Pirates Are a Better Bargain Than Congress

Information Dissemination: Pirates vs. Congress: How Pirates Are a Better Bargain

Pirates are hardly a financial blip of the
total costs of maritime shipping. 

What entity costs the maritime shipping industries more money - pirates or the US Congress? You know the answer just from the way the question is phrased.

Stephen M. Carmel, Senior Vice President of Maersk Line, Ltd., given August 3rd, 2011 at the Commander Second Fleet Intelligence Symposium of the US Navy. This is a long but must-read speech to anyone who wants to understand the relative risks that shipping has to calculate. And the very tiptop risk of all is what draconian, expensive regulations will be laid atop the industry by the US Congress.

In fact, the Congress costs shipping so much money that piracy costs are barely a blip. Read the whole thing. Some excerpts:

First let me say right out of the gate I am no fan of pirates. Do not like them at all in fact, contrary to what many may perceive from my remarks on the topic. Pirates do impose a cost on our business that we would rather not bear if possible so it is something I worry about. But, while worrying about pirates I also worry about the effect of MARPOL Annex VI and the cost of complying with increasingly harsh emissions control requirements, something that will cost our industry roughly $6 Billion a year to comply with now and that figure will go up as tighter standards kick in in the 2014 time frame. I worry about the requirement to cold iron in LA [use commercial power while at dock], something that is very expensive and disruptive. And since while common for Navy ships to go on shore power, commercial ships never do it and are not fitted with a system to do so, a modification is required that will cost the equivalent of one ransom for each ship it is done on. ...

I worry about bad policy such as the requirement for 100% scanning of containers imposed by congress in the “Implementing the requirements of the 9/11 commission Act”, a requirement which the European Commission estimates will cost the global economy 150 billion Euros or about 215 billion dollars per year were it to be implemented by all our trading partners. With that single act congress potentially does 20 times more damage to the global economy than pirates do by even the most ridiculous estimates of the cost of piracy, and in the process actually degrades maritime security rather than improves it. ...

I worry a heck allot more about bad policy than I do bad guys, bad policy being easier to inflict and harder, and expensive, to recover from once it happens. And speaking of bad policy specifically as relates to pirates, there can be no better example than the Executive order which most believe heads us down the slope towards making ransoms illegal, which in my view is breathtaking in its shortsightedness. That would remove the only tool that is available to us that has proven effective at resolving a piracy incident. Making ransoms illegal is unenforceable, will increase the violence against the crew, will criminalize the victims, and will do nothing to deter pirates. Hostages are a commodity to pirates and they will always find a buyer. [Carmel goes on to explain that if companies can't pay ransom, pirates will simply sell captives into "the very active slavery market."] ...

I assume everyone here knows the basic statistics – piracy is a very rare event considering the volume of traffic that moves through the area. The probability of any specific ship being attacked is remote, and for the types of ships that actually move the majority of international trade even more so, approaching zero. Attack success rates have fallen into the 14% range. But we’ll not belabor the obvious at this point and instead dwell a little on the issues that hide behind the numbers – the rest of the story as Paul Harvey would say.

From the US perspective it is difficult to see how piracy affects our economy or international trade in any significant way.

There is lots more, very compelling stuff from a man who knows firsthand what he's talking about.

I covered a lot of related issues in 2009. One thing I pointed out, that Mr. Carmel confirms, is that piracy off Somalia is not a matter of national security of the United States (link).

Piracy there doesn't even rate a blip on the screen of international maritime commerce. Barely more than one-half of one percent of ships transiting the waters concerned were even threatened with attack last year, much less actually hijacked. The "piracy tax," or the increased costs to shippers of the piracy, is virtually nil as a percentage of total operating costs. Besides which, what little financial end-costs there are are borne mostly by Europeans, not Americans. Only one kidnapped crewman has died in captivity, and he under circumstances not clear (which does not absolve his captors of culpability, it just means that he might not have been murdered).

This means that combating piracy should not displace, either in urgency or in budget, truly critical security issues such as fighting al Qaeda, stabilizing Iraq, winning in Afghanistan or continuing to discover and shut down nascent networks seeking to bring death and destruction to American citizens or possessions.

At best, anti-piracy has to remain an economy-of-force action.

But when it comes to "economy," the US Congress is clueless about what it is costing consumers because of all the layers of suffocating regulations it adds every session.