Liberia's 'Flags Of Convenience' Help It Stay Afloat

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MELISSA BLOCK, HOST:

The economy of Liberia has been hit hard by the Ebola crisis. Tourism has vanished. Exports have dropped off. Markets are closed. But there is still one unusual way that Liberia is bringing in money, a way that's unaffected by the crisis. Julia Simon reports for NPR's Planet Money team.

JULIA SIMON, BYLINE: Go to any seaport in America and look at the flags flying from the back of the giant ships, the tankers, the container ships. You will see something that looks like an American flag but not quite. These flags have one star on the blue field - the Liberian flag. This does not mean the ships are from Liberia or that they've ever visited the place. They've simply paid a fee to fly the Liberian flag.

ELIZABETH DESOMBRE: The whole thing is just weird.

SIMON: Elizabeth Desombre studies the so-called flags of convenience. She's a professor at Wellesley College. And she says the oceans are filled with ships that have never been to the countries where they're registered. Panama is a popular one. Marshall Islands.

DESOMBRE: It's very easy to register from wherever you are in the world.

SIMON: This flag of convenience thing comes from early 20th century international law. For century, ships flew the flag of their home country, usually the home country of the ship owner. And this meant that they had to follow all the laws of that country, even when they were half a world away. But in the last century, certain countries started to say, hey, come register here. We have different laws. We'll give you a flag. We're cheaper and easier.

DESOMBRE: Part of that cheaper and easier process means fewer regulations. So, you know, we won't necessarily join all those international rules that require that you act in a certain way on the ocean.

SIMON: With a flag of convenience you may not have to pay your sailors as much or maybe you could make them work longer hours. This is what Liberia offered. Although, they didn't come up with this idea themselves. Liberia owes its flag of convenience to a plan by an American guy - Edward R Stettinius Jr.

RODNEY CARLISLE: In the last year of Roosevelt's presidency, he served as Secretary of State.

SIMON: This is historian Rodney Carlisle.

CARLISLE: Professor emeritus from Rutgers University.

SIMON: And Carlisle says that as Stettinius headed home from Europe at the end of World War II, he made a stop in Liberia. He saw it was poor, underdeveloped, rich in natural resources. He decided he wanted to get American businesses to invest. Stettinius knew a lot of people in big American corporations. And he heard them saying, we want to have a new country where we can easily register our ships, a new flag of convenience. Stettinius thought, Liberia. It's perfect. Carlisle says standard oil lawyers even helped draft Liberia's shipping law.

CARLISLE: It was sort of done behind-the-scenes. And the Liberian legislator dutifully passed it.

SIMON: Not only was the law designed to help American businesses, it was set up to be run from an office in the U.S. and managed by Americans. By the late-1960s, Liberia's was the biggest registry in the world. It's in second place today, right behind Panama. But it's still run by an American - this guy.

SCOTT BERGERON: My name's Scott Bergeron. I'm the CEO of the Liberian registry.

SIMON: Bergeron says Liberia doesn't have to do much. Every year, the registry business sends some of its profits back to the Liberian government.

BERGERON: This is somewhere north of $20 million per year.

SIMON: Twenty million dollars may not sound like much, but Liberia is a very small country. The fees from registering ships make up about 6 percent of the national budget. And more importantly, in a time when all other businesses in Liberia are reeling from the Ebola crisis, this is money that flows into the budget no matter what. For NPR News, I'm Julia Simon. Transcript provided by NPR, Copyright NPR.