June 17, 2022

In a lesson for the ages about political grandstanding, Rep. John Garamendi said, “Nine multinational ocean shipping companies formed three consortiums to raise prices on American businesses and consumers by over 1,000% on goods coming from Asia,” as he and other members of the Swamp proudly passed the Ocean Shipping Reform Act of 2022, which former NIT-League president Ed Emmett has rightly called “a cure that’s worse than the disease.”

‘); googletag.cmd.push(function () { googletag.display(‘div-gpt-ad-1609268089992-0’); }); }

Never mind that the containership lines have actually operated these alliances, known as Vessel Sharing Agreements, for over a generation, strictly for the benefit of the consumer. The accusatory term of “consortium” is utterly unfounded.

Never mind that, in boom times and recessions alike, the containership lines have been delivering most of their services to American businesses – especially exporters – at a massive financial loss, with the government’s blessing and with the market’s appreciation, until the past two years.

But now that “supply chain disruption” is on the tip of everyone’s tongue, the nation’s politicians looked around for someone to blame, and predictably – with the Blamer-in-Chief’s blessing, of course – settled on the largely foreign-based shipping lines as the target du jour.

‘); googletag.cmd.push(function () { googletag.display(‘div-gpt-ad-1609270365559-0’); }); }

A few facts:

In the interest of transportation efficiency, for the benefit of shippers (importers and exporters), we have granted containership lines a degree of antitrust immunity for generations. This allows the container lines to take full advantage of the flexibility of the easy transferability of generic shipping containers, sharing ships and rail lines, so they could offer stable, dependable weekly service in thousands of port-paired shipping lanes across the globe.

This was done for the market’s benefit, not for the lines’.

Politicians and economists talk about the trade deficit all the time. In sheer dollars, we (the USA) import more than we export. What they don’t talk about, however, is that the imbalance is not modally even.  That means… we may import far more from one country than from another, export far more to one country than to another. And what we export takes up much different volumes, in different directions, in different shipping equipment.

We export more than we import in great big bulk vessels.  We import a lot more than we export in ocean containers. And what we do export in containers takes up much less space than what we import, being more valuable.

This causes what the industry calls an “equipment imbalance.”  The shipping lines aren’t really in the business of moving freight anymore; to best serve the market, they are in the business of moving equipment – the 20′, 40′, and 45′ containers in which most cargo is shipped.