THE US should launch a publicly funded container line to reduce its reliance on foreign carriers, a new report has suggested.
Authored by Open Markets Institute’s transportation policy analyst Arnav Rao, Creating a Publicly Accountable Ocean Supply Chain claims US importers and exporters are too reliant on a predominantly foreign-flagged container service.
The alliances between major container lines, which Rao described as “cartels”, has granted lines “so much market power that they frequently engage in abusive behaviour towards shippers”.
US shippers, as a result, “lack fair and open access to shipping services and face unpredictable pricing”, the report said.
Importantly, Rao argued, these carriers are foreign-owned and use vessels that are, for the most part, not flagged in the US.
This increases the risk that US shippers could easily be “cut off from global markets”.
Rao highlighted how many US-based carrier lines have been consolidated into the big foreign carriers. US lines such as Sea-Land and American President Lines have since been absorbed into the likes of Maersk and CMA CGM respectively (albeit via Singapore’s Neptune Orient Lines in the latter’s case).
“Although some foreign carriers have maintained US subsidiaries, they are still subject to extensive control by their foreign parents,” the report said.
“This reliance on foreign shipping restricts the capacity available to mount a US response to an emergency.
“Furthermore, the high concentration of foreign ownership would allow other countries to fracture US military supply lines.”
To counter this perceived reliance on foreign carriers, Rao argued that the US Maritime Administration should purchase vessels from US shipyards and create a publicly funded container line, using US seafarers for US importers and exporters.
However, Xeneta chief analyst, Peter Sand, told Lloyd’s List that creating a public shipping carrier “won’t solve any problem”.
“Nor would it be able to serve US importers and exporters to a meaningful extent, if we compare to the current offering in the container shipping market by incumbent carriers and alliances,” he said.
To compete with any of the five biggest container lines in the world, the US public carrier would need a fleet capacity of at least 2m teu, which would likely mean purchasing more than 100 container vessels.
As far as Rao’s assessment that foreign-controlled carriers make it harder for the US to respond to emergencies, Sand said the US had been able to respond to emergencies “fairly well” in the past couple of decades.
Carrier alliances are already highly scrutinised by competition authorities around the world, Sand said. This includes the US’ Federal Maritime Commission.
“It’s how the industry operates — you may like it or not, but it does offer a better product to shippers — working under the alliance structures, than without.”
That being said, it’s always important to question the status quo, Sand stressed, including the way container shipping operates.
US exporters have had a tough time since the Covid-19 pandemic, he said. But more than just Rao’s proposal of a public container liner would be needed to turn their fortunes around, he argued.
