Warren Says Ocean Freight Alliances Add to Inflation
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Sen. Elizabeth Warren (D-Mass.) blamed rising U.S. inflation in part on the largest ocean shipping companies, calling “the anti-competitive nature” of the industry the root cause of soaring prices to transport goods around the global economy.
“These price surges cause companies to pass higher costs on to customers and push out smaller businesses, which cannot compete with larger companies for dwindling ship space,” she wrote in letters addressed to each of the nine largest container carriers. “This has affected all corners of the economy, inflating prices for the cost of food, durable goods, and other essential needs.”
Warren cited a Bloomberg News report from January that explored how the consolidation of liner shipping companies in recent years, combined with supply-and-demand imbalances caused by the pandemic, contributed to a sustained surge in container rates that was starting to fuel inflation more broadly.
(David Ryder/Bloomberg News)
Warren’s letters are the latest salvo from Washington to a container shipping industry that has been the backbone of globalization for much of the postwar era, garnering little public attention until recently.
The U.S.-China trade war, COVID-19 lockdowns and now Russia’s invasion of Ukraine have exposed the frailties of far-flung supply chains, and shipping companies have become political scapegoats because they move some 80% of global goods trade.
In his State of the Union address President Joe Biden said he was initiating a crackdown on shipping companies for “overcharging American businesses and consumers.” Biden specifically called on Congress to address the current antitrust immunity for ocean shipping alliances, which had not been included in broader legislation working its way through Congress.
The World Shipping Council, which represents the major container lines, has argued that surging household demand is causing disruptions on land and that some attempts in Congress to fix supply chain strains would only make matters worse.
“Americans continue to import goods at record levels,” the council said in a statement March 22. “Ocean carriers have deployed every vessel and every container available, and are moving more goods than at any point in history, but the U.S. landside logjams are keeping vessels stuck outside U.S. ports.”
In her letters, Warren said, “Congress should act to address high shipping costs if the administration lacks the full authority to do so.” The senator asked companies to respond to questions about reported plans to further consolidate the shipping market, and their record profits and prices, by April 6.
The shipping industry’s position — that forces of supply and demand have pushed up container rates, not a lack of competition —appeared to get a high-profile advocate this week.
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“No matter how many times administration officials suggest otherwise, it is an economic falsehood to assert that big profit increases following a collision between rising demand & inelastic supply constitute evidence of profiteering or excessive market power,” former Treasury Secretary Lawrence Summers tweeted March 23.
“If the administration were serious about competition in shipping, it would suspend the Jones Act,” said Summers, who is a paid contributor to Bloomberg TV, referring to a century-old law that prevents foreign-flagged ships from operating between American ports.
— With assistance from Lauren Etter.