Environmental Engineering Reference
In-Depth Information
available to them. But beginning with Panama in 1916, and followed, especially after
Wo r ld War II, by a number of others, some states allowed ship registration by non-
nationals. The number of these open registries has grown dramatically since World War
II, as has the number and tonnage of ships registered in them (DeSombre, 2006).
The term '
fl
ag of convenience' (FOC) is derogatory and intended to refer to those states
that o
er ship registration to non-nationals, charge low taxes and fees, and do not hold
ships to high environmental, safety and labor standards. Although there is no universal
de
ff
t the label, the International Transport Workers' Federation
(ITF), a global labor union with an anti-FOC campaign, designates registries as '
fi
nition of which states
fi
ags of
convenience'; it has so designated 29 registries (ITF, 2005, pp. 3-4), although new ones
emerge annually.
Registry states gain economic bene
fl
ts from ship registration fees and taxes, so devel-
oping states saw the advantages of gaining income from luring ship registrations. (In
Panama, the largest open registry, 5 percent of the national budget comes from ship reg-
istry earnings - Morris, 1996, p. 15). In order to persuade ships to register there, they
promise low costs, keeping registry fees and taxes relatively low and - most importantly -
choosing not to adopt costly environmental, safety or labor standards for ships. Open reg-
istries in general adopt fewer international environmental, safety and labor standards
than do traditional maritime states, and the newest open registry states, trying to lure ship
registrations away from existing registries, have the lowest standards (DeSombre, 2006,
pp. 41-5).
Although in other contexts the evidence for a regulatory race to the bottom is decid-
edly mixed, the potential for such a race - or at least for more limited 'pollution havens'
in the shipping industry - is notable. Because of the ease of changing registry - ships need
not travel to the registry state and can generally register by mail or online - shipping is an
easier industry to 'move' to an area of low regulation than would be the case for more tra-
ditional manufacturing industries. From the perspective of the low-standard state itself,
running an open registry is politically and environmentally more appealing than serving
as some other form of pollution haven, in which the pollution from low environmental
standards would be felt domestically. An open registry bears no more of the environ-
mental impact of its low standards than does any other state; in fact, it may be remote
enough (or in some recent cases, landlocked) that it does not su
fi
er from the potential oil
spills or other environmental problems caused by ships that operate outside the interna-
tional regulatory system.
Ship owners, especially those engaged in international trade, have been willing to reg-
ister in open registries. At least 64 percent of the world's merchant
ff
eet tonnage is reg-
istered in FOC registries, including 68.7 percent of bulk carrier and 64.3 percent of
container ship tonnage (Institute of Shipping Economics and Logistics, 2004, p. v). That
ship owners choose to do so is not surprising: substandard shipping confers a compet-
itive advantage. An OECD study concluded that ship owners that do not implement
international safety and environmental standards bene
fl
t economically (OECD, 1996).
Another OECD study determined that owners of substandard ships externalize the
costs of these ships and are rarely economically harmed from problems that arise
because their ships do not follow international standards (SSY Consultancy and
Research Ltd, 2001). This regulatory context is central to understanding the environ-
mental politics of shipping.
fi
