If you’ve shopped for a new car, a new laptop or even a gallon of milk at the grocery store lately, you’ve likely felt the sting of inflation. The Department of Labor reports U.S. inflation rates surged 6% in October, as consumer prices rose at the fastest rate in 30 years. It’s no wonder that more than half of Americans say the economy is weak and the country is on the wrong track.
To fix the problem, we need to pivot to address the mismatch between an intense demand for goods and a supply chain straining at the seams. That demand is only growing – particularly in the technology sector. Stuck at home during the pandemic, Americans shifted their spending to goods rather than services. CTA data shows nearly 40% of U.S. households were more likely to buy tech products because of the COVID-19 pandemic. And with peak holiday shopping season underway, consumer spending on tech products and services is projected to reach its highest level yet – $142.5 billion this quarter alone.
The open question is whether the new smartphones, wearables and video game consoles consumers want will make it to store shelves. Amid significant supply chain breakages, the answer is less than certain. The backlog of container ships docked outside the Los Angeles and Long Beach ports, which process 40% of all shipping containers coming into the U.S., has grown to crisis levels. At the ports themselves, unpacked containers fill so much space that drivers struggle to return the empty ones needed to keep goods flowing.
While COVID-related bottlenecks are exacerbating supply chain challenges, they’ve only underscored longstanding structural issues at American ports. As Biden administration Port Envoy to the Supply Chain Disruptions Task Force – a title that in itself reveals the extent of the problem – John Porcari admitted last month, American ports are working with “your grandfather’s infrastructure.” While the United States is the world’s largest importer, our west coast ports rank 328th and 333rd in the World Bank’s Port Performance Index.
Recognizing the depth of the challenge – and spurred by a major dip in consumer economic confidence – the Biden administration is in problem-solving mode. Last month, the administration brokered an agreement with the International Longshore and Warehouse Union (ILWU) and major U.S. transportation and logistics companies to take port operation 24/7 – bringing them in-line with standard procedure at most major global ports. The administration also unveiled a Port Action Plan, a $17 billion roadmap to accelerate investment in American ports as part of the recently passed infrastructure bill.
But pouring money into American ports won’t be enough to solve our supply chain challenges. The Biden administration must ensure that ports are updated to incorporate the latest automation technologies, which can help to efficiently manage growing container volume. That process is already underway in Los Angeles and Long Beach, where portions of the terminal have introduced robots that can deliver cargo to waiting trucks. It’s no surprise that the terminals that have embraced automation have the shortest cargo turnaround times at the ports.
But the problems may get worse. The ILWU contract agreement is set to expire in 2022 and recent actions signal that the union may push back on the right to port automation built into the current contract. If both sides dig in their heels, we may see a work stoppage that could exacerbate our supply chain woes and require federal intervention along the lines of previous executive action by the Obama administration in 2015 and the Bush administration in 2002. If the union resists adding workers and technology, intervention should be modeled on President Reagan’s 1981 firing of air traffic controllers. No one group of workers should hold our economy hostage.
Addressing port challenges will also require a broader revamp of our shipping and logistics laws. Step one is passing The Ocean Shipping Reform Act sponsored by Reps. John Garamendi, a California Democrat, and Dusty Johnson, a South Dakota Republican, which would rein in the exorbitant fees imposed on U.S. companies by global ocean carriers. The U.S. should also remove the outdated and arbitrary antitrust exemption that’s delivering massive windfalls for these massive foreign shipping companies.
If this administration is serious about fighting inflation and staving off empty shelves this holiday season, relying on long-term infrastructure spending won’t cut it. More decisive action to enhance automation at our ports is needed – even if it means going toe-to-toe with powerful unions and other special interests invested in the status quo.