PResident Joe Biden is expected to take aim at the shipping industry and rising prices during his State of the Union address on Tuesday night.
Biden is set to raise concerns about the shipping industry and its consolidation as part of his comments on the economy, which are expected to be one of the main topics of his highly anticipated speech, along with the Russian invasion of Ukraine.
Biden will tell Congress that three major shipping alliances made up of foreign companies now control 80% of global container ship capacity and 95% on critical east-west trade lines, according to the White House. He will point out that shipping costs have increased due to rising rates and fees since the start of the pandemic.
“The President will note that foreign carriers are now posting record profits, while prices for American consumers and businesses have increased,” the White House said in a backgrounder released ahead of the 9 p.m. EST speech.
The White House noted that the Ocean Shipping Act, passed about a century ago, provides antitrust immunity for alliance agreements of shipping carriers when the alliance is in the “public interest.” The administration argues that over the years Congress has further deregulated the industry and expanded that antitrust immunity while weakening the obligations of shipping carriers to disclose prices and fees.
Now the administration is pleading with Congress to pass reforms to limit some of the immunity alliance agreements have from antitrust scrutiny.
Biden will also announce the launch of a new initiative between the Federal Maritime Commission and the Department of Justice to promote competition in the ocean freight transportation system and highlight the FMC’s efforts to strengthen its oversight of the global shipping industry. maritime transport.
The president will likely link higher shipping prices to the higher costs consumers incur in stores. Inflation has been rampant since Biden took office, with consumer prices rising 7.5% in the 12 months to January – the fastest pace since 1982.
The White House, citing the European Central Bank and the Kansas City Fed, said increases in shipping costs are expected to drive consumer prices up about 1% over the next year.
“Many shippers really want us to do something about the rapid rate inflation and declining reliability of the ocean freight system,” said FMC President Daniel Maffei.
said this week
at the TPM22 Conference.
Despite concerns about rising prices, Maffei said there was little evidence to support the idea that these three shipping cartels are driving up fare inflation “due to some sort of artificial limitation of the supply of cargo space”.
“But even after increasing reporting requirements and deepening our analysis so far, we have found no evidence of this kind of action, and furthermore, neither has the European Union or China,” did he declare. “We will continue to scrutinize and continue to search, but so far we are seeing the opposite. We’re actually seeing carriers adding capacity and actually increasing the number of vessels overall.
World Shipping Council CEO John Butler also pushed back against the White House’s claim that the industry was uncompetitive and that higher costs are due to shipping consolidation, according to Bloomberg.
The administration’s push to make the industry more competitive is likely to be met with skepticism from Republicans, who attribute higher demand prices to the demand created by federal government spending and accommodative monetary policy last year.
Some on the left have begun blaming goods producers for high prices as rising inflation drives down Biden’s approval ratings and threatens Democrats’ prospects in the midterm election.
Senator Elizabeth Warren, one of Congress’ fiercest antitrust enforcers, has raised the idea that uncompetitive big companies have also driven up the cost of goods simply to generate higher profits for their shareholders.
“Dealing with rising consumer prices also involves [
Federal Trade Commission
]the Department of Justice, to break up monopolies and investigate shady pricing schemes that also drive up costs for hard-working families,” Warren said.
The Biden administration has also been criticized by Democratic economists for overemphasizing supply chains when it comes to inflationary pressure.
Steven Rattner, adviser to the Treasury Secretary during the Obama administration, recently wrote a New York Times
say Biden’s insistence on blaming the supply chain for inflation problems is “dishonest.”
“Blaming inflation on the supply lines is like complaining that your sweater is keeping you too warm after adding several logs to the fireplace,” he wrote. “Most of our supply problems are the product of an overstimulated economy, not the cause of it.”
A recent Quinnipiac University poll found that inflation registers as the nation’s most pressing issue, surpassing concerns about immigration and the pandemic.
Moreover, a new Gallup poll earlier this month showed that just 33% of adults polled in the United States are satisfied with the state of the economy, a sharp drop from when Biden took office, when 43% said the same.