Chapter 18

Shipping Policy and Globalisation; Jurisdictions, Governance and Failure

Michael Roe*

1. Introduction

The shipping industry is characterised by a number of very specific features which make it unlike almost any other. In particular it is inherently mobile – both physically in that ships can be moved with relative ease to a very large number of world locations – and in terms of capital, which involves no physical movement of assets necessarily, but a transfer of ownership, registration or other features to wherever makes most financial sense. These two features are intrin sically linked in that the capital mobility of shipping is enhanced by the physical mobility of the assets which subsequently makes any sort of compulsory national, state association very difficult.

These two features of mobility are also fundamentally important when it comes to the issue of policy, and in this chapter we shall be examining the derivation of shipping policy and in particular the relationship between shipping policies at different levels of jurisdiction of origin and imposition – international, supra national, national, regional and local (Roe, 2007c, 2009c). The issues of mobility outlined above are the major feature of shipping which drives policy at all levels, although not to the exclusion of a large range of other factors which needs to be assessed.

This chapter will also place shipping policy in the context of the growth of glob alisation and its close relations, foreign direct investment and strategic alliances discussed in the recent works of Frankel (1999), Ryoo and Thanopoulou (1999), Thanopoulou et al. (1999), Peters (2001), Randay (2001), Sletmo (2001), Slack, Comtois and McCalla (2002) and Selkou and Roe (2004) – developments which the shipping industry has experienced often before any other and which are characteristic of the complexities that surround governance policy relationships in the industry. These issues have been further developed by Roe in a series of publications (2008a, 2008b, 2009a, 2009b, 2009c).

This chapter is structured into seven sections. The second section outlines the develop ment of research into shipping policy and examines the range of different studies that have taken place across the world and the common themes that have emerged.

The third section provides a model of the major themes that underlie shipping policy today and which are foremost in determining the detailed policy initiatives that have emerged in the late twentieth and early twenty-first centuries. It also incorporates the development of a new model of shipping policy that attempts to represent the more important influences that drive and direct policy-making at each level.

Using this new model, the fourth section introduces the concepts of spatial policy levels – international, supra-national, national, regional and local – and provides examples of activities at each jurisdiction. Here the specific problems associated with deriving effective and inter-linked policies for the shipping industry become apparent.

Policy can never emerge in any sector without interest groups – government, industry, employers and employees, pressure groups etc – and shipping is no exception. Section five looks at the role of interest groups using the model provided by Aspinwall (1995) and other work by Lu (1999) and how these affect the interrelationships between the spatial levels of jurisdiction that exist.

Section six follows the work of Ledger and Roe (1993) and examines the contextual factors that affect the industry in the derivation of policies; this further illustrates the problems of linking policies in shipping between the jurisdictional levels outlined in section three.

The final section incorporates the role of globalisation and its impact upon shipping industry policies. In particular it focuses upon the problems of reconciling the linkages between the jurisdictions of policy that exist and an industry that works outside of many of the constraints that these policy jurisdictions assume. The chapter ends with a summary of the issues and conclusions including an assessment of future policy issues.

2. Shipping Policy – A Spatial Perspective

Shipping policy is an area of research that has attracted interest over many years focusing on issues from subsidies to safety, the environment to employment, from taxation to inter-modalism and more. The key theme of this chapter is the problems inherent in linking together the different spatial levels of policy-making across the variety of jurisdictions that exist. The discussion deliberately focuses upon the international, supranational and national levels as attempting to include regional and local issues would prove to be too specific and complex.

The literature noted here is not exhaustive but indicative of some of the trends in spatial shipping policy and jurisdictional concerns that exist. The international jurisdiction for policy-making has been well documented and important works include those by Gold (1981) and Li and Cheng (2007) on the international maritime sector in general, Schrier et al. (1985) on liberalisation in shipping, Benham (1994) on UNCTAD’s role in the shipping sector, Moyer (1977) and his analysis of shipping subsidies, Frankel’s works (1989, 1992) on shipping, logistics and ports, Yannopoulos (1989) on shipping policy in general, Ademuni-Odeke’s (1984) work on protectionism and shipping, Li and Wonham’s (2001) discussion of the specific policy issues relating to safety, and the earlier seminal work by Goss (1982).

