Open Shipping Registries Best, Says US Report

by Jeremy Hetherington-Gore, Tax-News.com, London

31 August 2004

The Center for Freedom and Prosperity Foundation recently released a study analyzing the impact of open registries on the global shipping market. These registries, maintained by about 30 countries, are open to shipowners from all nations and the study finds that they have boosted international trade and the world economy by reducing shipping costs and increasing efficiency in the industry.

"Open registries have been particularly beneficial to the United States, which is the world's largest exporter and importer," says Andrew Quinlan, president of the CF&P Foundation. "Moreover," he adds, "open registries have good safety and security records - features that are very important to US policy makers."

The study was written by Heritage Foundation Senior Fellow Daniel Mitchell. Commenting on his study, Mitchell stated, "Unlike monopolistic national registries, open registries use a market-based model. And since they compete with each other to attract ships, this has led to better service for shipowners and more rational tax and regulatory systems."

Veronique de Rugy of the American Enterprise Institute warns that the anti-competition agendas of the Organization for Economic Cooperation and Development (OECD) and the International Transport Workers' Federation (ITF), highlighted in the study, are contrary to the interests of all trading nations. "Restricting open registries and returning to the days of high-cost, over-taxed national registries would throw sand in the gears of the global economy," she explains.

The OECD has targeted open registries as part of its anti-tax competition campaign on behalf of high-tax governments that maintain monopolistic "national registries." These registries tend to be much more expensive and much less efficient, so shipowners over time have been abandoning national registries to escape burdensome red tape and onerous taxation. The ITF has been fighting against so-called flags-of-convenience since 1948: seafarer unions, coordinated and represented by the ITF wielded enormous power prior to the advent of open registries, in large part because they used their political muscle to persuade politicians to set rules for national registries that increased union leverage.

The International Maritime Organization, which is an agency of the United Nations, with the support of the United States government, has rejected these efforts to hinder international trade. The IMO is the source of the conventions and treaties which set the standard for shipping internationally. Flag states finance the IMO, with the three largest open registries, Panama, Liberia, and the Bahamas, being the three biggest contributors.

The US government has resisted the anti-competitive agenda of the OECD and ITF. The Maritime Administrator at the Department of Transportation noted: "...it is not the policy of the United States to dictate where ship owners invest their money or register their ships." US resistance to the OECD's agenda has been spearheaded by the Coast Guard. Representatives of the Coast Guard recognize the importance of shipping to America, and they have also identified and acknowledged the good safety and security records of many of the most significant open registries, areas in which the OECD and especially the ITF have most unfairly focused their attack.

The sensible part of the OECD, still sometimes managing to be heard above the strident, polemical wailing of its 'militant tendency' section, agrees that: "Freely flowing international trade, carried predominantly by a large and heterogeneous fleet of ocean-going vessels, has been the impetus behind the significant advances in world prosperity experienced in the second-half of the 20th century." The OECD also agrees that under the influence of open registries, shipping costs have decreased dramatically over the last 20 years. Much of this booming trade depends on open-registered ships - an official from the US Department of Transportation's Maritime Administration notes that, "Over 97 percent of US overseas trade (by tonnage) now arrives or departs on foreign vessels." Nearly two-thirds of that trade is carried on ships from open registries, with ships from Liberia, Panama, and Bahamas accounting for the lion's share. Other major open registries include those of Cyprus, Malta, the UK, Germany, and Bermuda.

Interestingly, Liberia's maritime registry is a free-market (US-based) organisation which operates the registry under contract to the Liberian government, and is the one undisputed success story of that unfortunate country, well-respected by ship-owners and regulators alike. Needless to say, critics of open registries make much of the problems experienced by Liberia as a country, which in fact have nothing to do with operation of the registry.

In most cases, however, says Mr Mitchell, registries from the developing world have less impressive records than those in the first world - regardless of whether they are open or closed. This is not an argument, he adds, for discrimination against developing nations. But it is true that poorer nations might experience difficulty when creating and maintaining registries: setting up a registry - whether open or closed - is a huge undertaking, requiring inspectors, surveyors, lawyers and other professionals. With the help of classification societies, registries of both varieties from Belize, Russia, and St. Vincent and the Grenadines have recently taken strides in the right direction - and Malta, Turkey, and Ukraine are now participating in similar programs.

Recommended