Wednesday, April 21, 2004

Buy ferries offshore if that's the best deal

VICTORIA - The Liberals have got it right on the issue of whether BC Ferries should go offshore to buy new ships.
The Liberals say BC Ferries should shop for the best price, which likely means future additions to the ferry fleet will be built somewhere like South Korea.
NDP leader Carole James, and shipyard unions, want the government to order the ferry corporation to insist on a "Made in B.C." label, even if the ships cost more.
That's a bad idea, both on principle and in practical economic terms.
James claims that it's worth paying a premium - she hasn't said how much - because the money would create jobs and economic activity in the province.
But what she's really saying is that ferry users - businesses, tourists and locals - should donate money to subsidize the owners of big shipyards and their employees. After all, the extra cost of the ships has to be recovered, and that means higher prices for ferry users. Every time a shipper transports goods on BC Ferries, he'd be paying a premium to subsidize the shipbuilding companies.
Sure, there is some benefit to having ships built in B.C., in terms of job creation.
But it would come at cost to the rest of the economy. BC Ferries plans to place orders for two new major ships this year, at a cost of about $225 million. Paying a 10-per-cent premium to buy B.C. means ferry users would be paying some $25 million as a subsidy to the shipyards.
Every ferry trip would cost more than it needed to, and that also has economic implications - for tourism, for businesses dependent on the ferries and for individuals.
It's not even as if the subsidies would be helping to establish a major shipbuilding industry that could someday stand on its own.
We've tried that. The $460-million fast ferry project was supposed to develop a global aluminum shipbuilding industry in the province. It failed. The Canadian shipbuilding industry has successfully lobbied for a 25-per-cent tariff on most foreign-built ships and a string of subsidies and handouts.
They haven't worked. Sales have fallen in half over the last decade, and employment across Canada has gone from 12,000 to fewer than 5,000.
Part of the problem is that other countries are doing the same thing, subsidizing their industry with tax dollars. But lower wages, especially in Asia, also mean ships can be built more cheaply there. (Slamming the door on foreign ships would deny those workers the chance to use their energy and skill - and current lower living standard - to improve their lot.)
B.C. shipyards deserve every chance to compete. And there is lots of work they will likely continue to win, especially in repair and maintenance projects where proximity is a big advantage.
But asking ferry travellers to pay a premium or hidden surcharge to subsidize B.C. shipyards is unfair and economically destructive. Unfair because there's no way a minimum wage worker who needs to use the ferries to make an involuntary contribution to the owners of B.C. shipyards. And economically destructive because the higher ferry costs created by the subsidy damage other businesses.
It's odd that James has grabbed on to this issue. The fast ferry fiasco shredded the NDP's credibility when it comes to shipbuilding policy. Leaping into this fray - on the side of unions and shipyard owners and against the interests of ferry users - just reminds voters of that disaster.
B.C. builders - which effectively means the U.S.-owned Washington Marine Group when it comes to large projects - should get every chance to bid.
But the deciding factor should be where the ferry corporation can get the best value.
That's the right thing to do for ferry users. And it's the right thing to do for the B.C. economy.
Footnote: It's ironic that while B.C. workers are suffering because of unfair U.S. trade barriers erected to keep our softwood out of their market, the New Democrats and some unions want to throw up the same kinds of barriers against foreign shipbuilders. Trade breaks down quickly when every country decides to bar the door to new competitors.

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