Examples of work at the supra-national level can be found in the extensive literature concerning the European Union including the seminal works by Bredima-Savopoulou and Tzoannos (1990), Wang (1993), Hart et al. (1993), Peeters et al. (1995), Aspinwall (1995), Urrutia (2006) and Tongzon (2007) and the journal articles by Van Der Linden (2001), Paixao and Marlow (2001) and Marlow and Mitroussi (2008). In addition, the over-arching supra-national issues and their conflict with national priorities are discussed in Brooks (2000) in terms of liner shipping policies and the relationship between the USA, Canada and the EU. There is also a large number of other publications which dwell on the specifics of policy at the EU level and the complexities of imposing such policies on nation state members who may or may not be willing to co-operate. Aspinwall’s work here is especially significant and will be referred to later in some depth.

In Eastern Europe, the work by Ledger and Roe (1995) and Roe (1998, 2007a, 2007b) dominates the discussion of shipping policy issues in a framework where there is no overriding authority (unlike in the European Union) but where regional commonalities are sufficient to suggest that a supra-national consideration of policies and policy implementation is appropriate. The authors stress the difficulties of intro ducing common-themed policies for the distressed shipping industries of Poland, Romania, Bulgaria Ukraine, Russia, Latvia and Lithuania in the light of common approaches to EU accession and the need to meet a set of widely applied rules and requirements is clearly apparent. This is particularly the case where national demands (and even regional and local ones within a country) conflict with the more over-riding needs and demands of the newly adopted supra-national authority.

Other pseudo supra-national policy work is typified by that of Hawkins and Gray (1999, 2000), Sun and Zhang (2000) and Hawkins (2001) for the Asia-Pacific region which again lacks a supra-national authority to give it coherence and even less so than Eastern Europe, suffers from the absence of an over-riding driving force of potential EU membership which acts to compel national policies to work with each other and at different levels. Similar work in the Caribbean is provided by Wilmsmeier and Hoffmann (2008).

At a national policy-making level the published work is extensive and only a few sources can be noted here. In terms of UK policy much has been produced following the introduction of a tonnage tax system in 2001 – an issue itself that raises conflicting views with respect to the requirements of the EU, relations with neighbouring countries and the international (for e.g. through the effect on flags of convenience) and regional (for e.g. employment) implications. Particularly significant publications include Brownrigg, Dawe and Mann (2001), Selkou and Roe (2002) and broader policy discussions can also be found in Colvin and Marks (1984), Gardner (1999), and Gardner, Naim and Obando-Rojas (2001).

Discussion concerning policies and policy-making in other countries is extensive. For example, Poland receives attention from Walenciak, Constantinou, and Roe (2001) and Wrona and Roe (2002), Taiwan from Lu (1999), the USA from Whitehurst (1983)³, Iran from Mirmiran (1994), the USA from Sletmo and Williams (1981), Nigeria from Omosun and Nasiru (1987), Japan from Goto (1984) and Managi (2007), Turkey from Yercan (1999), Yercan and Roe (1999) and Barla et al. (2001), China from Flynn (1999), and Sun and Zhang (1999), and Korea from Kokuryo (1985), Lee (1996, 1999) and Song, Cullinane and Roe (2001). There are many other discussions focusing upon other countries of the world emphasising the significance of the national level of policy-making that exists in shipping and its importance in relationship to other jurisdictional levels.

3. The Factors that Drive Shipping Policy

Hoyle and Knowles (1998) provide a basis for analysing the generic factors that underlie the emergence of transport policy at the end of the twentieth century. These factors can be used as a basis for understanding the development of shipping policy worldwide. From there we can go on to look at the development of shipping policy under different jurisdictions before analysing the problems manifest in linking these policy levels together and in achieving a meaningful and efficient governance framework.

