There Will Be No Viking Longboats Cruising the Mississippi, Thanks to Hard-Headed U.S. Protectionism
An old federal law demolishes the development of some domestic tourism markets.
The market won't likely be calling for more docks in the United States anytime soon. Switzerland-based Viking Cruises, which wanted to build and send small cruise ships up the Mississippi River, leaving new tourism dollars for river towns in its wake, is backing off its plan.
Viking announced a couple of years ago a plan to bring its luxe longboats to the Mississippi River, but last week the city manager from one those little communities got word Viking had terminated its plans, WQAD in the Quad Cities reports. The cruise ships Viking had been wanting to build and operate would have ended up costing double what they had planned, according to the report.
"As the details were being refined, it became the economics did not meet Viking's goals," a company statement read.
No new tourists. No new tourist revenue. No new tourism jobs.
Our own federal laws are to blame. More specifically, President Grover Cleveland's Passenger Vessel Services Act (PVSA). The 1886 law requires that in order to ferry passengers between ports in the United States, the ship must have been built in the United States and be owned and operated by Americans.
If the absurd contours of this law sound suspiciously familiar, it's because these restrictions are just like the Jones Act, the terrible protectionist law that uses similar rules and ultimately drives up the costs of shipping goods to U.S. islands and territories. The law received a lot of attention and criticism in the fall because it's going to make it much more expensive for Puerto Rico to recover from Hurricane Maria.
The Jones Act is for shipping. The PVSA is for ferrying passengers and for cruises. The intention of the PVSA was obviously to protect and foster domestic shipbuilding and shelter them from foreign competition.
Ships built and owned by foreign companies can depart and return from the same U.S. port, and they can go to distant foreign ports (outside of North America) and return back to a port in a different city. They cannot travel from port to port visiting locations within the United States. There are a very small number of exceptions, like Alaska.
As the decades sailed past, the law has ended up punishing only us. America doesn't make cruise ships anymore. An attempt to do so in 2001 (subsidized by the government, no less) failed miserably. Because cruise companies are not logistically able to meet the requirements of the PVSA, America doesn't really have a domestic cruise industry. (Clarification: To be clear, there are indeed domestic river cruise companies. But the market is not nearly as robust as it could be.)
The law doesn't protect American jobs from foreigners; it has prevented new jobs from being created in the United States. Victoria and Todd Buchholz (Todd is a former economic policy director under President George W. Bush) noted the consequences of this terrible law in a Los Angeles Times op-ed in August:
Without the PVSA, dozens more cruises would depart daily from U.S. cities such as New York and Seattle, and the hundreds of millions of dollars generated from those voyages would stay within the U.S. economy, providing thousands of portside jobs — for longshoremen loading cargo, bellhops, tour guides, taxi drivers and local farmers supplying fruits and vegetables for those all-you-can-eat buffets. And of course, each stop would generate revenue for U.S. cities in port fees as well as local and state taxes.
Who does the PVSA protect? Not Americans. Instead, Canada and Mexico should send thanks to that Congress of 1886, "attn. Grover Cleveland." The cruise docks of San Diego sit vacant 90% of the year. Meanwhile, 80 miles south, Ensenada receives more than three times as many passengers as San Diego, and many more than New York, New Orleans and Boston. Vancouver hosts three times as many sailings as Seattle. Since cruising generates an estimated $3.2 billion for Canada's ports, it's no surprise that the Canadian government lobbies to preserve the PVSA.
The existence of the PVSA is particularly absurd because about half of all cruise ship passengers are American. No other country comes close. We are net exporters of cruisers. American tourists spend money overseas and the PVSA makes it impossible to reduce our "cruise tourism deficit."
We don't even know what this protectionism is costing us. Would we see a dramatic increase in foreign tourism to cities people would never have chosen as destinations, but would be happy to visit along the way on a cruise?
We almost had a chance to find out. But for now, absurdly obsolete American protectionism wins and Americans lose.
This post has been updated to clarify that there is a modest domestic cruise market.