Commissioner Daniel B. Maffei’s Report on the U.S.-Japan Bilateral Meeting
Commissioner Daniel B. Maffei
Federal Maritime Commission
September 20, 2016
On August 16th, I was honored to participate in bilateral discussions between U.S. and Japan with delegates from the U.S. Maritime Administration, the Federal Maritime Commission, U.S. Department of State, the U.S. Coast Guard, and the Japan Maritime Bureau that took place in Washington, D.C. It was a pleasure to meet Mr. Ichiro Hao, the Director-General of the Japan Maritime Bureau who led the Japanese delegation. The United States and Japan have been conducting bilateral maritime talks since the 1970s. This year’s discussion topics included: National maritime policy updates, the Panama Canal expansion and initial effects of its opening, safety cyber security concerns, Japanese commercial ship building industry updates, environmental issues and antitrust regulatory system overview, and strengthening the relationship between the Japan Maritime Bureau and MARAD through an exchange program. Prior to the daylong bilateral meeting, the Japanese delegation visited the Virginia Internal Gateway in Norfolk, Virginia.
Administrator, Paul Jaenichen, began the discussions by providing an update about the U.S. National Maritime Transportation Strategy, and he outlined some of the critical goals within that strategy. Administrator Jaenichen stated that the strategy shows major potential to facilitate trade, expansion, drive job growth, keep American businesses competitive, streamline freight flows, and help reduce congestion along transportation corridors. Both countries anticipate an increase in cargo moving through the expanded Panama Canal and the U.S.-Asia trade, and both sides recognize that inland upland infrastructure connectivity, including rail, will be needed to maintain the movement of goods to the markets. Administrator Jaenichen explained that the U.S. is preparing for larger vessel calls, by strengthening the capacity of inland transportation networks and leveraging public/private partnerships. I noted that in addition to allowing larger ships to transit the canal, another positive effect of the expansion has been that the wait time vessels have experienced during their transit through the locks.
The Coast Guard led discussions regarding safety issues, specifically, cyber security and the potential impact a cyber breach could have on maritime transportation systems. Japan provided an update regarding their shipping and ship building industries. The Japanese delegation explained that the largest vessel type of Japan’s merchant fleet is a bulk carrier and the third largest is a container carrier. Japan also explained that ship building is important to their domestic economy and, this past year, Japan overtook China to place second in ship building worldwide. Japan also mentioned its concern about an ageing workforce within the maritime industry; and the United States expressed that they share those concerns.
The U.S. Coast Guard and the U.S. Department of State led discussions about some important environmental issues: air pollution with greenhouse gas emissions, ballast water management, and ship recycling. MARAD then spoke about efforts it is making to grow the U.S. flag fleet, specifically, for car carrier operations in the Pacific trade. Administrator Jaenichen highlighted that 60 percent of all U.S. armed forces are now positioned in the Pacific Theater, making staging and timely response in the region of critical importance, especially for roll-on/roll-off, so-called ro-ro vessels, on the west coast. Therefore, Administrator Jaenichen expressed his appreciation for any cargo transport opportunities that Japan may be able to provide.
The Japanese delegation was interested to learn more about the Federal Maritime Commission’s role in reviewing ocean carrier alliances. I explained that the Commission does not approve such agreements, but rather by law, a proposed agreement will take effect unless the Commission determines to take action to stop it. Japan on the other hand, recently had its Ministry of Land, Infrastructure, Transport, and Tourism (MLIT), Maritime Bureau, review the block exemption for international shipping derived from the Anti-Monopoly Act (AMA) enacted together with the Marine Transportation Act. MLIT reviewed policy positions and regulations of other countries on topics including: block exemption from competition laws, the effect on the interest of shippers, and the impact on the Japanese economy. In June 2016, MLIT determined to maintain the current block exemption, however, MLIT plans to conduct a further review on liner conferences.
I discussed current carrier alliances and some of the anticipated realignments that may take place in the coming months. Now, this was before, of course, the Hanjin bankruptcy. And in addition, I offered two examples of other types of agreements filed with the Commission, not just carrier alliances. I described two recent filings relevant to U.S. – Japan cargo flows: the amendment to the 2013 Los Angeles and Long Beach Port Infrastructure and Environmental Programs Cooperative Working Agreement and the second, an agreement creating the Northwest Seaport Alliance.
I closed by saying that while the antitrust review systems in the US and Japan are different, they do seem to complement one another in an effort to maintain global competition. Everyone recognized that the maritime industry is vital to both countries’ economic growth as well as to the global economy. Administrator Jaenichen noted that each nation’s set of objectives were tightly linked due to mutual concerns overcapacity, lower earnings for vessel owners, extreme price competition, an increase in oil prices, the size and strength of each nation’s flag fleets and the maritime workforce, and environmental issues. Japan also noted the importance of fostering a sound and healthy market, improving the efficiency of shipping activities, addressing economic security concerns, and improving transparency in the shipbuilding market. The Japanese delegation then extended an invitation as host of the next meeting in 2017, to which the U.S. accepted.
I also say on a personal note, that I dined with the Deputy Chief of Mission from Japan last night. And the conversation focused on how the U.S. and Japan really have been closer allies than ever before in history. And so it is, I think, very gratifying that the Federal Maritime Commission is part of that. This is the end of my discussion, and I’m happy to take any questions. Thank you, Mr. Chairman, this concludes my remarks.