Shipping has a vital role to play in post pandemic recovery for the EU but must not be ignored in reforms to the bloc’s trade policy, said speakers at the latest Leadership Insights Live.
Underscoring the importance of the EU to global maritime trade, Guy Platten, International Chamber of Shipping’s Secretary General, noted that EU ports handled 824m tonnes of goods in the first quarter of 2021, with maritime trade accounting for 81% of goods traded to and from the region by volume.
However, protectionist measures are threatening to undermine boosts to global trade that could aid in economic recovery from the COVID-19 pandemic. The Chairman of the European Parliament’s Committee on International Trade, Bernd Lange, said restrictions on trade were becoming more common globally, and export restrictions have risen during the pandemic.
“We are faced with a situation where this rules-based trading system is going to a more, let’s say power-based trading system, and this is not in our interest,” he said. “We have to resist against this tendency of power play in trade, sometimes really weaponising trade.”
Platten quantified potential gains for national economies cutting tariff and non-tariff barriers to trade, as outlined in ICS’ report, Protectionism in Maritime Economies. In the report’s most ambitious scenario this could lead to GDP gains of up to 3.4% for national economies.
Ruosi Zhang, Counsellor, Trade in Services and Investment Division, WTO, underscored the point, stating that “the EU still has a lot to gain from the further liberalisation in maritime transport”.
Beyond Europe, Platten said that all countries stand to gain from a reduction of maritime protectionism, regardless of economic development. He added that it is crucial to give equal focus to removing tariff and non-tariff restrictions and that a combination of domestic reforms and multilateral negotiations is vital.
Fair and open trade
Lange said the ICS study’s findings “are crucial” because the EU faces increasing trade restrictions globally that are “impacting import and export and harming business and national economies”. He stressed that as the world biggest trading bloc, the EU depends on fair and open trade. Trade accounts for 30% of the EU’s GDP and employees around 36 million people.
The EU is “really trying to rebuild a rules-based system”, Lange said, and is “deeply engaged” with modernising the rules of the WTO. While noting the system is “under pressure”, with major trading partners showing little engagement in the process of stabilising a rules-based system for trade, he explained that the EU continues to push with the likes of India and the US for the system to be reviewed and new rules developed for e-commerce and subsidies.
He also pointed to the need for free trade agreements with Mexico, Chile and Australia to be concluded, which will diminish restrictions, export controls and tariffs.
A win-win
In a significant step to reduce non-tariff barriers to trade, Pascal Kerneis, Managing Director, European Services Forum (ESF), noted that after many years of failed attempts, last December 67 WTO members reached an agreement to simplify trading services and cutting red tape around trade – something the ESF had been advocating for more than a decade.
The signatories, which include the EU, UK, US and China, represent 90% of all trade in services. The agreement, he said, will help in simplifying regulations and easing procedural barriers to navigate foreign markers and export overseas, particularly for SMEs. It is expected to cut trade costs by £133bn a year.
Level playing field
Zhang also highlighted that the webinar was taking place on the first anniversary of the EU publishing its Trade Policy Review last February. President of the European Community Shipowners’ Association (ECSA), Philippos Philis, said his organisation “strongly welcomed” the new EU Trade Policy and encouraged efforts to conclude Free Trade Agreements with neighbouring countries and to prioritise safeguarding free and non-discriminatory market access to maritime transport.
He underscored that, as shipping is the “backbone of trade” it must have a continued voice during EU trade discussions at both multi and bi-lateral level. However, he issued a word of caution to the bloc. “Our main message to the EU is, and has been, to never use shipping as a trade off in negotiations with third parties.”
Supply chain disruption
Speakers also acknowledged how global trade has been impacted by a strong rebound and growth in demands for consumer goods throughout the pandemic, as well as government COVID restrictions, putting great pressure on the global supply chain.
Lange said that in some cases there is an average delay of around seven days in maritime transport “which is not acceptable for a lot of just in time production processes”. Questions about the value of onshoring manufacturing remain, he added. Philis confirmed that delays in maritime transport were symptomatic of ‘protectionist measures and COVID related issues [which] remove [maritime transport] capacity from the market’.
Platten noted valuable lessons must be learnt from the pandemic, “not least supply chain resilience”, noting the hard work that seafarers have played throughout to keep global trade moving. He stressed that WTO has a key role to play in ensuring nations work together to ensure supply chain resilience going forward.
Shipping’s green role
As the world looks to rebound from the economic impact of the pandemic, it must also accelerate decarbonisation efforts. While shipping continues on its own path to decarbonisation, Zhang said that it will also play a “key role” in the world’s green transformation. This will include the transport of green fuels around the world.
Philis noted that as decarbonisation efforts continue, there will also likely be an increase in demand for commodities including iron ore, copper and cobalt, “so shipping becomes more vital for decarbonisation in general”.
Philis said that the shipping industry is “committed to contribute its fair share to reduce GHG and improve sustainability” and supports EU ambition to contribute to global progress on sustainability and responsible supply chains through its trade policy.
However, he expressed concerns over regional approaches that are not aligned at the IMO level, that could create a “two-tier market”. He urged the EU to ensure a global level playing field and that green measures such as the Fit for 55 legislative package does not disadvantage European companies.
Lange later responded that decarbonising the maritime transport sector “should not lead to competition disadvantages but [the maritime industry] has to bring their part of the game to climate neutrality”.
