Tariffs on Cruise Lines?

The Pride of America, the only US flagged cruise ship, in Hawaii. Image from Wikipedia.

Cruise ships haven’t had good news in 2020. Many of the first COVID patients in the US, including the people in my area, caught the disease while onboard a cruise vessel. Then cruise lines wanted federal money under the CARES act, even though they aren’t incorporated in the United States, and thus don’t pay US taxes. Combined with the difficulty in cleaning a ship while underway, and cruise lines are facing a difficult return to normal. If stock price is any indication, Carnival Cruise line plummeted from 50 dollars a share in January to almost 8 dollars in April, and is currently sitting around 17 dollars.

Cruise lines have found unique ways to evade US laws and taxes. All but one cruise ship is flagged outside the United States. The flag of the cruise ship allows it to sail in international waters, and dictates what sort of domestic laws apply while onboard. Most cruise ships are flagged in Liberia, Bahamas or Panama. Each of these nations have weak labor laws with limited ability to enforce them. Cruise lines don’t have a minimum wage and get away with significantly lower safety standards. Worse still, if a crime is committed onboard, its notoriously hard to prosecute. A study from the University of Florida found that:

The Cruise Line International Association claims that cruise ships are inherently secure because ships offer a controlled environment with limited access. “However, there has been some startling statistics between 2003 and 2005: 24 people were reported missing and 178 people reported a claim against sexual assault. Additionally, the FBI has opened investigations on 305 cruise-based crimes, from 2000-2005” (Porter, 2006, p.597). The CLIA compares these statistics to U.S. crime rates and harps on being the safest form of transportation and inherently secure. They fail however, to examine the context to which these statistics apply.

Given that Americans make up nearly 75% of cruise line passengers, it seems unfair to have Americans financing a system that is exploiting workers and dodging taxes. The tax dodging makes it easy to undercut any US company trying to start a competitive cruise line. Given the negative attention on cruise lines, its probably time for President Trump to threaten tariffs on the cruise industry.

Cruise ships pay a docking fee and port tariff, based on tonnage, when they dock in a US port. An easy way to encourage better behavior is to raise the port tariffs on non-US flagged vessels, as well as providing a discounted tariff to cruise lines that voluntarily follow US employment and criminal laws. You could have a high tariff, with a discount if the ship pays minimum wages, and a further discount if they follow proper US criminal proceedings. The result is a carrot and stick approach, either getting more money from the industry or enforcing better behavior on the part of the cruise line. Given that cruise lines are struggling, now is the time to negotiate a better deal.

Cruise lines have benefited from America for years under flags of convenience. Perhaps its time they follow the same rules the rest of the United States does.

This post represents the views of the author and not those of the Department of Defense, Department of the Navy, or any other government agency.

You Can’t Eat Debt

Col Von Luger: Flyers are gentlemen, not peasants to dig in the earth. So I am surprised.

Group Captain McDonald: The English have always been keen on gardening.

Col Von Luger: Oh Yes, but flowers? It this not so?

McDonald: You can’t eat flowers

Col Von Luger: Good Point

The Great Escape 1963

 

I must confess that I was concerned when President Trump started slapping Tariff’s on China having been taught from youth that tariff’s had been one of the underlying causes of the Great Depression and knowing that China has been a great holder of our debt.

His confidence in his ability to manage our trade problems apparently has not been misplaced:

China will exempt some agricultural products from additional tariffs on U.S. goods, including pork and soybeans, China’s official Xinhua News Agency said Friday, in the latest sign of easing Sino-U.S. tensions before a new round of talks aimed at curbing a bruising trade war.

This development is of some disappointment to those looking to defeat him politically but not to producers of Pork and soybeans:

“The importance of this market to U.S. pork producers is clear,” said National Pork Producers Council President and North Carolina hog farmer David Herring. “U.S. pork exports could single handedly make a huge dent in the trade imbalance with China.”


An outbreak of deadly African swine fever, which has cut China’s pig herd by a third since mid-2018, has propelled Chinese pork prices to record levels and left the country in need of replacement supplies from overseas. U.S. pork exports to China so far this year have largely fallen short of expectations.

Ed Morrissey sees what it means.

The concessions on pork and soybeans are significant, much more so than a two-week delay in tariffs. It signals that China can’t afford to deal with a lengthy trade war, especially not this year. They may not like it, but they still need to trade in order to feed their massive population, and China might have to get used to fully opening their markets and complying with agreements to do so.

President Trump, being more successful and more experienced in business than myself and recognizing that checking China’s expansion without military confrontation was a vital American interest apparently understands one of basic facts of life, a fact that he as a person who was born to wealth might not be expected to remember.

The most imposing nation no matter how large a standing army or how broad a shadow it casts on their neihbors, is impotent if it can’t feed it’s people.