CMA Editor Continues Editorial Series on US Shipping
Don Frost, author of the May editorial "The Fall of U.S. International Shipping 1960-1990" has continued his piece in the June issue of the Connecticut Maritime Association newsletter, posted as follows.
The Fall of U.S. Shipping - Is there a solution?
By Donald B. Frost
None of the anti-competitive protectionist policies outlined last month (The Fall of U.S. International Shipping – 1960- 1990 pp 8-12) work in today’s world. In Economics 101 you learned that British Economist David Ricardo’s 1817 treatise (Principals of Political Economy and Taxation) set forth the reasoning (*) why international free trade among nations is beneficial to both nations. Nowhere in his model is there mention of transportation or costs. He used as a model the trading of British woolens to Portugal in return for Portuguese wine to England using the building blocks of Land, Labor and Capital and the concept of “comparative advantage”.
In the 1990s Harvard Business School Professor Michael Porter suggested that in the age of globalization “competitive advantage” replaces “comparable (or comparative) advantage”. My hypothesis is that in the 21st Century Transportation and Logistics are critical competitive advantages.
Therefore, the solution to how to increase manufacturing jobs in the United States must include abandoning protectionism in all of its forms. The idea that ship building policies are only national issues and U.S. shipping is exceptional relative to other global businesses must change. The Build American part of the Jones Act of 1920, not only taxes ourselves but serve as an economic burden that results in exporting US manufacturing and process industry jobs. No U.S. seafarer jobs are created by raising shipbuilding costs so high as to force shippers to move their goods by rail or highway, or sell them abroad to avoid high U.S. shipping rates, or buy foreign made materials or goods because the delivered cost will be cheaper than if sourced domestically and transported aboard U.S. built ships.
I am told that Alaska was the first to recognize the costs of U.S. built ships and petitioned the Supreme Court in 1922 to declare the Build American part of the 1920 Merchant Marine Act unconstitutional under the commerce clause of the U.S. Constitution. The Court refused to hear the case because the clause refers to commerce among the states and Alaska was not a state at that time.
I hope MARAD’s National Maritime Strategy takes a fresh look at “competitive advantage”. Once again, keep in mind Einstein’s definition of insanity: “Doing the same experiment using the same data over and over again and expecting different outcomes.”
Footnotes:
(*) – Ricardo concluded that trade between countries was influenced by relative costs of production and differences in internal price structures that could maximize the “comparative advantages” of the trading countries.
(**) – In addition to Andrew Gibson’s book, “The Abandoned Ocean: A History of United States Maritime Policy, I recommend a paper by Robert Lowry and Jennifer Zeien “U.S. Maritime Assistance in Perspective” in the Society of Naval Architects and Marine Engineer’s magazine Marine Technology Vol. 25, No.3, July 1988, pp. 172- 185. Figure 2 is especially informative.
