Saturday, September 3, 2016

Hanjin "Crisis" and Jones Act - An Aside

Another reason not to worry about the Hanjin crisis. This is last May.  Since all the major lines already linked up, does it sound like they will let the freight sit and rot?  They may have to move things up a bit schedule wise, but here it is.
May 13th, 2016, Seoul, Korea – Hanjin, Hapag-Lloyd, “K”Line, Mitsui O.S.K. Lines, Nippon Yusen Kaisha and Yang Ming have agreed to create a new alliance covering all East-West trade lanes namely, Asia-Europe/ Mediterranean, Asia-North America West Coast, Asia-North America East Coast, Transatlantic and Asia-Middle East / Persian Gulf / Red Sea.  A binding agreement has been concluded by all partners and “THE Alliance” is scheduled to begin operation in April 2017 subject to approval of all relevant regulatory authorities. The initial term of the cooperation will be five years.
Now, that "Alliance" mentioned.  What does that suggest to you?  They used to be call "conferences" and in essence they were created to fix prices.  That's right, anti-trust.  Illegal in USA.  But no more USA shipping.  (I know, back in the day they got an anti-trust pass).  But anyway, what can we say when we no longer play?  With Hanjin capacity out, those foreign companies can fix prices higher.

By the way, note there is no longer any USA steamship line. SeaLand, the last to go, was bought out by Maersk.  Now USA is 100% dependent on foreign shippers. What happened to SeaLand?  American President Lines, with its 1960a super cool office tower in San Francisco? United States Lines?  Lykes Lines? All gone?  How come?  Protectionism.  In this case the Jones Act.
The intention of Congress to ensure a vibrant United States maritime industry is stated in the preamble to the Merchant Marine Act of 1920.[5
The rich and powerful crybaby millionaires, with names like Roosevelt, wanted to get rich without competition. What specifically, inter alia, did they get?
Section 27 of the Jones Act deals with cabotage and requires that all goods transported by water between U.S. ports be carried on U.S.-flag ships, constructed in the United States, owned by U.S. citizens, and crewed by U.S. citizens and U.S. permanent residents.[2] 
Not to mention massive subsidies by taxpayers, and what happened to them all?  Gone.  The millionaires took the profits, the taxpayers took the losses.  By reserving it all to themselves, we ended up with nothing.  And price fixing.

From the 1820s to 1920s private individuals could start up ocean freight lines and get rich, back when there were no subsidies, regulations, protections, acts of congress.  We had more separation of business and state.  Then we got subsidies, regulations, protections, acts of congress and now we have nothing but foreign vessels calling on our ports and price fixing.

Trump is right to decry NAFTA and TTiP and TPP etc.  Those have nothing to do with free trade.  But protectionism like the Jones Act has the opposite effect.  So I hope we have none of that.

Eliminate the Jones Act and let anyone sail between our ports, unilaterally welcoming world trade. Since Hanjin ships will come up at auction prices, let some USA billionaire get them marked to market value and then engage in free trade shipping.  No subsidies, no protections, no regulations outside of lex mercatoria.  Not only will shipping costs drop (no more price fixing) elegant travel from LA to Seattle on US flagged vessels will resume:  "Champagne and fancy dress, we won't set sail for less"

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