Government Subsidizes Luxury Cruise Lines
July 7, 1997
For years U.S. shipbuilders pressured Washington to force other countries to abandon subsidies to their shipbuilding industries. An agreement was finally reached with other shipbuilding countries to eliminate subsidies for the construction and repair of vessels as of 1996.
Then, in 1996 the six major U.S. shipbuilding concerns reversed course and successfully pressured Congress into not ratifying the treaty -- which involved all the European Union countries, as well as Japan, Korea and Norway. The U.S. shipyards noticed they would have to give up their own government subsidies and realized they couldn't compete.
- The U.S. subsidies are mainly for loans to make military vessels.
- But the U.S. shipyards also realized they could not compete for business in the construction of cruise ships with more experienced foreign yards -- unless they had the subsidies.
- Fed up with the U.S. change in policy, the European Union is largely ignoring the agreement.
- Earlier this year, the EU announced it was pouring $2.1 billion into new subsidies in Spain, Germany and Greece.
As a result, taxpayers are subsidizing U.S. cruiseship lines and their passengers. Cruises today, in luxurious ships with a variety of destinations, cost about the same as they did 12 years ago. The taxpayer picks up as much as 9 percent of a new vessel's contract value.
Source: William G. Flanagan, "Thanks for the Subsidies," Forbes, July 7, 1997.
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