ladies and gentlemen. Thank you for your hospitality and the opportunity
to tell you about what I believe to be a very positive development
for the maritime industry - the establishment of the World Shipping
Shipping Council was recently formed by the international liner
shipping industry in order to establish a permanent and coordinated
voice for ocean carriers that can effectively and professionally
advocate the industry’s position on public policy issues of importance
to the country’s international transportation future .
We hope to
be a respected and constructive voice in transportation policy.
We intend to be an organization that government and other transportation
interests can work with confidently.
industry is in fact a vital, contributing partner in America’s
foreign trade and economic growth.The Council intends to discuss
that partnership and the demands that will be placed on all of
us to successfully serve the forecasted doubling of America’s
trade by the end of this decade.
is a task that all sectors of the industry have a common interest
in thinking about and working on together. Our transportation
infrastructure is today feeling the pressures of increasingly
significant issues. Congestion and inefficiency in marine terminals.
Port and harbor access. Intermodal rail service capabilities.
Highway congestion. Land use concerns. Supply chain reliability
and speed. Information technology developments that can meet carrier
and shipper needs in managing the supply chain. The recent Maritime
Transportation System Report that the U.S. Department of Transportation
sent to the Congress underscores these major challenges.
big issues that provide reasons to unite our efforts, or at least
should cause us to consider coordinated efforts.
liner shipping is perhaps the most international of all industries.
There are no governmental barriers to entry in America’s international
shipping market. There are thirty one members of the World Shipping
Council serving the United States’ foreign trade. They are from
the United States, Canada, Asia, Europe, Latin America and the
has shipping lines that trace their roots to the era of sail powered
clipper ships, and shipping lines that have just begun service
to the United States. The Council has in its membership container
ship operators, ro-ro operators, and car carriers, - each with
a variety of logistics capabilities.
efficiencies and services provided by this industry have shrunk
the world and made it easy and inexpensive for Americans to trade
easily with any city or factory or distribution center in the
world. The cost of ocean transportation is a very small component
of total cargo value. The low cost and efficient services of the
liner industry enable American shippers to ship goods around the
world almost as easily as within our own borders. According to
1998 Census data, ocean freight as a percentage of imports’ cargo
value was estimated to be less than 2%. In U.S. export markets,
which consist primarily of lower value commodities, chronic overcapacity
has plagued the industry and produced very competitive, backhaul
is the liner shipping industry one of the most international of
industries, it is one of the most capital intensive industries.
Keeping pace with the growth in trade demands enormous, constant
capital outlays for new ships, equipment, chassis, containers,
marine terminals and IT systems. Too many people do not recognize
the high fixed cost nature of liner shipping operations where
fixed costs exceed 75% of total costs. The industry has invested
over $125 billion in building a remarkable transportation system
to handle America’s foreign trade. But, not only do carriers have
to focus on earning an acceptable return on their existing investment
- which they haven’t - they have to plan for the investment necessary
to service the growth in U.S. foreign liner trade forecast for
of recent trade projections are forecasting a doubling of containerized
shipping volume in that time. In order to service that growth,
the required investment in operating assets over the next ten
years has been estimated to be an additional $34 billion of new
capital. And that investment projection assumes no inflation or
cost increases from 2000 prices, and does not include the financial
commitments necessary to keep pace in the important area of information
technology. That is an exceptional challenge.
It is exceptional
not only because it is very large. It is exceptional because liner
shipping is also one of the most competitive of industries. As
many of you know, a recent analysis of container carriers’ profitability
highlighted that in 1998 carrier losses in the major international
trade lanes were estimated to be $3.4 billion. “All in” ocean
revenue (including accessorials and surcharges) per load was estimated
to have dropped 29% from 1995 to 1998. While things have improved
some for the industry in the last year, it is obvious that if
carriers are to earn reasonable returns and the private sector
is to invest the $34 billion plus needed to build the infrastructure
necessary to handle this decade’s projected growth in trade, improved
carrier profitability is essential.
having the privilege of joining the World Shipping Council, I
have at times seen the observation - and at times heard the not-so-veiled
criticism-that the liner industry is predominantly made up of
“foreign” companies, and that somehow this should lead our government’s
policy makers to take a dim view of their activities or their
motives. I’d like to address that sentiment.
start with the obvious. Foreign capital is a critical component
of America’s economic growth. Our economy -because of its freedom,
relative stability and openness-is fortunately an attractive place
to invest and build. We should be grateful for that fact. In 1999
our economy was aided by over $282 billion of net financial inflow
from foreign direct investment, creating economic growth and American
than a little difficult to follow the logic that it’s OK for Ford
to buy Volvo and Jaguar, but it’s a concern when Daimler buys
Chrysler. What’s the logic in saying it’s OK for Microsoft and
AOL/Time Warner become players in other countries’ economies,
but a concern if foreign companies do so in the United States?
is that the liner shipping industry -- whether backed by U.S.
or foreign capital -- is a partner in America’s international
two-thirds of the value of America’s international commerce. It
is an essential link in the efficient delivery of that trade.
It is an essential innovator in linking American businesses efficiently
with their customers around the world on a door-to-door basis.
