President Barack Obama is facing pressure to intervene andprevent a strike that would gridlock eastern U.S. ports and riskdamaging industries from retail to manufacturing.

Federal mediators have been pushing for a deal betweendockworkers and their employers before a Dec. 29 deadline. Talksbetween the International Longshoremen's Association and the U.S.Maritime Alliance broke down last week amid a dispute overso-called container royalty fees, or levies that supplementwages.

A walkout would be the first at East Coast and Gulf Coast portssince 1977, and would halt shipments of containerized cargo,including clothing, frozen foods and car parts. Obama would be leftto choose between forsaking a pro-labor stance by invoking the 1947Taft-Hartley Act and allowing a union action that could compoundthe effects of the fiscal cliff.

“To throw that kind of a strike on top of the economy right awayin January, I'm sure is something the administration would rathernot see,” Mike Asensio, a labor lawyer at Baker Hostetler LLP inColumbus, Ohio, said in a telephone interview. “Now, would itcreate that much of a nightmare for him that they would be willingto do something that would anger part of their constituency inorganized labor? That's the $64,000 question.”

Matt Lehrich, a White House spokesman, declined to commentbeyond a statement last week that the administration was monitoringthe situation and urged the parties “to continue their work at thenegotiating table to get a deal done as quickly as possible.”

The Federal Mediation and Conciliation Service, which has guidedtalks since September, organized a meeting between the two sidesthis week in an 11th-hour effort to salvage negotiations. All threeparties declined to provide further details on the new talks.

If federal mediation fails, the only remaining tool in thegovernment's arsenal is Taft-Hartley, which empowers the presidentto intervene in strikes that are deemed national emergencies, saidPhillip Wilson, president and general counsel at the LaborRelations Institute in Broken Arrow, Oklahoma.

The act was last invoked by President George W. Bush in 2002after a lockout closed West Coast ports for 10 days. The mostrecent successful use prior to that was in 1971 under PresidentRichard Nixon.

Retail Pressure

The National Retail Federation and Florida Governor Rick Scotthave urged Obama to use the law to avoid an eastern port shutdownthat they say would cripple an already weak economy.

“The threat to national health and safety that would result frommass closure of the ports cannot be overstated,” Scott wrote in aDec. 20 letter to Obama. “The Taft-Hartley Act provides youradministration with tools that can help avoid this threat.”

Even as pressure for action mounts, Obama may hesitate toundermine the union's bargaining power, Bradford Livingston, apartner at Seyfarth Shaw LLP, said in an interview fromChicago.

Labor unions “continue to be one of the bigger donors of theDemocratic Party,” Livingston said in a phone interview. “As thetop Democrat, even though he may not be re-elected, he's going towant to be a friend to organized labor for the next fouryears.”

Calls from the Retail Federation for presidential interventionduring an eight-day strike last month at the Port of Los Angelesand adjacent Port of Long Beach went unheeded. A strike at EastCoast and Gulf Coast ports would need to last at least as long orlonger before Obama steps in, according to the Labor RelationsInstitute's Wilson.

“The president intervening is a big deal,” he said in a phoneinterview. “At the end of the day, the way these situations aresupposed to work out is the parties inflict whatever pain they canon each other and then they reach a deal.”

Still, with the fiscal cliff of more than $600 billion inspending cuts and tax increases looming at the end of the year, thepresident won't be able to linger on the sidelines, said JockO'Connell, international trade adviser at Los Angeles-basedconsultant Beacon Economics LLC.

“There's always the possibility that the mediators will lead therespective parties to come to a solution before the strike,”O'Connell said in a phone interview. “After that, then the clockstarts ticking. The precedent in this case is about a 10-day clockbefore pressure on the White House to invoke Taft-Hartley startsbecoming irresistible.”

Bloomberg News

Copyright 2018 Bloomberg. All rightsreserved. This material may not be published, broadcast, rewritten,or redistributed.