The Law of the Sea Treaty: A View from Below

The high-level exchanges about the Law of the Sea Treaty (LOST) have come down on two sides.  Six secretaries of state argue that the United States must ratify and participate in order to protect its national interests, mainly military navigational freedoms.  Two former cabinet officers, by contrast, point out that we already have the navigational freedoms and that joining the international bureaucracy will complicate dispute settlement and make a host of other economic interests vulnerable to fatal compromise.

When I was a member of the U.S. delegation to the U.N. Conference on the Law of the Sea during the 1970s, it was obvious that there were two classes of U.S. interests.  One was a group of navigational freedoms enjoyed by the U.S. military, which were already well-established in customary international law.  The other interests were economic in nature.  These included fisheries, ocean mining, oil production from the continental margin beyond the 200-mile economic zone, pollution, scientific research, and others that may emerge in the future. 

The de facto position of the U.S. delegation was that all of the economic interests were potential pawns to be conceded in hopes of maintaining some of the navigational freedoms.  The Group of 77 developing countries soon discovered what the U.S. strategy was, and they demanded concession after concession.  Scientific research was the first to go.  Next was the revenue from the continental margin beyond the 200-mile economic zone.  Then the fledgling ocean mining industry was made uneconomic, to protect countries and companies that produce land-based minerals.

Fisheries would have been sacrificed except for the fact that the U.S. Congress adopted the Magnuson-Stevens bill excluding the foreign fishing fleets that were decimating the fish stocks in the nation's coastal waters.  True to form, the State Department and Pentagon vociferously opposed the Magnuson-Stevens bill, but to no avail.  The bill became law in 1976 and took effect in 1977.

It could be argued that there is nothing left to be conceded by the United States government.  But with that argument comes the opposite argument: there is nothing for other nations to gain in the negotiations to maintain navigational freedoms.  If this were true, there would be no danger in participating in the negotiations.  However, this is not true: there is considerable danger from participating in future negotiations.

My view as an economist is that a potential danger exists from the formation of a minerals cartel.  It could come about as the U.S. government tries to head off a new restriction on navigation.  It would be argued, as it has in the past, that U.S.  government participation in the International Seabed Authority would keep cartel formation from occurring.  But that ignores cartel theory and the experience with the coffee cartel under the Kennedy administration. 

For a cartel to be successful, it needs a mechanism to enforce output quotas so that members do not shave their prices and do not increase output, thus making them unable to siphon off a bigger share of the monopoly rents.  Under the coffee cartel, the enforcement mechanism was the U.S.  government.  As coffee bags came to ports of entry, they were checked against the country quota to make sure they were not in excess.  If they were in excess, the bags were sent back to the producing country.

It is easy to see that this could happen if the International Seabed Authority formed a minerals cartel, with the U.S.  government acting as the enforcement mechanism as a treaty obligation. 

There is nothing to be gained from U.S.  ratification of the LOST.  Indeed, there is much that could be LOST.

Jim Johnston is an economic advisor to The Heartland Institute.

The high-level exchanges about the Law of the Sea Treaty (LOST) have come down on two sides.  Six secretaries of state argue that the United States must ratify and participate in order to protect its national interests, mainly military navigational freedoms.  Two former cabinet officers, by contrast, point out that we already have the navigational freedoms and that joining the international bureaucracy will complicate dispute settlement and make a host of other economic interests vulnerable to fatal compromise.

When I was a member of the U.S. delegation to the U.N. Conference on the Law of the Sea during the 1970s, it was obvious that there were two classes of U.S. interests.  One was a group of navigational freedoms enjoyed by the U.S. military, which were already well-established in customary international law.  The other interests were economic in nature.  These included fisheries, ocean mining, oil production from the continental margin beyond the 200-mile economic zone, pollution, scientific research, and others that may emerge in the future. 

The de facto position of the U.S. delegation was that all of the economic interests were potential pawns to be conceded in hopes of maintaining some of the navigational freedoms.  The Group of 77 developing countries soon discovered what the U.S. strategy was, and they demanded concession after concession.  Scientific research was the first to go.  Next was the revenue from the continental margin beyond the 200-mile economic zone.  Then the fledgling ocean mining industry was made uneconomic, to protect countries and companies that produce land-based minerals.

Fisheries would have been sacrificed except for the fact that the U.S. Congress adopted the Magnuson-Stevens bill excluding the foreign fishing fleets that were decimating the fish stocks in the nation's coastal waters.  True to form, the State Department and Pentagon vociferously opposed the Magnuson-Stevens bill, but to no avail.  The bill became law in 1976 and took effect in 1977.

It could be argued that there is nothing left to be conceded by the United States government.  But with that argument comes the opposite argument: there is nothing for other nations to gain in the negotiations to maintain navigational freedoms.  If this were true, there would be no danger in participating in the negotiations.  However, this is not true: there is considerable danger from participating in future negotiations.

My view as an economist is that a potential danger exists from the formation of a minerals cartel.  It could come about as the U.S. government tries to head off a new restriction on navigation.  It would be argued, as it has in the past, that U.S.  government participation in the International Seabed Authority would keep cartel formation from occurring.  But that ignores cartel theory and the experience with the coffee cartel under the Kennedy administration. 

For a cartel to be successful, it needs a mechanism to enforce output quotas so that members do not shave their prices and do not increase output, thus making them unable to siphon off a bigger share of the monopoly rents.  Under the coffee cartel, the enforcement mechanism was the U.S.  government.  As coffee bags came to ports of entry, they were checked against the country quota to make sure they were not in excess.  If they were in excess, the bags were sent back to the producing country.

It is easy to see that this could happen if the International Seabed Authority formed a minerals cartel, with the U.S.  government acting as the enforcement mechanism as a treaty obligation. 

There is nothing to be gained from U.S.  ratification of the LOST.  Indeed, there is much that could be LOST.

Jim Johnston is an economic advisor to The Heartland Institute.

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