The work of Hoyle and Knowles was directed essentially at understanding transport activity from a spatial perspective and for this reason is particularly suited to our discussion, although they were not considering policy making, governance and policy applications, nor the shipping sector specifically. Nevertheless, the structure they employed is useful consisting of five main factors that can be applied to the maritime sector:

1. Historical perspective. The shipping sector is partly at least, directed by its past, either immediate or more distant. Thus traditional trade routes, port locations and maritime seats of power are all established features of the market place. Shipping policy tends to emerge from, or be associated with, the established network of trade patterns, centres of activity and centres of power. Any policy development – regardless of where it emanates from – has to take this into account as well as any changes to the world maritime scene such as the emergence of new routes, ports or maritime powers. Services associated with exploitation of North Sea oil, the development of the Port of Fos/Marseille and the rise of China in world shipping are all recent examples.
   
2. Nodes, networks and systems. The shipping sector is essentially a combination of nodes (ports), networks (trading routes) and systems (the organisation and infrastructure that connects the other two items together – including communications, financial agreements, a legal framework, shipbrokers, freight for warders etc.). Both governance and policy making ultimately is about all these elements and the environment it creates for them. This might be to encourage activity in a certain location, trade or at a certain time (e.g. favourable tax regimes in EU Member States for shipping), or to control unwanted activity (e.g. sub-standard environmental or safety practices). Policy-makers have to understand the series of inter-linkages that exist if the policies they create are to be specific, meaningful and to achieve what they are aimed to do. A suitable governance framework makes these linkages possible.
   
3. Modal choice, intermodalism and flexibility. Shipping works in a highly competitive environment, not just within the industry itself but also in competition with other modes. In Europe, short sea shipping faces intense competition from trucking across the whole continent, whilst even international rail services are increasingly competitive, as developments in East European infrastructure continue and new investments such as the Channel Tunnel and the Oresund link have become fully operational. Policy-makers need to have a full view of the choices available to shippers. In addition, the concept of intermodalism continues to expand with the support of the EU, so that shipping is now commonly seen as one link within a complex intermodal chain – including trucks and trailers on ferries, rail ferry operations, containerised services and the multitude of specialist facilities needed to ensure an adequate inter-linkage. Policy making in shipping has much to do here to ensure that developments are co-ordinated and that the shipping industry plays its full role.
   
4. Deregulation and privatization. Both deregulation (the reduction or removal of state control and influence) and privatisation (the partial or complete transfer of ownership from the state to the private sector) have been major trends worldwide in many economic sectors for some years now. Shipping is no exception. The substantial developments in Eastern Europe have resulted in many examples of both trends, but elsewhere the privatisation of ports, state shipping companies and ancillary activities coupled with the attempts by the EU to reduce state interference through relaxing cabotage rules and reducing state subsidies have been apparent also. Shipping policies have reflected these trends since the 1980s and will continue to do so although par adoxically, the need for tighter safety and environmental controls and the desire to see reduced state interference has raised government involvement at all jurisdictions in policing the industry’s activities.
   
5. Holism. Shipping policies have to recognise that shipping is part of a much wider activity that is closely linked with a multitude of other economic, social, political and technological developments which both influence the ship ping environment and are influenced by it. Thus shipping policy-makers have to understand that any changes, for example, in financial policy in the EU will have substantial impact upon the shipping investment climate and may necessitate further action incorporated into shipping policy measures. Shipping is an holistic activity that cannot be separated out from the complexity of the real world but this makes policy making both difficult and at times, very slow.

4. Shipping Policy — Spatial Levels of Origin and Implementation

Policy in the shipping sector both emerges and is applied to the industry at different spatial levels. These are indicated in Figure 1 which attempts to summarise the shipping policy framework and the factors which influence the policies that emerge and the players involved in its development. They can be divided into five levels – in many ways a convenience as in real life there remains overlap between them – but at the same time there are clear distinguishing features of each which are significant for policy derivation and implementation. These different spatial policy levels (or jurisdictions) and the problems of co-ordinating and making consistent their policy initiatives is the central theme of this chapter and has been identified in earlier work by Cafruny (1987, 1991), and Aspinwall (1995). The following discussion focuses on the relationships between these levels and the difficulties this sometimes presents.

