Maritime Agreements with State Traders

St. John's Law Review, Dec 2012

By Jon Magnusson, Published on 12/06/12

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Maritime Agreements with State Traders

Maritime Agreements with State Traders Recommended Citation Magnusson, Jon (1971) "Maritime Agreements with State Traders," St. John's Law Review: Vol. 46 : No. 1 , Available at: https://scholarship.law.stjohns.edu/lawreview/vol46/iss1/4 - Article 4 Follow this and additional works at: https://scholarship.law.stjohns.edu/lawreview Article 4. STATE TRADERS JON MAGNUSSON* INTRODUCTION Wouldn't it be nice if a perfectly operating open market trading system were an assured condition for our merchant marine. We hear the merchant marine is expensive, inefficient and uncompetitive. Under a well-functioning free enterprise market every ocean carrier would pursue his business assured that if he were efficient he would be rewarded; his price would reflect the quality of service; he could make speedy service changes to meet shippers' needs without asking the government's permission; he would not have to pay anyone to remove a threat of injury, but only for services rendered; he would bargain on terms of relative equality; and, his contract obligations would be respected and enforced. It would be a world where there were no penalties on useful service to the public. Our merchant marine would be efficient and competitive. We know, of course, this ideal condition is just a utopian dream. The real world of ocean commerce is not so nice and rosy. On the contrary, in some parts of the world trade routes are beset by penalties on useful service. There is gross inequality of bargaining, expensive payments to avoid commercial injury are necessary, government restrictions are prerequisites to service changes (in the name of public interest, of course), quotas are imposed on tonnages or products that may be carried, governmental price restraints are imposed, and worst of all there is no assurance of contract enforcement. These conditions seem to be most prevalent and most penalizing along trade routes where governments participate directly in ocean transportation by operating ocean carriers (herein "state traders"), rather than leaving operations to private citizens. There is a very good reason for these adverse conditions. The origin of the conditions is the absolute inequality of the state trader vis-i-vis any private citizen, in competition, in contract negotiation, and contract enforcement. UNEQUAL ADVANTAGES OF STATE TRADERS The inequality between a government and its citizens need not be belabored, but its consequences when the two try to operate on equal terms are not so well understood. Antiquity supports the inequality and we have the following from The FirstBook of the Kings: And Samuel told all the words of the Lord unto the people that asked of him a king. And he said, this will be the manner of the king that shall reign over you: He will take your sons and appoint them for himself, for his chariots, and to be his horsemen; and some shall run before his chariots. And he will appoint him captains over thousands, and captains over fifties; and will set them to make his instruments of war, and instruments of his chariots. And he will take your daughters to be confectionaries, and to be cooks and bakers. And he will take your fields, and your vineyards and your oliveyards, even the best of them, and given them to his servants. And he will take the tenth of your seed, and of your vineyards, and give to his officers, and to his servants.... And ye shall cry out in that day because of your king which ye shall have chosen you; and the Lord will not hear you in that day.1 Hobbes concludes the Leviathan with: And thus I have brought to an end by Discourse of Civil and Ecclesiastical Government . . . without other design than to set before men's eyes the mutual relation between protection and obedience; of which the condition of human nature and the laws divine, both natural and positive, require an inviolable observation.2 The unequal relation of subject to sovereign, then, is not open to question, but the implications are sometimes overlooked and the lessons ignored. Before discussing the effect of state traders on our commerce a few examples from the adjudications of a government agency, the Federal Maritime Commission3 (Commission), reveal how these penalties operate in the real world of ocean commerce. SOME SPECIFIC ExAMPLES The similarity of the facts provided by cases involving commerce with two South American nations are good illustrations of what may be expected from other state trading nations. Venezuela, Brazil and several other countries in South America use state agencies to transport their ocean commerce and have promoted their use by different restrictive practices, but with the same effect. A. The Venezuelan Pooling Agreement Through government agencies Venezuela holds the stock of Compania Anonima Venezolana de Navigacion (CAVN) an ocean carrier 1Samuel 8: 10-18. 2 1 CoLLuR CLASCS IN THE HISTORY or THouGHTf 511 (1966). 3 Established by Reorganization Plan No. 7 of 1961, ยง 191(a), 75 Stat. 84 (...truncated)


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Jon Magnusson. Maritime Agreements with State Traders, St. John's Law Review, 2012, pp. 4, Volume 46, Issue 1,