Article written by Jonathan Helton, associate researcher at the Grassroot Institute of Hawaii.
Some ancient laws have stood the test of time. Some did not.
The 135-year-old Passenger Vessel Services Act is the epitome of this. From the Atlantic to the Pacific, from the Great Lakes to the Gulf of Mexico, the PVSA has limited America’s tourism potential, for little tangible return.
The PVSA is the passenger equivalent of the 1920 Jones Law, which requires that goods transported between U.S. ports be carried on U.S.-flagged, built, and mostly American-owned and American-crewed vessels. Both the PVSA and the Jones Act are intended to protect America’s domestic maritime industry and ensure that a pool of ships and sailors are available to the government during a national security crisis.
These laws look nice on the surface, but they don’t work in practice. American shipyards that build large ocean-going commercial vessels have shrunk to a mere four, which in total build only two to three merchant ships per year.
In the case of cruise ships, however, the outlook is even bleaker. There has not been a single ship with more than 800 passenger berths built in the United States since 1958. The last time anyone tried, in 2001, the project was a miserable failure, despite millions of dollars in federal grants.
Half completed in the United States, this ship had to be transported to Germany for completion. Ironically named, the Pride of America is now the only major ocean-going cruise liner qualified under the PVSA to carry passengers between US ports without having to call at a foreign port as part of its itinerary. Plus, the only reason it can do this is because Congress exempted it from the US-built PVSA requirement.
Of course, there are several smaller US cruise lines that operate PVSA-qualified ships in the river and coastal markets. But these lines are not fans of the law, although it is designed to block outside competition. Several American lines are registered to complain its high costs.
So if there is only one large ship “protected” by law, and the passenger ship industry as a whole opposes it, why bother keeping it?
This is exactly what US Senator Mike Lee called for a few weeks ago. The Utah Republican proposed three bills to repeal or reform the PVSA, each of which can go a long way in revitalizing domestic cruise tourism.
Cruises from New York to Miami, without stopping in a foreign port? May be. But these routes don’t stand a chance in the status quo. This makes the cost of the law difficult to estimate, but anecdotal evidence reveals that the law is putting a damper on American tourism.
During World War I, for example, the PVSA and other US cabotage laws had to be waived for Hawaii. So many American ships were drawn in to transport troops that foreign ships were needed to move goods and people between the continent and the territory.
Fast forward nearly a century and, in 1997, a study prepared for the California State Tourism Board find that amending the PVSA would increase tourism revenue for the state, while a 2001 U.S. Senate report Noted that “the growth of domestic cruise ship trade has been discouraged due to the higher costs of building and operating US-flagged cruise ships”.
The harm of the PVSA is not limited to the ocean market. When Viking wanted to start offering river cruises in the United States in 2015, the law would have required it to use American-built ships that were twice as expensive like those built in Europe. Consequently, the company considered canceling its expansion into the United States. Viking will begin offering US river cruises in 2022, but the PVSA is at least partly responsible for the delay.
The COVID-19 lockdowns of 2020 and 2021 further underscored how the PVSA created potentially destructive market distortions for the US cruise industry.
One of its quirks requires foreign-flagged cruise ships — often owned by U.S. companies, such as Carnival Cruise Line and Royal Caribbean Cruises — to make at least one port call in a foreign port if carrying passengers between American ports.
That’s why most cruises between the lower 48 and Alaska stop at Canadian ports like Vancouver and Victoria. Similarly, foreign-flagged ships sailing from California to Hawaii often stop in Ensenada, Mexico. And foreign-flagged cruises from Florida to New England must stop in Canada to meet legal requirements.
In Canada, the PVSA is in the news right now because US efforts to repeal or reform the murky law are partly driven by Canada’s ban on cruises calling at its ports until March 2022, in due to concerns about COVID-19.
In 2020, Canada’s ban didn’t matter, as U.S. COVID-19 restrictions had all but crushed Alaska’s cruise-dependent tourism industry single-handedly. But as U.S. restrictions began to ease, all hopes of a tourism revival in Alaska for 2021 were dashed when Canada announced plans to keep its ban in place for another year.
That’s when Alaskan officials realized it was the PVSA that now stood in their way, preventing large cruise liners from making trips between Seattle and the Last Frontier.
A summer without income from cruise tourism has been difficult. Two would have sounded the death knell for dozens of small businesses. “The survival of our communities is really at stake right now. …Not everyone will survive,” a Juneau business owner predicted early March.
After negotiations with Canada failed, the Alaska congressional delegation introduced legislation to waive the PVSA. In an incredibly quick and bipartisan effort, the Alaska Tourism Restoration Act was approved by Congress without objection and signed by the President in late May.
While this waiver was key to helping save Alaska’s 2021 tourist season, it indicates when a law must be lifted in an emergency to prevent further disasters.
As Keli’i Akina, president of the Grassroot Institute of Hawaii, wrote of Jones Act waivers: “If a shipping law that ostensibly protects ‘national security’ must be lifted whenever there is has a crisis, the problem may be the law itself. ”
Curiously, most of the voices opposing Lee’s PVSA bills come not from the United States, but from Canada. That’s because cruise ships that trade with Alaska bring in about $2.2 billion a year to the country’s tourism industry — extra money that could be spent in Alaska if cruise ships cruise did not have to stop in Canada.
Even though the PVSA has been repealed or reformed, travel writer Bruce Parkinson believes that “cruise ships will still be calling in British Columbia, simply because of their appeal to guests.”
But the market, not an outdated law, should decide those stops. As Senator Lee said, “The PVSA is bad economics and bad law.” His bills are the perfect opportunity to update the PVSA for the 21st century.