At the highest jurisdiction there are international policies derived by international organisations which should, at least in theory, provide an over-arching structure for the policies derived at lower levels. In the shipping sector, the most prominent international policy-making institutions include the United Nations International Maritime Organisation (IMO), responsible amongst others for policies towards safety, security and the environment in shipping generally, and the Organisation for Economic Co-operation and Development (OECD), which is made up of the developed countries of the world and which is active particularly in shipbuilding policy and issues relating to efficiency worldwide. In each case, there is no compulsory legal requirement for nation-states to abide by their policies and no direct powers of law-making rest with these organisations, but at the same time, membership by individual (and powerful) nations is extensive and requires that the policies and recommendations are followed. Hence in terms of influence they are some of the most significant organisations.

The policy framework set out at the international level provides the general agenda for that at the next – supra-national – which is typified by that of the European Union (EU) which generates policies that are applied to all Member States and in the case of the EU, is backed up by laws that are normally superior to national (Member State) laws where there may be conflict (Brooks and Button, 1992; Kiriazidis and Tzanidakis, 1995; Paixao and Marlow, 2001; Urrutia, 2006; Marlow and Mitroussi, 2008).

Alternative supra-national regimes include the North America Free Trade Association (NAFTA) with a series of maritime related policies but no law making powers, and in historical terms, the Council for Mutual Economic Assistance (CMEA) which represented the countries of the Former Soviet bloc but which again had no legislative powers (although considerable persuasive ones) (Chrzanowski, Krzyzanowski and Luks, 1979; Ledger and Roe, 1996).

Taking the EU as an example, the policies which emanate from the deliberations of the Commission (DGVII), Council of Transport Ministers and the Parliament are normally designed to inter-act with international policies of (for example) the IMO, so that recent EU legislation on double-hulled tankers and other environmental and safety measures have avoided any conflict between jurisdictions. This may not necessarily be the case where the interests of the EU conflict with those of the wider global or national (Member State) framework and it is clear that divergences of policy-making from interjurisdictional consistency will produce tensions that are hard to reconcile. The agreement of policy over implementation of the UNC TAD 40/40/20 rule for liner shipping by the EU in 1979 reflected these tensions as the EU’s commitment to free trade and liberalisation was tested by UNCTAD’s demands for market interference on behalf of developing countries. An agreement was reached but the problems of achieving consistency of policies across spatial boundaries where the agendas were fundamentally different were apparent. Very recently, problems continue in relationships between the EU (supranational) and the IMO (international) over representation and policy-making reflecting greater governance inadequacies that exist.

This discussion of supra-national policy-making also needs to refer to the problems of compatibility with national policies, particularly with reference to the EU and the difficulties experienced in reconciling EU policies on (for example) state aids and cabotage with the desires and agendas that exist in individual member states. Aspinwall⁸ referred to the prolonged discussion that took place before Greece agreed to the opening up of cabotage markets within the EU to all ships of the EU, an agreement that eventually contained safeguards for socially vulnerable markets and extended delays in implementation to give the industry time to adapt. A good example of this was the application of cabotage rules to the Greek Island trades where intense seasonality of demand could lead to some islands losing services altogether in winter as European shipowners from countries other than Greece creamed off summer profits. These concessions diluted the ambitions of the EU to open all shipping markets to all ships and operators that were both safe and environmentally friendly and reflected a divergence in policy ambitions between supra-national and national interests. The provision of shipping state aids have presented similar difficulties and the EU Commission has compromised on its leading

Figure 1: The context for shipping policy-making

principle of free markets and liberalisation so that some state aid remains in place at a national level, albeit controlled in amount and characteristics.

Figure 1 also notes the existence of two more levels of policy-making in the shipping sector upon which we shall not dwell here but which also play a part in the conflict between jurisdictions – regional and local. These two spatial levels, typified by regional governments (such as Devon County Council in the UK) and city governments (such as Plymouth in the UK) once again should derive policies that are compatible with the levels above them at national, supra-national and international level as not doing so