Tuesday, January 2, 2007

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How protectionism causes bad traffic

My Fletcher colleague John Curtis Perry, with Scott Borgerson and Rockford Weitz, have an op-ed in today's New York Times that explores America's decline as a maritime shipping nation. Apparently, it has something to do with protectionism:

In 1948, more than a third of the world’s merchant fleet flew the stars and stripes; today that figure is down to 2 percent. Half a century ago, America built more ships than any other nation, and New York City could boast that it was the world’s busiest seaport. Sliding from the top since the 1980s, New York now barely ranks among the top 20.

The only American port now on the top-10 list is Los Angeles-Long Beach, an indication of how much maritime trade has shifted from the North Atlantic to the North Pacific.

A major factor in the decline of American shipping has been an antiquated law that prevents American coastal shippers from buying ships made in other countries. By amending this law and, at the same time, encouraging the development of domestic coastal shipping, Congress could help restore America’s status as a great and proud maritime nation....

Shipping has always been the most economically efficient way to carry goods from place to place; it requires no investment in highways or rails, and thanks to the relatively frictionless ease with which ships move across water, fuel costs per ton are low. The arrival of containerized shipping pushed transport costs even lower, swelling world trade and expanding global wealth....

The export-driven economies of Pacific Asia built much of their enormous success upon the new maritime technologies. The United States did not. The Merchant Marine Acts of the 1920s and ’30s are one reason why.

Intended to protect the domestic shipbuilding industry, the acts decreed that the only ships allowed to call on two or more consecutive American ports would be those built in the United States, owned by American companies, flying the American flag and operated by American crews.

At the time, the United States still had a large merchant marine. But the acts’ restrictions handicapped coastal shipping within American waters, opening the way for the growth of the trucking and freight-rail industries.

To revive the maritime trade, Congress should give shipping companies as much choice in buying ships as their land-based rivals have when buying trucks and train cars.

Freed from the restraints of the Merchant Marine Acts, commercial shippers could not only begin to resume their position in global trade but also handle much more of the freight that moves within our borders. Before railroads and highways were developed, a network of water transportation routes connected America’s port cities and towns. Today coastal shipping handles only 2 percent of domestic freight, even though coastal counties hold more than half of the nation’s population.

The trucks that carry nearly a third of our cargo clog the highways. That is one reason why Americans now lose at least 3.7 billion hours and 2.3 billion gallons of fuel each year sitting in traffic. Ships could take on a larger share of this freight — and even some of the passengers now traveling by highway and rail — and carry it at lower cost....

Americans are rightfully concerned about security, but part of protecting the nation is generating a strong economy. Revitalized coastal shipping could shorten our morning commutes as it begins to rejuvenate America’s wider maritime economy.

UPDATE: Tyler Cowen unearths this great Walt Whitman quote about protectionism:
The profits of "protection" go altogether to a few score select persons--who, by favors of Congress, State legislatures, the banks, and other special advantages, are forming a vulgar aristocracy full as bad as anything in the British and European castes, of blood, or the dynasties there of the past

posted by Dan on 01.02.07 at 08:38 AM




Comments:

This is a joke, right? It is not immigration-driven population growth causing traffic jams in LA , it is the lack of foreign steamers plying our waters. ROTL. The dead giveaway, of course, is the trade advice from that giant of economic thought, Walt Whitman.

posted by: Mitchell Young on 01.02.07 at 08:38 AM [permalink]



Ah, the US merchant marine was in decline from about the Civil War on. Also, I'm not clear on the link between coastal shipping from one US port to another and trans Atlantic or trans Pacific trade. Finally, since Liberia and Panama and the Bahamas bascially exist to provide 'flags of convience' how would repealing a couple of laws end those countries 'comparative advantage?'

posted by: msj on 01.02.07 at 08:38 AM [permalink]



msj:

Indeed, I'm not aware of similar Canadian regulations for international shipping, and they have had a decline as well. Former PM Paul Martin had a political issue with his family-owned ships being flagged Liberian or something.

posted by: John Thacker on 01.02.07 at 08:38 AM [permalink]



thomas e reillyjr 8877 pickwick dr. indy in 46260
all workers at iu bloomington will be at @2.oo
a hours and no health insurance at all all poor
workers in the state of indiana will do the same
cover up in pay why their no poor people or
workers or campus people who are poor here at
all in bloomiongton indiana 47401 i do not see
then or talk too them at all

posted by: golab on 01.02.07 at 08:38 AM [permalink]



thomas e reillyjr 8877 pickwick dr. indy in 46260
all workers at iu bloomington will be at @2.oo
a hours and no health insurance at all all poor
workers in the state of indiana will do the same
cover up in pay why their no poor people or
workers or campus people who are poor here at
all in bloomiongton indiana 47401 i do not see
then or talk too them at all

posted by: golab on 01.02.07 at 08:38 AM [permalink]



thomas e reillyjr 8877 pickwick dr. indy in 46260
all workers at iu bloomington will be at @2.oo
a hours and no health insurance at all all poor
workers in the state of indiana will do the same
cover up in pay why their no poor people or
workers or campus people who are poor here at
all in bloomiongton indiana 47401 i do not see
then or talk too them at all

posted by: golab on 01.02.07 at 08:38 AM [permalink]



Nice Whitman quote, but your use is rather anachronistic.

