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President Donald Trump’s views on trade and spending may or may not be good news for the U.S. marine industry and its insurers, analysts say.
While President Trump is looking to revitalize the nation’s infrastructure and supports protectionist policies, which could benefit the marine sector, his international policies could restrict access to certain ports.
Julia Palmer, a partner in the Houston office of law firm Holland & Knight, said the protectionist policies may require the use of U.S.-flagged vessels on certain exports and in petroleum exports, increasing the number of U.S.-flagged vessels.
She noted that in other countries that have adopted similar protectionist policies, such as Brazil, restrictions on international insurance and reinsurance have also been introduced.
But new or reflagged vessels and insurance restrictions could offer new opportunities to U.S.-based marine insurers, she said.
“If you’re requiring use of U.S. vessels, you could also expand that to require use of U.S. insurers,” she said. “There’s a potential for that. Lots of things would have to change in order for that to happen, but there’s certainly a potential for that.”
Conversely, Ms. Palmer said, restrictive trade policies could lead to less cargoes being shipped in or out of the U.S. and the closing down or limiting of certain markets.
“Cuba and Iran have been markets that the marine industry has been looking at as opportunities,” she said, “but there may not be opportunities if trade is limited.”
While restrictive trade can have a significant impact on the marine industry, Ms. Palmer said that “Brexit, oddly enough, plays into this mix in that you’ve got insurers looking for other markets to invest in, and the U.S. may be one that’s attractive.”
America’s ports are in need of investment and there’s been a push for many years for further investment and development of the U.S. ports, she said.
“So much of our port development work was done prior to World War II,” she said. “And ports projects require constant maintenance. A dredging project has to be done again and again to keep a port at a certain project depth level. So there are always projects to be done. And just as our bridge works and tunnels need work, so do many of our ports.”
Focus on megaships
Ms. Palmer noted that the condition of U.S. ports has become more significant given the recent expansion of the Panama Canal to accommodate so-called "megaships."
John Graykowski, a Washington-based maritime consultant, said he believes U.S. ports are doing “the best they can with the resources they have.”
“Other countries have consistently spent more money,” Mr. Graykowski said, “and continue to spend more money on modernization, upgrades, dredging and other things to make their ports competitive.”
Mr. Graykowski said he believed there is some optimism in the marine industry based upon the nominations of Elaine Chao as secretary of transportation and Wilbur Ross as secretary of commerce, “because they’re both familiar with the shipping industry and understand that the flow of commerce around the world depends on the freight industry generally.”
“It’s hard to be anything but hopefully optimistic because we have to see where things are going to go,” he said.
Mr. Graykowski is a former deputy maritime administrator and acting administrator in the transportation department, who oversaw the National Shipbuilding Initiative, which included issuance of more than $4 billion in loan guarantees for vessel construction in the United States.
“We just marched out with great purpose and effect from year one and built hundreds of vessels,” he said. “If you want to get people to work fast, almost immediately, there’s a cause and effect between signing a ship building contract and people going to work.”
One of the key factors in the shipping industry is the Jones Act, which, among other things, requires that all goods transported by water between U.S. ports be carried on U.S.-flag ships, constructed in the United States, owned by U.S. citizens, and crewed by U.S. citizens and U.S. permanent residents.
The act has been criticized as an anachronism in some conservative circles, but Mr. Graykowski described the statute as “the lifeblood, heart and soul pretty much of the U.S. maritime industry.
“I do have concerns to the extent that an influence in the Trump administration or in congress could cause the Jones Act to come under pressure,” he said. “There are significant adverse effects if the Jones Act was eliminated, major effects not only on the economy but also national security.”
NEW YORK — If President-elect Donald Trump follows through on his pledge to cut corporate taxes to 15% from more than 30%, it could lead to more mergers and acquisitions among insurers, a panel of equity analysts said.