Shippers pay $1.25 for every $1,000 worth of cargo that goes through American ports. This is the Harbor Maintenance Tax. Canada and Mexico don’t charge a similar tax and a new report shows that the levy does put U.S. ports at a competitive disadvantage. “Pacific Northwest ports are facing an invisible blockade that is sending our business to Canada,” U.S. Rep. Rick Larsen, D.-Wash., said in a prepared statement last week. Larsen is the ranking Democrat on the Coast Guard and Maritime Transportation Subcommittee, which has jurisdiction on the issue in the House.
The Federal Maritime Commission study found that Canada and Mexico are not breaking any trade laws. It also stated that “many of the advertised benefits of foreign ports are not as significant as may be believed, for example, the transit time from China to inland destinations such as Chicago and Memphis through the Port of Prince Rupert as opposed to ports in the United States.”
American ports are found to be competitive internationally. “However, it would appear that the (Harbor Maintenance Tax) makes the challenge more difficult. This is especially the sentiment of the ports that are competitive with Canadian and Mexican ports.” It quotes Tay Yoshitani, CEO of the Port of Seattle: “A lot of factors go into the routing of cargo and a lot of carriers/shippers want diversity in how they get cargo to warehouses…cost is always an issue, and the HMT clearly disadvantages us against Canadian ports.”
The conclusion: “It seems clear that removal of the HMT would drive some U.S. discretionary cargo going through Canadian ports back to U.S. west coast ports, but by no means all. That being said, the HMT does appear to be one competitive force that is not based on natural competition, but may indeed be a legislative disadvantage on some U.S. ports.”
The issue is of particular importance for Seattle and the Port of Tacoma. The money raised by the tax has been used for channel dredging and maintenance that the Puget Sound ports don’t need — if the money is spent at all. Thus, it would help pay for east coast ports to improve their capacity to take larger ships that will soon be moving through the Panama Canal. What’s needed is a more aggressive, holistic national infrastructure policy that would also help our ports, too.
The report states: “Currently, many U.S. ports, highways, and bridges are slowly decaying due to lack of investment and strategic long-term planning. Our closest competitors, Mexico and Canada, have national transportation policies that ensure that their ports, highways, and bridges, all of which play important roles in the intermodal transportation of commerce, are sustained.” I know “roads and bridges” is the political meme, but let’s also not forget the need to improve rail infrastructure, which can’t be handled by the private sector alone.
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Today’s Econ Haiku:
Sunny summer hike
What could possibly go wrong?
Oops, a fiscal cliff