It is an essential investor in the transportation infrastructure
that carries our country’s international commerce, with hundred
of thousands of containers, hundreds of ships, numerous marine
terminals, and the plethora of IT systems and equipment necessary
to serve U.S. importers and exporters. Liner shipping was characterized
by American Heritage magazine as one of the ten most important
developments of the 20th century by facilitating and lowering
the cost of America’s international trade. The foreign capital
that contributes to that is something we should encourage and
embrace, not discourage and demean.
capital is what today supports the U.S. flag container ship fleet
engaged in international ocean common carriage. The member companies
of the World Shipping Council utilize 56 U.S. flag vessels in
America’s foreign trade. And, if the liner industry is to grow
in the future -- whether with U.S. registered vessels or other
registries’ -- the vast majority of the necessary capital for
any such growth is likely to come from these companies.
I am at times
bemused by those who would criticize the existing regulatory system
as being un-competitive or anti-competitive. The truth is that
the liner industry is so competitive that the publicly traded
U.S. liner companies sold their interests in the business -- because
the intensity of the competition resulted in their not being able
to earn even the cost of capital for their shareholders. There
are still active wholly American-owned companies in the liner
business providing excellent service (such as Crowley, Waterman,
Central Gulf, and Tropical). They are companies that are rich
with family commitment to the business and are not publicly traded.
But, to those who say that the existing regulatory system isn’t
competitive, I ask you to step around the bodies still warm on
the competitive battleground.
structure for the U.S. international liner trades is the most
competitive in the history of this country. It offers shippers
an exceptionally large array of carriers from which to choose
at very competitive rates. It has no restrictions to entry, and
as we see some exit the business, we also see new entrants serving
American commerce. Shippers have more international ocean carrier
choices than air carrier choices. They have more choices than
in the rail industry. They have more choices than in the domestic
choices continue to exist and develop despite the growing demand
for capital investment and marginal profitability. Why? Because
the industry believes that, with the three year struggle and compromise
that successfully produced the Ocean Shipping Reform Act, they
can look forward to a period of regulatory stability and predictability
in the United States. If that stability and predictability is
shattered, it can only produce less investment, fewer carriers
and fewer choices.
industry - in its broadest sense-is often better known by government
policy makers for its intramural quarrels than for coming together
in cooperative efforts to be effective partners in America’s growing
Shippers. Ports. Labor. Transportation intermediaries. Terminal
operators. We fight with each other. We fight amongst ourselves.
And as a result, government policy rarely changes.
exceptions. When carriers, shippers, ports and labor finally came
together and cooperated and compromised, the Ocean Shipping Reform
Act was passed and the international liner shipping regulatory
structure was improved and stabilized.
we all know that the odds are pretty good that each sector of
the industry has at least a fairly decent chance of obstructing
the other sectors’ agenda if it wants to.
But the World
Shipping Council begins its mission with the hope of moving beyond
that kind of approach. While we expect everyone to look after
their own self-interest, we hope that the challenges are big enough
and important enough, that dialogue and cooperation can bear fruit.
We want efforts
borne from that kind of cooperative process to be encouraged and
successful, and thus we believe the long struggle that ended in
the good-faith compromise that is the Ocean Shipping Reform Act
should be honored and respected by those who made it, and should
be allowed to work. We want to work with interested shippers,
insurers, terminal operators and others to develop a cargo liability
regime that is internationally consistent, uniform and viable.
We want to
work with shippers, ports, labor and affected government agencies
to make sure that U.S. harbor dredging policy is developed soundly,
without dislocations or disproportionate burdens on any particular
interest, and with a recognition of the substantial contribution
that maritime transportation makes to the U.S. economy.
to work with ports, shippers, labor, terminal operators and government
to address concerns about port security - in a way that does not
impede the flow of commerce or disrupt a system already congested
in many places.
We want to
participate in the planning that will be required to invest intelligently
in infrastructure development that will be necessary if the efficiencies
gained for today’s international commerce are to be extended for
industry realizes that it must do its part in these kinds of efforts,
which is one of the reasons behind the formation of the World
Shipping Council - to try to create a coordinated voice for ocean
carriers that can participate meaningfully in such efforts. We
would appreciate any support or luck you may wish us in such endeavors.
We can certainly
continue business as usual. Many people, including a fair number
of lobbyists in Washington, make a good living from it. But there
are limits to the satisfaction one gets from being in that rat
race where the objective is to try to keep the other guy from
getting ahead. And, the trouble with being in a rat race is that,
even if you win, you’re still a rat.
that dynamic won’t be easy, and it won’t happen overnight. The
Bible says that the lion and the lamb can lie down together. It’s
just that the lamb won’t get much sleep.
So, the World
Shipping Council has been created to provide a coordinated voice
for the liner industry, and we look forward to working with all
segments of the shipping and trade community.
And, I am
very optimistic for several reasons. First, the Council is off
to a good start. We have well over 90% of the liner industry serving
America’s trade in our membership, with excellent representation
of small, medium, large, regional and global carriers. Second,
we have begun an enterprise consciously founded on the proposition
that the liner industry needs to do a better job in providing
a coordinated and strategic approach to public policy advocacy.
Third, the executives, who will serve on the Council from the
member lines, include some of the most respected names in international
shipping, and they have pledged their involvement and support.
And finally, the time is right for the industry to do this.
of the World Shipping Council are partners in America’s global
trade. We look forward to working with you in building an even
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