Continuing to elaborate upon my previous themes on Maritime Regulation/Deregulation. (here, here and here).
Part 1
Canada (aka America’s Hat)
As the title so aptly states, “Short Sea Shipping: A Canadian Perspective” by Brooks and Frost (2004) approaches the topic of short sea shipping from a Canadian perspective – but gives due consideration to the association with the United States – particularly in connection with NAFTA. In that, Brooks and Frost provide a valuable summary of existing regulations – as of 2004 – in the US, Canada, and Europe while examining what legislative functions would need to be modified in order to broaden acceptance of short sea shipping as a viable transportation method. Significantly, one highlight of existing policies in North America is that NAFTA as a general agreement, made no dispensations for existing cabotage regimes either with respect to the Jones Act in the US or additional, similar regulations in Canada or Mexico – although the latter two countries did sign an additional bilateral treaty to address the issue. Tellingly, given the geographic and port situations between the two countries, it has had far less tangible effect than a liberalization of policies by the US would have produced across the board (Brooks, 399). The basic domestic cabotage policy requirements for Canadian shippers are also similar to those imposed by the Jones Act with respect to flagging, construction, and crewing requirements – and the potential tax liabilities for failing to meet those requirements. In some cases, however, the regulations appear somewhat more piecemeal – and potentially contradictory – than the all-encompassing Jones Act (and accompanying legislation) in the US. For instance, Canadian safety standards for new vessels are reportedly more onerous and expensive to meet than the internationally accepted IMO standards – while at the same time, a number of existing Canadian flagged ropax vessels would not meet the IMO standards if they were formally accepted as a baseline by the Canadian government (Brooks, 399). While Brooks and Frost appear to be in favor of expanding short sea shipping as an alternative to trucking – particularly in the congested I-5 and I-95 corridors – much the same as Perakis and Denisis – they are cognizant that there is no financial incentive (big surprise) to shippers utilizing current technologies – under the current regulatory regime. In order to develop a competitive alternative, particularly focusing on international traffic between Canada and the US – a market with growth potential on the East and West Coasts – both the US and Canada would need to amend their regulatory structure in order to remove port and cabotage restrictions (Brooks, 401). It bears mentioning additionally, that while the EU historically has a more robust short sea shipping sector – even following loosening of EU regulations – the service still fails to meet the just in time requirements for many shippers who continue to prefer rail or truck services for efficiency – even in light of carbon taxes or greater fuel expenditures (Brooks, 398).
The EU
Similar in tone and content to Perakis and Denisis (2008), Medda and Trujillo (2010) provide another set of good arguments in favor of short sea shipping – while in turn referencing the current policies in place across the globe – but are forced to acknowledge that a number of the current structural and economic disadvantages are still unable to be overlooked without new incentives.
While on the surface the advantages still appear to outweigh the weaknesses, particularly when it comes to public perception and environmental considerations, the fact that these issues do not necessarily have any impact on concerns espoused by shippers has severely hampered the implementation of short sea shipping in regions where it does not have a historically strong foothold. Medda and Trujillo are also careful to point out that governments to date have neither provided sufficient incentives for shippers utilizing short sea shipping or disincentives for road and rail transportation. Additionally, they are careful to note that in the EU at least, decreasing some road traffic would result in significantly decreased tax revenues for localities relying on said funds for structural maintenance and general welfare – a decidedly negative and potentially unforeseen consequence of implementing more short sea shipping (Medda, 293).
Noting the importance of efficient shipping technologies within the more limited scope of short sea shipping, the authors also recommend directing more attention towards Roll-On/Roll-Off (RO-RO) and Float-On/Float-Off (FLO-FLO) cargoes as the sort that shippers would see the most efficiencies from backing – in these early stages – in spite of the larger initial capital expenditures (Medda, 296). Similarly, many smaller ports still require significant infrastructure improvements in order to meet shippers requirements for speedy cargo handling – container or otherwise – to justify the increased focus on short sea shipping as a time-efficient alternative to road or rail transport (Medda, 297).
Paixao and Marlow (2001) provide a detailed chronological summary of EU (and prior to that, the EEC) shipping policies – addressing the various organizations and policy directives that were promoted as the Union expanded and developed. A significant amount of detail is utilized in reviewing the distinctions between mainland Europe and the outlying, more insular regions – and the need to tailor policy accordingly. In a familiar refrain, the adoption of a cabotage system or short sea shipping policy by the EU was reactive rather than proactive in response to the first expansion which added several non-continental members (Paixao, 188). Furthermore, it wasn’t until after several Northern European nations had already established free shipping agreements between themselves that the EU even began to review an official uniform trade policy on cabotage (Paixao, 192). Similarly, the short sea shipping concepts that function efficiently in some regions don’t work as well compared with trucking or rail transport in other regions.
