Congressman James Oberstar introduced legislation that would deregulate the process by which carriers set shipping rates and could potentially dramatically reduce wages for longshore workers. Oberstar lost his House seat in the November 2 election.
A potentially devastating piece of legislation that could lower wages for longshore workers was introduced in Congress shortly before the election recess. The legislation, co-authored by Jim Oberstar (D-Minn.), chairman of the House Committee on Transportation and Infrastructure and Elijah Cummings (D-Md.), chair of the Subcommittee on Coast Guard and Maritime Transportation, would deregulate the process by which carriers set shipping rates and significantly alter the way the industry does business. Most significantly, the Shipping Reform Act of 2010 (H.R. 6167) would repeal carrier’s antitrust immunity with regard to rate discussions that has been in place since 1916. The bill’s opponents say the changes would create significant price volatility in shipping rates, lead to greater consolidation of the shipping industry and cause downward pressure on wages for longshore and maritime workers. The bill would still allow vessel sharing agreements (VSA’s) but would impose significant restrictions on them that carriers say would render them so unworkable that they would no longer effectively function. The bill is being promoted as “free market” reform despite the fact that the bill would dramatically expand the power of the Federal Maritime Commission (FMC) over the liner shipping industry and create and burdensome reporting requirements for carriers.
Backlash against service interruptions
The bill came about from service complaints from the first half of 2010 as carriers were emerging from the effects of the recession that had a devastating impact on the ocean shipping industry in 2009. Opponents of the bill point out, however, that the legislation does nothing to address the economic conditions that created those problems. The recession devastated many carriers, driving some to the brink of bankruptcy. Carriers were forced to reduce service to adjust to reduced cargo levels. They note that those service issues have corrected themselves now that the economy and the shipping industry have partially recovered.
Legislation likely “dead on arrival” this year
Both supporters and detractors of the bill agree that Congress will not take any action on the legislation any time soon. It was introduced one week before the House recessed for campaign season and no movement is expected in the “lame duck” session after the election, which means it would need to be re-introduced after the new Congress is seated. The future of the legislation is also clouded by the fact that Oberstar lost his re-election bid in November. Nevertheless, many carriers as well as organized labor are raising awareness about the potential negative consequences this legislation would have on the industry.
“We are watching this legislation very carefully because of its potential to undermine wages and working condition for longshore workers. We urge all of our members to pay close attention to this as well,” said ILWU Coast Committeeman, Leal Sundet.
The World Shipping Council, a trade organization representing 29 carriers that handle most of the world’s ocean liner cargo, issued a statement opposing the bill, saying that it would lower service quality and increase costs for American importers and exporters:
“The industry’s operating agreements improve service and increase the number of competitive options on any given trade lane. The bill would disrupt current services and operations, and it would make cooperative arrangements impractical in the future. We can identify no benefit and many disadvantages for American commerce arising from such a proposal. If enacted, the bill would create an ocean transportation system that would make U.S. trades less efficient and more costly for carriers, resulting in less choice, less capacity, lower service quality, and higher costs for U.S. exporters and importers.”
“The Department of Homeland Security has said that the ocean liner shipping industry is a part of America’s critical infrastructure so the system needs to work for both shippers and carriers alike,” Christopher L. Koch, President and CEO, World Shipping Council said in a recent online debate hosted by the Journal of Commerce (www.joc.com). Koch also posed some important questions about the potential impacts of the legislation. While most of the arguments for ending rate discussion immunity are grounded in abstract principles and economic theory, Koch asked what the real world impact of the changes would be.
“Most observers believe that it is likely that if you end the rate discussions, there will be more rate volatility. Is that a good thing?” Koch asked. “Is the assumption of eliminating rate discussion immunity that this is going produce significantly lower carrier revenues and if so with what effect? There [would be] no choice but for carriers to cut costs.”
In addition to the questions posed by Koch, there are other important questions that could also be asked:
- What would be the impact of the legislation of the wages of longshore and maritime workers? Will it promote a “race to the bottom” in worker wages and benefits? Will workers be forced to do the same amount of work but with a reduced work force?
- What would be the impact on health, safety and other working conditions for longshore and maritime workers? Would workers be at higher risk for occupational injury or illness? Would it make our ports less safe?
‘Free market’ failed workers in trucking industry
Michael Belzer, an economics professor at Wayne State University and a former Teamster long-haul tank truck driver, said that deregulation of the trucking industry in the 1980s had disastrous consequences for workers and for public safety. Belzer wrote Sweatshops on Wheels: Winners and Losers in Trucking Deregulation, which details the negative consequences deregulation had on workers. Deregulation lowered ship- ping costs, which in turn led to a considerable decline in wages and working conditions for truck drivers, Belzer said.
In a recent interview with The Dispatcher, Belzer said the term “deregulation” is really a misnomer and that instead, one kind of regulatory regime is being traded for another. “This is really all about shifting from institutional regulation—like collective bargaining—to market regulation,” Belzer said. “And when markets regulate, there are winners and losers. The people with the power win and the people without the power lose.”
Belzer added that in addition to lower wages for workers in the ship- ping industry, another consequence of the legislation would be an increased loss of manufacturing jobs in the United States. “The purpose of this bill is to get liner fleets to compete with one another more aggressively and use that to reduce the costs of the transportation of freight. The cost of freight of transportation is already low—which has helped to facilitate the exporting of American jobs to Asia,” Belzer said. And while some may argue that that the Shipping Reform Act would aid US exporters by reducing transportation costs, Belzer said the legislation would equally benefit importers. “The legislation will lower costs for exporters and importers. There is no way this bill advantages exporters; it will make it cheaper for more industries to move their manufacturing operations to China,” Belzer said.