Study Says Cruise Law Limits Growth

A coalition that wants to change an arcane federal law that forbids foreign cruise ships from calling at two U.S. ports in a row is releasing a study today predicting a rising tide of economic benefits for Los Angeles and other California port cities if parts of the Passenger Services Act were sent to a watery grave.

Legislation is pending in the U.S. Senate that would amend the 111-year-old law--which was originally intended to protect U.S. ferryboat operators on the Great Lakes--so that cruise lines can offer domestic itineraries.

If the legislation were to pass by next year, revenue from cruise passengers would jump more than 130% in California by 2003 because large cruise ships that fly a foreign flag would be allowed to stop at additional California ports. Most major cruise lines, even those based in the United States, operate ships under foreign registries for tax and other financial reasons.

“The [Passenger Services Act] legislation really protects no one anymore and does nothing but impede commerce,” said George Kirkland, president of the Los Angeles Convention & Visitors Bureau.

Some maritime unions have opposed changing the Passenger Services Act, fearing that it might bring more foreign competition for U.S. jobs and that momentum from changing the PSA might be used to undermine laws protecting the U.S. cargo shipping industry. The cruise industry has remained cautiously on the sidelines of the effort.

But the study commissioned by the Cruising America Coalition predicts that changing the PSA would create a market for new cruises along the California coastline, and from California ports to Hawaii, Alaska and Mexico.

A foreign-flagged cruise ship now cannot travel from Los Angeles to Alaska, for example, without stopping at a foreign port, such as Vancouver, British Columbia.

Without changes in the PSA, California’s share of the cruise industry will continue to grow at between 7% and 9% a year, according to the coalition’s study conducted by Applied Development Economics in Berkeley.

Cruise ship calls in California would grow from 500 in 1996 to 850 in 2003 without amending the PSA. Changing the law would boost that total to 1,330, the study predicted.

That larger increase would translate into a 131.4% jump in business receipts and tourist spending in 2003, a 139.9% hike in industry jobs and a 170.6% rise in tax revenues compared to 1996, the study said.