Australia and New Zealand
The timing of Everett and Robinson’s (1998) research is set in a period in the mid to late 90s during which the Australian government was examining options on modernizing or updating its policies and does not reflect a true change in status or legislation. Additionally, the focus is more on the nationalized state of the largest domestically flagged lines – the Australian National Line (ANL) – and their inefficiency – more than any specific examination of cabotage. Everett and Robinson provide a general history of the Australian National Line and its relationship with the national government, and as a general rule, the observed inefficiencies fall along lines similar to associated protected industries in other nations (Everett, 270).
Operating from a protected position domestically, the ANL historically posted losses in spite of traditional trade barriers via cabotage policies and favorable government treatment and subsidies. At the time this article was written, several policies had been passed to increase competitiveness by shrinking mandatory crewing requirements, but there were no definitive adjustments to the established cabotage restrictions on the domestic coasting trade (Everett, 283). To date, there have been no loosening of restrictions in this market, although following the recommendations made through the Harper Competition Policy Review, there is a better likelihood of a shift towards more flexibility in response to the markets in an effort to increase market competition and greater benefits to the domestic community (Thompson).
Cavana’s (2004) study of New Zealand contrasts significantly with other countries reviewed for this paper. (Refreshing!) New Zealand’s existing cabotage laws were formally removed in 1995 – although international ships transporting cargo between domestic ports must still have delivered imports or picked up exports (Cavana, 182). After almost a decade of unrestricted trade, Cavana was commissioned by the government of New Zealand to determine whether there was any inherent benefit to reintroducing a cabotage program in whole or part. This paper was the end result of analytical discussions reviewing 83 stakeholder submissions to the Shipping Industry Review team assisting in determining how best to increase participation in the New Zealand shipping industry (Cavana, 179).
As a smaller, more isolated country largely dependent on imports while primarily exporting commodities, New Zealand is in a different position than the US and Canada – although the cabotage policy shifts reflect only a portion of a larger effort to become more of an “open economy” (Cavana, 182). By the time of this paper in 2004, market estimates indicated that international shippers had captured approximately 10-15% of the domestic coastwise shipping market, but even those estimates are difficult to quantify due to the fact that a portion of the resulting increase in traffic also appears to come from international shippers transshipping internationally bound containers between domestic ports for convenience. In this article the practice is referred to as “hubbing” – where one ship will drop off containers at a central port for another ship owned by the same company to pick up – or use feeder services to move to another port for pickup. Container traffic rose approximately 5% per annum between 1995 and the publication of this article in 2004. Accordingly, some of the smaller domestic shippers saw additional traffic as they are received more business participating in the movement of tranship containers between domestic ports (Cavana, 185-186).
Although the sample sizes are small, initial numbers during the period encompassed by this paper indicate that domestic shipper container shipping costs dropped by as much as 50% and at least one domestic shipper saw a 100% increase in volume. The shipping cost decreases vary greatly depending on the routes, however – due to the fact that most international shipping traffic utilizes a north to south route along the coast. Similarly, in a limited case scenario provided, farmers in one region see a much better return on grain sales due to the cheaper shipping options offered. The low transportation rates offered by coastwise shipping (domestic and international) force railroad and trucking services to maintain low prices to stay competitive (Cavana, 187)
Consequently, at the time of publication, Cavana recommended against reintroducing cabotage but suggested leaving it open as a future option subject to economic climate shifts. Over a decade after this assessment, cabotage has not yet been reintroduced by the government of New Zealand (NZIER, 45) .
Some links don’t work based on library links – article information provided in case anyone else wants to look them up later:
Brooks, Mary R. & James D. Frost. “Short Sea Shipping: A Canadian Perspective.” Maritime Policy and Management. Vol 31: No. 4, (2004): 393-407. Web. 11 Jun. 2016.
Medda, Francesca and Lourdes Trujillo. “Short-Sea Shipping: An Analysis of Its Determinants.” Maritime Policy and Management. Vol. 37: No. 3, (2010): 285-303. Web. 31 July.
Paixao, A.C. & P.B. Marlow. “A Review of the European Union Shipping Policy.” Maritime Policy and Management. Vol 28: No. 2, (2001): 187-198. Web. 11 Jun. 2016.
Everett, Sophia and Ross Robinson. “Making the Australian Flag Fleet Efficient: Dysfunctional Policy Processes and the ‘Play of Power’.” Maritime Policy and Management. Vol 25: No. 3, (1998): 269-286. Web. 12 Jun. 2016.
Cavana, Robert. “A Qualitative Analysis of Reintroducing Cabotage onto New Zealand’s Coasts.” Maritime Policy and Management. Vol 31: No. 3, (2004): 179-198. Web. 11 Jun. 2016.
