President Joe Biden used his State of the Union address to announce a crackdown on profiteering by global shipping companies.
The White House’s supporting fact sheet tells us how terrible it is that detention and demurrage fees rose 50% over just one financial quarter to $2.2 billion. The White House is correct that this translates into higher prices for American consumers. The problem is that they’re going to do absolutely nothing about it.
After all, those detention-demurrage numbers are effectively a rental fee on returning the shipping containers to the shipper late. Perhaps like a late fee on a credit card payment. They’re also not caused by the shipping companies at all, but by the ports. The clock doesn’t start ticking on when the fees are due until the cargo, the container, is off the boat and on dry land. So, running out of those days you get for free and into the charged period has to be about the efficiency, or not, of the port and its cargo handling.
There is a monopoly causing the problem, but it’s one that the Biden administration isn’t going to do anything about. That’s because those “good union jobs” the president is so fond of also translate into higher prices for consumers. All of the west coast ports are covered by just one longshoremens union. As with any monopoly, this means lower production and higher prices — that’s just what monopolies do. The way to bring those west coast ports up to even the average of rich nations — a standard they sorely lag behind at present — means breaking the union. To the benefit of consumers, of course.
When London faced this problem 50 years ago, the solution was to simply build a new port at Felixstowe, 50 miles away, and tell the unions they weren’t welcome. The U.S. can’t do this as the union agreement covers all west coast ports. Therefore it has to be the union that is broken, not just ignored.
Except, of course, nothing like this is going to happen at all. Instead, there will be some shouting at those shipping companies who do not cause the problem at all, and the original creators of the costs to consumers will be allowed to continue.