19th Century American protectionism was a bedrock component of Republicanism and was the instrument of industrialists (labor was only struggling to establish real bargaining power in those days) in fattening their profit margins and driving growth. It was an "aggressive" top-down protectionist impulse.

The decidely un-Republican protectionism in the air today is much more a defensive bottom-up reaction to the rapid shift of labor intensive industry (whether manufacturing or services) to "low cost countries" which may or may not have similar labor or environmental constraints.

Would poorly designed protectionist initiatives undertaken in the present prove self-defeating? Quite likely. But it is unfair to conflate anxiety over steady erosion in American competitiveness with rent-seeking 19th century policies orchestrated from the top.

posted by: STS on 01.02.07 at 08:38 AM [permalink]



While I don't necessarily disagree with their policy position, I've the impression that their history is skewed to their benefit--to overdramatize, American shipping was swept from the seas by the Civil War and never really recovered. For example, in 1859, 7,806 ships entered US ports, 5,266 were US flag. In 1869, 8,750 ships entered, 3,403 were US flag. By 1900, well before the Merchant Marine Acts were passed only 6,136 of the 28,163 total were US flagged.

As for more recent history, in 1948 the world's merchant marine was US built because the U-boats had sunk the British etc. ships and Henry Kaiser built his ships very very fast.

I suspect the current rules are the result of the coalition of US shipbuilders, US politicians (like Senator Lott) and US unions. It's the same sort of setup that ensures that we ship US grain to starving countries rather than buying grain regionally.

posted by: Bill Harshaw on 01.02.07 at 08:38 AM [permalink]



Dan -- I wouldn't want to defend the jones act, but I rather doubt the decline of new york as a port for global trade is a product of the jones act per se; geography may have more to do with this than anything else. The US population is dispersed and spread along two coasts that are a long ways apart as the ship sails but tied together by an effective internal transportation system (railways. etc). You ship goods from one end of eurasia (say korea) to the other (france and uk) by sea, but you don't necessarily ship goods by sea from SF to NYC, and that isn't simply a product of the jones act/ restrictions on maritime transit. geography/ the canal/ good internal transit options play a role. The US also is a destination point geographically for the transatlantic and transpacific trade and not obvious a good hub for any global shipping --

finally, the US just doesn't make all that much stuff these days -- the hub of manufacturing and shipping is in east asia. and the US will never by the logical hub for managing intra-asian sea based shipping of electronics components ..

posted by: bsetser on 01.02.07 at 08:38 AM [permalink]



"...Before railroads and highways were developed, a network of water transportation routes connected America’s port cities and towns...."

Internal waterways such as the Ohio and the Mississippi handle a great deal of freight but are limited by simple geography, only a tiny number of businesses are adjacent to water. Trucks and trains will continue to carry the rest.

I suppose we could reopen the barge canals and rehitch the mule trains - gee haw!

As far as ocean-bound freight, as long as I can remember freighters have been registered in places such as Liberia and Panama - something to do with maritime liability? Maybe someone here knows - I'm not certain.

posted by: save_the_rustbelt on 01.02.07 at 08:38 AM [permalink]



The port of New York, and Bayonne and all that, shipped the production of what is now the Rust Belt, so it's not too surprisong that traffic is off.

Mitchell is right about immigrants clogging the freeways in Southern California - immigrants from the Midwest. But it seems to me that the truck traffic clogging the roads is going inland rather than coastwise, so maybe we should be talking about problems with our rail system instead.

There is a small amount of US shipping to and from China and Japan to the Puget Sound ports, but I don't see how to increase this just by allowing the lines to buy foreign vessels - they would need foreign crews to compete on price, and with foreign vessels and foreign crews, what would be American about those shipping lines?

posted by: Jim on 01.02.07 at 08:38 AM [permalink]



""In 1948, more than a third of the world’s merchant fleet flew the stars and stripes; today that figure is down to 2 percent. Half a century ago, America built more ships than any other nation""

The "Realist" position which wishes to return us to those glory days is a two-step process:

1. End recognition of "Flags of Convenience" like Liberia and Panama, and

2. Instigate a world war and destroy all competitors ships and ports.

posted by: Karl on 01.02.07 at 08:38 AM [permalink]






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