The maritime industry is without a doubt the major freight transportation vehicle for international trade since time immemorial. Despite air and land freight transportation, the maritime sector still transports almost 90 percent of all of the world’s raw and manufactured products around the globe. The majority of global freight shipments, 60 percent, is from and delivered to developing countries.
“Shipping is truly the lynchpin of the global economy,” according to a March 6 Maritime Knowledge Centre paper.
Transporting heavy products, such as crude or refined oil, earth metals, bulk agricultural goods, and the majority of manufactured goods from the world’s producing nations to the world’s consuming nations would be impossible without the shipping industry.
“We live in a global society which is supported by a global economy—and that economy simply could not function if it were not for ships and the shipping industry,” the Maritime Knowledge Centre paper states.
Freight Transportation in a Nutshell
The shipping industry has faced many problems over the past years, including the downturn of the global economy, energy prices that went through the roof, and the European Union crisis. Each and every one of these problems was disastrous in its own right and affected the shipment of goods.
In 2008, freight shipments were at 8.2 billion tons of goods. But in 2009, due to the global economic crisis, such shipments decreased by 4.5 percent to 7.8 billion tons. Then, in 2010, the shipping industry experienced an upturn, and total freight shipments increased to 8.4 billion tons, a 7 percent increase.
“By 2060 the 8 billion tonnes of cargo will have grown to 23 billion tonnes, and unless we do something about it that will expand the shipping carbon footprint by 300%,” forecasted Dr. Martin Stopford of Clarkson Research Services Ltd. in a 2010 article.
Freight shipments increased by 3.9 percent in December 2011 compared to November 2011. Between December 2006 and December 2010, freight shipments increased by 3.6 percent, and since December 2001, seaborne shipments have increased by 16.3 percent. For the full year 2011, freight shipments increased by 6.4 percent, an increase not seen since 2002.
“Shipments in December 2011 (113.7 on the index) were at the highest level in the 22-year history of the series. After dipping to a recent low in April 2009 (94.3), freight shipments increased in 22 of the last 32 months, rising 20.6 percent during that period,” according to a Feb. 8 release by the U.S. Department of Transportation’s Research and Innovative Technology Administration section.
Freight Shipment Disparity Addressed
“Canadian and Mexican ports are free to compete with U.S. ports for U.S. cargo. But they should do so on a playing field that is not artificially tilted by governments’ policies. So the primary question is: are we handicapping our own ports in international competition?” asked Richard A. Lidinsky Jr., chairman of the Federal Maritime Commission (FMC), according to an October 2011 FMC press release.
The FMC voted unanimously in 2011 to begin a Notice of Inquiry into unfair competition by Canadian and Mexican freight ports of entry, affecting U.S. ports of entry.
Based on complaints from U.S. Senators Patty Murray and Maria Cantwell and U.S. Representatives Rick Larsen, Jay Inslee and others, in October 2011, the FMC initiated an inquiry into U.S. importers moving freight shipments through Canadian and Mexican ports, instead of through U.S. ports, to reduce expenses. Foreign ports do not charge a Harbor Maintenance Tax, amounting to 0.125 percent on the value of the total shipment.
In a written response to the FMC’s request for comments by any interested party, Matthew Shay, president of the National Retail Federation stated, “We understand that ‘diversion’ of U.S. bound cargo to ports outside the U.S. is estimated to be roughly 6%.”
Shay also noted, for example, that retailers take into consideration a number of factors before choosing the port of entry for transportation of goods, of which the Harbor Maintenance Tax is just one small part.
“Among the primary considerations are speed to market, reliability of service, operational efficiency, workforce stability, proximity to the distribution network and the availability and cost of domestic transportation services,” said Shay in his response to the FMC.
The Canadian government sent a 17-page response to the FMC, pointing out, among other benefits, its “long-standing and mutually-beneficial relationship [with the United States] based on cooperation, shared values, and unprecedented levels of commercial activity.”
Citing statistics, Canada said that during the 10 years ending in 2010, ocean freight shipments entering Canadian, Mexican, and U.S. ports increased annually by 5 percent, 11 percent, and 3 percent, respectively, with the U.S. East and Gulf coasts accounting for over 80 percent of the total increases.
Based on evidence, the loss by the United States to Canadian ports averaged less than 2.5 percent of the total ocean freight shipments, while shipments for which the final destination is Canada amount to around 7.5 percent.
“Simply put, US ports handle a substantially higher percentage of Canada-bound containerized cargo than Canadian ports handle US-bound cargo,” said the Canadian government in its response.
Next...Piracy of Great Economic Issues
Piracy of Great Economic Issue
Of great issue have been this century’s piracies, which include hijacking and kidnapping, in the Gulf of Guinea in West Africa, the waters outside of Bangladesh, the South China Sea, and increasingly more in the waters outside of Somalia in the Gulf of Aden. Such attacks not only increase shipping costs, but also the insurance rates of all ships traveling through the abovementioned areas.
In 2011, Somali piracy directly affected nine different economic cost factors: ransoms, insurance, security guards and equipment, re-routing, increased speed, labor, prosecutions and imprisonment, military operations, and counterpiracy organizations. The total direct cost of these nine factors is estimated to be between $6.6 billion and $6.9 billion. The indirect costs of piracy could not be assessed.
“Of the total costs of $7 billion in 2011, over 80% were borne by the shipping industry, 19% by government, and less than 1% by civil society,” according to the article “The Economic Cost of Somali Piracy 2011,” released in 2012 and published by the One Earth Future Foundation.
In 2000, there were 469 piracy incidents worldwide, but only 22 near Somalia, 4.7 percent of all such attacks. By 2005, attacks worldwide had decreased to 279, and those near Somalia increased to 48 piracy incidents (17.2 percent). In 2009, worldwide piracy attacks increased to 406, of which 217 (53.45 percent) were attributed to Somali pirates.
“While the success rate of pirate attacks in 2011 has declined from 27% in 2010, to 13% in 2011, there has been an increase in both the number of attempted attacks (from 152 in 2010, to 189 in 2011), as well as the ransom price. In other words, pirates have been securing equal or greater value for less hijacked vessels,” according to the One Earth Future Foundation article.
