Storm the Bastille
The September 2011 MARAD report, “Comparison of U.S. and Foreign-Flag Operating Costs,” was not only a waste of precious dollars but filled with “analysis-paralysis” comparisons and meaningless data the Maritime Administration has had for decades. More importantly, the report is simply a regurgitation of information already in the hands of the professionals at MarAd. The fact is, in order to participate in the Maritime Security Program (MSP) or Cargo Preference, U.S. flag operators are required to submit their operating costs to the agency annually.
The report by PriceWaterhouse Coopers (PwC) spends significant time explaining why U.S. operators are not as cheap as their foreign counterparts. To do so, it compares operating costs such as ‘Stores and Lubes’ (“not evident why U.S. operators cost more”); ‘Maintenance and Repair’ (PwC says “significantly higher U.S. crew costs tend to diminish the importance and impact of M&R on U.S-flag vessels”); ‘Insurance Costs’ (U.S.-flag operators’ insurance costs are roughly 1.5% higher, and bulkers and Ro/Ro vessels 2.1% higher); ‘Overhead Costs’ (“overhead costs of U.S. flags are 1.7 times higher than foreign flags and requires further research”); ‘Costs Variation’ (“the reason ships register under the U.S. flag is due to MSP payments of $3.1 million and the availability of cargoes”), and ‘Conclusion’ (U.S.-flag operators in foreign trade are 2.7 times more expensive than foreign equivalents).
The report goes on to say that U.S. crews cost more because foreign operators can hire the cheapest crew available. Additionally, “Citizen Crew Requirements” in the U.S. result in “higher manning requirements, higher wages and higher benefits compared to foreign registries.” And “the standard of living in the U.S. and higher social benefits, including mariner training/education and union fees also contribute to higher costs over foreign operations.” Moreover, “U.S. crewing costs were 5.3 times higher than foreign-flagged vessels in 2010. And “U.S. crewing accounted for about 68% of total U.S.-flag operations while foreign crew costs represented 35 percent of foreign-flag costs.” U.S. carriers rejected “a secondary registry like Denmark, Germany and Norway did in the 1980s in order to compete with open registries.”
“Off With Their Heads”
The ‘report’ has brought nothing new to light, and it has taken a year and thousands of dollars to produce. The non-competitiveness of the U.S. Merchant Marine in foreign trade is the result of congressional complacency toward the maritime sector over many decades and foreign shipping agendas being pushed on the Hill by lobbyists. While laissez-faire government policies have dominated U.S. maritime affairs since the 1980s, all other modes of surface transportation have received robust subsidies, bailouts and infrastructure funding. For DOT and MARAD to produce a report of this nature, which recommends the U.S. Coast Guard allow third-world mariner standards to become the norm in the U.S. maritime industry, is not only disingenuous but demonstrates a lack of leadership.
As the U.S. Armed Forces expedition in the Middle East ends, future prospects of transporting military cargoes by the U.S. Merchant Marine will certainly be limited. However, with that said, there are still tremendous amounts of cargo volumes available for transport by the U.S. Merchant Marine in U.S. Food Aid programs and cargo preference from the Ex-Im Bank and other federal agencies including the Department of Energy.
This nation hands out over $170 billion annually to aid U.S. corporations in their international export endeavors and gives them another $1.3 billion in tax breaks on foreign revenues earned. The agricultural industry gets $790 million in subsidies for foreign sales, and another $300 million goes to assist foreign purchasers of U.S. agricultural products. U.S. arms manufacturers get $10 billion in annual subsidies just for foreign sales programs. And a final point on the Ex-Im Bank: It currently has a $100 billion lending cap, but there is a push on Capitol Hill to increase its cap to $200 billion by 2015.
So with billions of dollars ‘given’ each year to U.S. corporations and agricultural and munitions industries to trade in international markets, it is ludicrous and demeaning for Congress, DOT and MARAD to insist that U.S mariners lower their training and living standards. The federal government should be providing tax incentives and subsidies to U.S.-flag operators like it does for the aforementioned industries and assist the flag lines of this nation to prosper and become the envy and professional standard of the world. It is time to rebuild America and create jobs. It is not time to become a third-world maritime nation like Senator McCain and his contingent would make us.
It is time for David Matsuda to be removed as the Maritime Administrator because this agency needs a maritime executive with years of experience to be its leader. There are no secrets in this industry; the agency also needs a deputy administrator, and a deputy associate administrator needs to be appointed immediately to oversee the cargo preference department.
It is imperative that DOT Secretary LaHood include the maritime sector as a vital component of the surface transportation budget. For the maritime sector to get ZERO support beyond MSP needs to end now. The United States has the largest economy in the world, and for its flag line to be treated as a third-world carrier is unconscionable. This was once the greatest maritime nation on the planet, and there is no reason the current course to futility cannot be corrected with the right leadership.
The opinions expressed herein are the author's and not necessarily those of The Maritime Executive.