The UAE has been the top export market for US goods in the Middle East and North Africa region since 2009.
The logistics industry is bracing for a potential crippling effect as the members of the International Longshoremen’s Association (ILA) plan to go on a strike in the US. The Middle East may experience the ripple effects which may accelerate the already existing challenging situation.
The ILA maritime alliance representing all major shipping lines is about to stop operations on the US East Coast. The strike halts the flow of goods across 14 port authorities. This is the first demonstration at these ports since 1977.
The New Jersey-based ILA and the United States Maritime Alliance (USMX), a coalition of container carriers, direct employers, and port associations servicing the East and Gulf coastlines of the United States, have until today to reach an agreement.
The six-year contract between them began on October 1, 2018, and since then, they have grappled with concerns like worker pay and industry automation, as well as criticism of what is alleged to be billions of dollars in incentives for USMX executives.
The Chief Executive of Container xchange, Christian Roeloffs said, the time before the strike has created uncertainty with many significant disruptions mainly in the regions that are heavily reliant on the US ports for imports and exports.
The regions include the Middle East that is experiencing geopolitical tension where the logistics sector has already been beset.
The attack by Houthis on the commercial vessels has severely affected disrupting trade routes. This has resulted in affecting the bottom line of shipping companies and increased transit times which further forced them to raise their rates to cover the losses.
The shipping lines may redirect their vessels to West Coast or Middle Eastern ports due to the stoppage in the US East Coast port operations. This may cause direct consequences on major carriers that may impose increased surcharges. The amount may vary from $1000 to $3000 per container and may vary due to the duration and nature of the disruptions.
Christmas is known to be the most important time of the year for retailers and more critically for consumers while the ILA strike comes into effect during the period just before that.
According to data from the UAE embassy in Washington, DC, the United Arab Emirates has been the top export market for US goods in the Middle East and North Africa region since 2009. According to the report, bilateral commerce between the two countries reached a new high of $31.4 billion in 2023.
According to official figures, the US sold over $24.9 billion in goods and services to the UAE, a 19% increase from 2022, leading to a $18.3 billion trade surplus for the US, which is America’s fourth highest globally.
According to analysts, the Middle Eastern sectors most vulnerable to interruptions caused by the ILA strike would be retail, automotive, and, to a lesser extent, food products.
The duration of the strike would depend on the speed and scope of the negotiations and hence there is no definite answer to how long the ILA strike would last. However, the Arab world may not be affected as much as other sophisticated countries, as strikes in the United States run significantly shorter, according to Nassib Ghobril, head economist at Lebanon’s Byblos Bank Group.
Trade factors also play a crucial role: US exports are concentrated in five Arab countries, with the UAE leading the way, followed by Saudi Arabia, Qatar, Egypt, and Morocco. In 2023, they combined to account for over 80% of US exports to the Arab world. US exports to the region accounted for 3.5% of total US exports in 2022, but less than 7% of the region’s aggregate imports.
The ILA strike also poses a serious challenge to the government of retiring President Joe Biden, as it occurs just weeks before the 2024 presidential election. Vice President Kamala Harris is competing for the nation’s highest elected office.
For container trade and leasing enterprises, these disruptions could cause severe delays and port congestion, affecting equipment turnaround times. Companies may expect short-term increases in demand for leased containers as retailers hurry to acquire items before anticipated interruptions, especially for seasonal inventory and industrial shipments.