What Trump Could Mean to Maritime Industry?


How Donald Trump’s maritime transport agenda might look

By Olaf Merk


Whatever one thinks of the man, Donald Trump has become the president.  What could this mean for maritime transport, and how could Trump use maritime transport to realise his campaign promises?

Trump’s campaign slogan is his economic agenda: make America great again.  Now, there are various ways in which this could be understood.  Based on Trump’s statements it seems to mean creating value added and jobs in the United States.  He supports global trade but not under someone else’s conditions: no trade at the cost of American firms or jobs – and this has priority over the benefits that American consumers might have from trade.  Hence his wish to renegotiate or ‘break’ NAFTA, oppose TTIP and impose tariff walls against certain countries.  And this is where his economic agenda is connected to maritime transport.

The economic model of global value chains, so the model of very advanced outsourcing, the model that Trump does not like, is made possible by very low maritime transport costs.  Very low because shipping is efficient, but also because it is subsidised in all kinds of ways.  Part of these subsidies – e.g. for supporting ailing shipbuilding and shipping industries – are paid by Chinese and Korean taxpayers.  But – more importantly for Trump – a considerable part of it is shouldered by American citizens, in particular for investments in ports that are the gateways for global trade.  And here the USA – world’s first economic power but only the eighth largest shipping nation – is at the mercy of the foreign shipping companies that rule the oceans and coasts.

Two examples illustrate this.  First, mega-ships.  No American firm or consumer asked for this or has any benefit from it, yet shipping companies expect American ports to be mega-ship ready, to heighten bridges, to expand ports, strengthen quay walls and deepen access channels.  Second, the speed of port operations.  Shipping companies sail slower than before, yet want ports to be faster – so fast that they pressure for automation.  Now, automation of port terminals in the current sluggish economic conditions means job losses.

Considering this, what could be the agenda of a president that wants to be the record job creator, that does not want to pay for the excesses of global maritime trade, that wants to make America great again? Four possible ways.

1. Reduce the power concentration of shipping

Lessening shipping’s iron grip on ports could be realised by giving a clear mandate to the Federal Maritime Commission (FMC) to be much stricter vis-à-vis shipping companies and their alliances – possibly to break up alliances and conglomerates.  Only the US could realistically do this considering that both the EU and China have large ambitions for their shipping ‘champions’.

2. Make shipping pay for infrastructure

The US already has the vehicle for this: the Harbor Maintenance Fee (HMF) that ships have to pay when entering a US port.  The flaw of the current fee is that it is not related to the actual port maintenance costs that a ship generates.  “Making them pay” could mean: ships with deeper drafts pay more, possibly also: dirtier ships pay more.

3. Increase the price of global maritime trade

An alternative to cancelling trade agreements or installing new trade tariffs, could be to increase the costs of global maritime transport, for example via a carbon price for shipping, which would have a similar effect of increasing the costs of outsourcing, but has the additional advantage that it could reduce carbon emissions.  Trump is an outspoken climate change skeptic, but would surely not mind if others rather than Americans do the mitigation.

4. Reduce subsidies to shipping

US firms and consumers pay some sort of a hidden subsidy to the domestic shipping and shipbuilding sector, via the Jones Act that stipulates that ships in coastal trade must be US-built, US-flagged and US-crewed.  Although this protects jobs, it also means higher transport prices than if the domestic sector would have been subject to international competition – and it has also kept US shipbuilding and shipping companies unprepared for expansion in foreign markets.  If making America great again also implies the re-emergence of the US as a big shipping nation, then reform of the Jones Act might help to achieve this ambition.

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Source: Shipping Today