Sea History 084 - Spring 1998

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From a Labor Perspective by Henry F. Trutneff, PhD


here are a numbe r of ways to look at the bu siness of moving goods across the surface of the g lo be. Malcolm McLean , the fath e r of containe ri zation who revolutioni zed the shipping business, has described frei g ht as an ex pense added to the cost of goods. David Howard , the editor of American Shipper, has noted that the g lobal shipping industry is driven today by the search for cheap labor, adding, "Ocean fre ig ht is an ex pe nse added to the cost of labo r in some Third World o r deve lo ping country ." For too man y in both bu siness and gove rnment, thi s sums up the thinking about US maritim e poli cy. For the general public , the shortcomin gs of thi s attitude are unclear, and the impac t of maritime policy on their o wn well -be ing is trul y unapprec iated. National Security First, the Ame ri can flag me rchant marine is essential to nation al security and for good reason has been ca ll ed th e Fourth Arm of Defen se. Most Ame ri can s forget that th e Gulf W ar was protracted by de lays in transporting the pe rsonn el and equipm e nt to laun c h Desert Storm. Further, as Hug h M ayberry , national president of the Nav y Leag ue, has asked in Sea Power (May 1996): " Would foreign fl ag ships be avail abl e-at an y pri ce-in a future con flict in which conditi o ns we re not nearly as favorabl e?" He we nt on to point out that US flag me rchantme n in the Gulf War c harged $ 122 pe r short to n, whereas the foreig n fl ag ships used to supplement Ame rican carri e rs charged $174 per short ton- a 40% hi g her rate. Fifteen years ago Todd Shipyards rai sed th e concern that the US was 99 % depende nt upon fore ign ships to bring us the raw material s we need to manufacture our comme rc ial a nd defe nse products. Sh o uld curre nt tre nd s continue, we will be I 00% de pe nde nt upon forei g n ships to bring us the parts to ma ke our tanks, trains and plants run . If this happens, we could become a maritime quadriplegic dependent on the prices and policies of other nations. The Global Economy In Sea History 77 (Sprin g 1996), Dav id O ' Ne il , pres ident of the Soci ety of Naval Architects and Marine En g ineers, pointed o ut that the US is the largest s ingl e na tional m a rk e t for trade th e world has e ve r kno wn and th at our foreign trade is worth one trillion dollars annu a ll y. Thi s equates to nearl y


on e bi II ion ton s of cargo . Maritime Admini stration stati stics reveal that from l 993 through 1995 there was a 22.6% increase in imports. The Trade Deficit Monitor of May 1997 projects that the US trade deficit will reach $220 billion in 1997 , as the US contin ues to import goods and ex port jobs. Curre ntly , with the coll apse of the Southeast Asian economies, Ii ttl e mon ey is left fo r those nati o ns to bu y American exports, whil e in the US the low cost imports become e ven lo we r pri ced and more pl entiful. The bal a nce of trade defi c it becomes a more d ramati c iss ue as the US and the Inte rnati o nal Mon etary F und provide the A sians fund s to reente r the tradin g game- aga in an outpouring of taxpaye r fund s. "Free" Trade In the closing days of the I 04th Congress , the Coastal Competition Act of 1996 (HR 4006) was introduced to allow fore ign-o wned , foreign-built and fore ign-crewed vessels into US domestic trades . It was defea ted but reappeared again in the 105th Congress . Criti cs of the Jones Ac t,* whi c h protects Ame rican shipping in A me rican waters, al so oppose subsidies, cargo prefe rence and selec t fede ral reg ul ation s as protectioni st meas ures and detrimental to the g lo bal econ omy. Preac hing free trade, they maintain that such regulations lead to the ex port of jobs in forestry , steel, coal , ag ri c ulture, and auto and othe r heavy manufacturing. (See Sea History 78.) Ho we ve r, there is little trade that can be call ed "free," and the US cannot be s ing led out as protecti o ni st. Our fri ends in NATO , me mbe rs of the European Union concerned o ve r ex cesses in mari time refl agg in g, have fo und re li ef in the proposals of Neil Kinnock , E U Tran spo rt Co mmi ss ione r, many of whi c h are c urrentl y in prac ti ce, s uch as : ( I) ex te ns ion of tax relief to EU-ow ned but not EU-flagged vesse ls; (2) allow ing membe r states to compe nsate shipo wne rs for the cost ga p be twee n nation al fla g o pe ration s and flag s of con ve ni ence. And the re vised g uidelines w ill allo w gove rnme nts to c hoose be tween exempting shippin g from fis ca l and soc ial c ha rges o r re imburs ing the m. Ho weve r, tota l aid mu st not exceed the total amo unt of taxation and soc ial sec urity contribu ti o ns from the maritime sector. One furthe r aspect of Mr. Kinn ock 's proposal * Th ey are organi zed as the Jones Ac t Refo rm Coaliti on (J A RC) .

will be that Southe rn Europe will be forced to fall in line w ith m aritime reg ulati o ns in Northe rn Europe. Simpl y put, Ne il Kinnock is pressing for worldwide legislation to lure shipping, and w ith it tax revenu e, bac k to E uropean fla gs . In Britain and the Neth e rlands recent leg islation allo ws vessels to fly the national fl ag if onl y the captain is Briti sh or Dutc h. US Manning Costs The cost of Ame ri ca n labor has been blamed fo r the probl e ms of the US merchant marine. But containeri zati o n and increases in ship s ize, speed and pay load coupled w ith ve ry modest c re w cost increases (bare ly 6% over a 12-year period ) ha ve reduced c rew costs by 24%. Meanwhil e, c rew s izes of containe rships in 1982 numbe red 34 o n ships carrying 1200 T E Us (twenty-foot equivalent units). C urre ntly ships pl ying the trade lanes a re carrying 6000 to 7000 TEUs w ith crews of 11to1 5. ln short, certainl y in the containe r trade, cre w costs hav e become a no n-factor. Warre n Le back , fo rmer M a ritime Ad mini stra tor, writin g in the A utumn 1996 Sea History, fo und the wages of US flag me rc hant marine rs to be comparabl e to the wages of the ir counte rparts in other industries . That was pri o r to recent roll -bac k negoti ations. Currently , w ith new ag reements, American seafare rs have fa ll e n well be lo w the ave rage of the ir c ivil service counterpa rts, while ave rage domestic wages are inc reas ing at 4.2 perce nt. The Maritime Security and Competitiveness Act T he passage of the M aritime Sec urity and Competi tive ness Ac t in Nove mbe r 1996 may reduce but will not stop the tide of Ame ri can refl agg ings. Funding mu st be appro pri ated year by year and in many cases the moni es are 30% be lo w present s ubs idy payme nts. Bas icall y, fl agging o ut is maritime o utso urc in g, a nd th e passage of the MS CA will do little to sto p re fl agg ings as lon g as the bottom line a lone di cta tes nati o nal m aritime po li cy. As Ame ri cans watc h o ur trade de fi c its surge and a n entire indu stry lost to othe r nations, o ur Euro pean alli es un de rstand the va lue of th eir me rcha nt fl eets and a re wo rking towa rd a turnaround . W arren Dean of the Journal of Commerce put it thi s way: " What the Jo nes Ac t Reform Coa liti o n is reall y advocatin g is a re pea l of a vari ety of ta x a nd SEA HISTORY 84 , SPRING 199 8