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urbs. American shipping firms replaced the Stars and Stripes with the unfamiliar flags of
Liberia and later the Bahamas and Panama.
This supposedly temporary fix to reduce labor costs and avoid expensive regulations be-
came a fixture in the world of maritime transportation. Today the majority of shipowners
are based in wealthy maritime nations like the United States, Great Britain, Norway,
Greece and Japan, but their ships are registered and flagged in foreign countries with
“open registries”—that essentially have no minimum wages, labor standards, corporate
taxes or environmental regulations and only a flimsy authority over the ships flying their
flags. All these countries require is that ship lines pay a handsome registration fee.
These fat maritime loopholes caught the eye of Arison and the other leaders of the
leisure cruise industry. So what if these maritime rules were meant for ships transporting
goods, not floating hotels. A ship is a ship. Even though Carnival was an American corpor-
ation headquartered in Miami with an American client base, Carnival decided to register
and flag its ships in foreign countries that had nothing to do with their business. It didn't
matter where the ships traveled or where they established home ports. Cruise companies
could register and flag their ships wherever it was best for their bottom lines.
Dickinson wrote in his book that the reason cruise ships adopted this practice was
simple: following the rules and laws of the United States meant paying minimum wages.
“Many countries, including the United States, Norway, and Britain, have strict regula-
tions concerning unionized labor which severely constrain the ability of a ship to staff with
an optimal crew mix, and almost invariably create a higher labor cost than a free-market
environment. Other countries, so-called flag of convenience countries, do not have these
constraints. . . . ”
Carnival registered its fleet in Panama. Royal Caribbean registered its ships in Liberia.
(During its two-decades-long civil war, Liberia earned at least $20 million every year by
acting as the off-shore registry for foreign ships.)
Cruise lines gain another enormous advantage by registering as a foreign corporation.
The Internal Revenue Code exempts any income from airlines or ships from taxation as
long as the foreign nation gives the same benefit to American corporations. Neither Liber-
ia nor Panama nor any other open-registry country levies a corporate income tax.
In a symbolic gesture to its original Norwegian owners, Royal Caribbean flew the Nor-
wegian flag on a few of its ships, but in 2005 the firm announced that all of its ships would
fly the flag of the Bahamas. Richard Fain, the chairman of Royal Caribbean, said this was
necessary because “the competitive nature of the cruise industry is intense, and we must
ensure our competitiveness throughout the business.”
It was now free to follow the industry leader, Carnival Cruise Lines, and pay third-world
wages with no paid vacations or overtime pay while charging first-world prices for the jour-
neys. With some 44,600 crew members on its ships, that amounts to an annual savings
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