Monday, 7 March 2016

Our Euro-centric attitudes to trade hold us back

If you're a regular reader of this blog you know I have a somewhat obsessive fixation with the shipping industry. That's because it's so far reaching significance and a huge indicator of the extent of global governance. If you're watching the shipping industry and the connected issues you can learn a lot about global trade and the implications therein.

You would assume that with so much depending on smooth operations and unimpeded supply chains that things would be a good deal more harmonised than they are - and you would also assume that this would be cutting edge technology led. It isn't. Not by a long shot.

So much so that we are starting to see the likes of Amazon moving into shipping. They have identified the sector as the weak link in the chain, and since they have vertically integrated logistics on land and in the air, why should they not look to the seas? As much as there are physical barriers to trade there is a world of technical barriers still to be addressed. 

The latest row to hit the sector is over the new container weight regulations requiring shippers to provide the verified gross mass of all export containers points to a chaotic rollout of the rule when enforcement begins in July.
In a bid to counter widespread misdeclaration of container weight, the International Maritime Organization has placed the responsibility for ensuring the correct weight of loaded boxes with shippers. Through the IMO’s Safety of Life at Sea convention, shippers from 162 countries that are signatories to SOLAS will have to provide the verified gross mass of each loaded container to the terminal and carrier or the container won’t be loaded.
But with just four months before the regulation takes effect, the rule remains a moving target, with official sources releasing confusing information and doing little to calm industry nerves. The rule “could raise already chronic congestion at the ports that are slowed by chassis management issues, higher cargo loads from larger vessels and inadequate inland or intermodal links,” Fitch Ratings warned in a recent research note to investors.
Many shippers are calling for a delay of up to a year to the amendment but the U.S., Canada and Europe have shown no indication they will ask the IMO for more time. Russia, however, said it plans to ask the IMO for more breathing room, while China has been silent, with reports that some ports are preparing for enforcement and others are ignoring it.
In basic terms, it's a mess. And the thing about chains is that if just one link is broken then you don't have a chain. And this is regarding one rule from one institution in one industry.

And what has this got to do with Brexit? The answer is, not a lot. All it shows is that the EU is not alone in making a pigs ear of regulations. But what we can assume is that these regulations haven't simply appeared from the ether. The shipping companies themselves will have had a say.

The big drive is to improve safety and bring down insurance costs, in which stacking order plays a huge part in the stability and safety of container ships. There is reason to oppose it in principle. What matters is the roll-out and the deadlines. The are huge costs and considerable externalities.

In this, national governments have their own part to play, and we can be sure the EU had something to say to about it. And this is why I would advise caution in assuming Brexit is a silver bullet. Regulatory issues do not vanish, nor can we simply walk away from this very necessary task.

What it suggests to me is that the International Maritime Organisation is every bit as dysfunctional as the EU and if there ever was a case for pooled sovereignty, it is not over nations, but over ports - globally. It should be clear by now that shipping is major need of reforms and the industry is overdue a huge correction that simply isn't happening fast enough.

Trends suggest that we need smaller ships servicing more destinations - and that the era of mega containers was an outlier as a consequence of a global debt boom, fuelling a boost in consumer demand. Now we see that it is necessary to open up new new markets to maintain the same level of trade, for which super-size container ships are not appropriate.

If we can bring more destinations on stream, toughening up environmental regulations to take older, less compatible ships out of circulation we can stimulate shipbuilding for the new paradigm. Again that is more an IMO area than EU, where an independent Britain could initiate such moves.

The industry will moan, as indeed it always does, but it has been told all too often to get its own house in order. It hasn't. And in tackling the oversupply of ships, incentivising scrappage, we take a lot of the black market ships out of circulation - those feeding the counterfeit goods market and offshore weapons factories. Such will certainly not harm our efforts to clean up the Greek economy of its massive corruption problem.

Unusually, I'm not going to commit to any hard and fast conclusions, save to say there is much happening outside of the EU sphere, and major work to do in terms of global harmonisation and simply focussing on Europe is somewhat parochial. It matters not a jot if we have modern automated ports with the best compliance possible if the partner ports are still in the dark ages with uncooperative governments and obsolete equipment. We need a global initiative.

One could argue that EU "clout" is what we need to sort it out, but I would argue that it needs leadership - and who better to lead the world in maritime issues than the UK? That clout we supposedly enjoy as part of the EU evidently doesn't work and the input of landlocked states with no real ocean exports add no real value to the debate. In this, the WTO Trade Facilitation Agreement is far more relevant to enhancing global trade and creating jobs, along with solving the many issues in global shipping.

We have seen some progress with EU moves to sort out its own ports, not least with the Port Services Directive (PSD), which is more of a headache for European ports than our own. Unlike Daniel Hannan, I don't oppose it on principle in that EU ports are long overdue liberalisation. We just don't need it here.

As it happens, port privatisation was one of the conditions of the Greek bailout and an insistence on a more competitive industry is actually exactly what we want from the EU. But it's one of those instances where the EU needs us more than we need it. We definitely don't need anybody telling us how to run our ports.

What we do need, however, is for the same to apply to Indian and American ports. The Indian government recently agreed a key law which will allow foreign container shipping lines to operate between Indian ports. This is the same global agenda driving the EU Port Services Directive. Surprisingly, the slow man is the USA.

In this, quite clearly, the EU should not be the focus of our attention. We need far greater global participation in order to revive trade. In this there is no value in Britain being subordinate to the EU at the IMO or anywhere else, and seeing how we could deal directly, we could even act as an agent for the EU. A real partnership. Real cooperation.

A lot of this is speculation, but I'm tuned into shipping news channels and it would appear the industry experts also struggle to bring clarity to it all. What we can say is that the opportunities are many, and again we are not well served by our euro-parochialism. There is life beyond the EU and massive scope for boosting global trade - but only if we have our own integrated trade and aid policy and stop delegating to the EU, which in turn delegates to do-gooder NGOs who are accountable to nobody and have wholly different agendas.

What we see from Hannan and the likes is opposition to regulation for its own sake, especially so because they believe it comes via the EU. It's a variant of Bent Banana Histrionics. The worst kind too; libertarian hypocrisy. Better regulation that opens up ports to competition and brings efficiency to supply chains could well be the engine of global growth - but only if we think globally and deal direct with the people who really make the rules. The IMO and the WTO should be the focus of our attention. There is a big mess to clean up.

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