back to work.

Unlike the fiscal cliff—and the debt ceiling and the "milk cliff"—at least the two sides facing this deadline are actually talking to each other. Since no union workers have to face a primary challenge in 2014, perhaps this stalemate might actually get resolved before everything collapses.

This article is from the archive of our partner The Wire.