Letting the big tankers compete

Should some 15 large, US-registered, oceangoing tankers built with federal subsidies be allowed to compete for the domestic shipping trade in American coastal waters? That question is now being debated in Washington, among shipping firms, and in a number of seaport communities. The issue is not inconsequential, for it involves making a major change in United States maritime policy. Currently domestic shipping is limited to smaller US-registered ships built without federal subsidies. The 15 large tankers are now in limbo because the international shipping business has slumped, in part from the recession.

Back in January Drew Lewis, then secretary of transportation, proposed a federal rule that would allow the large tankers to compete for the domestic trade. Under the tentative regulation (which was published in the Federal Register), the tanker owners would reimburse the government for the subsidies used to build their ships. The department's argument is that such a reimbursement would help reduce federal deficits, while the added competition for the coastal trade - particularly involving the Alaskan oil now carried by small domestic ships - would lower freight costs. Domestic coastal carriers, their congressional allies, and many officials in the US Maritime Administration (which is part of DOT) oppose such a rule on grounds that it would force owners of smaller vessels out of business.

The contest is thus between owners of US-registered ships. The 15 large tankers are modern and efficient. Some of the 50 or so ships in the Alaska trade are older and less efficient, with larger crews. Hence it is possible that some crew members would be thrown out of work if shipping were taken over by the larger tankers.

The final date for comment on the proposed rule is May 2. Owners of smaller ships thus have an opportunity to show why it would be unfair to let the new rule take effect. But, barring a strong case on their part, it would seem reasonable to open up the domestic shipping lanes to the large ships. The maritime industry has too long been overprotected and overregulated. The best policy should be one that encourages competition, reduces transportation costs, and promotes efficiency. And if the federal deficit is lowered a little in the process, that's a happy bonus for US taxpayers.

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