U.S. Ocean Shipping Policy: Going against the Tide

Abstract

The ocean shipping industry remains the odd man out in an era of deregulation and decreased protectionism for the economy in general and transportation industries in particular. In this article, we discuss current U.S. policies toward ocean shipping and analyze their rationales and consequences. A long-standing combination of operating and construction subsidies, antitrust immunity, and reserved cargo has shielded the U.S. merchant marine from market forces. This protection has meant higher costs for shipping goods in the coastal trades and higher costs for shipping government-impelled cargoes. Government-enforced cartel agreements maintain rates above market levels. These policies are responsible, at least in part, for the steady decline of the U.S. fleet. The rationale for these policies is based on faulty economic reasoning. Even the apparently strongest rationale, the need for the U.S. merchant marine in the event of war, does not provide support for current policies. We conclude that a change in course is imperative. We recommend an end to economic regulation, cargo preference, and operating and construction subsidies. The result would be a more efficient merchant marine.