Economic Effects of Cargo Preference Laws

Using 1980 shipping data, GAO analyzed the dependency of the U.S.-flag fleet on cargo preference laws, the economic effects of cargo preference, and the effect of eliminating the cargo preference requirement for the Food-for-Peace program.

Cargo preference laws mandate that at least 50 percent of all U.S. Government-owned or -financed cargo shipped between American and foreign ports be carried on U.S.-flag ships. GAO believes that the following general conclusions regarding the effects of cargo preference laws are valid provided the assumptions used in analyzing 1980 data remain applicable: (1) the maritime industry depends on cargo preference laws for some of its cargo, but not all government cargo carried on U.S.-flag ships is transported because of cargo preference laws; (2) additional U.S.-flag ships and American crews are employed in transporting government cargo; (3) the government pays more to ship its cargo than it would if it were allowed to use less expensive foreign-flag ships; and (4) the Food-for-Peace program is a major source of cargo carried on U.S.-flag ships because of cargo preference laws.