Liner Shipping Services Ltd Submission to the PRODUCTIVIYT COMMISSION REVIEW of PART X of the TRADE PRACTICES ACT 1974 MAY 1999
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Liner Shipping Services Ltd submission to THE PRODUCTIVIYT COMMISSION REVIEW OF PART X OF THE TRADE PRACTICES ACT 1974 MAY 1999 This submission has been prepared by Liner Shipping Services Ltd on behalf of the following shipping Lines: • ANL Container Line Pty Limited • Australia-New Zealand Direct Line • APL Lines (Australia) • Cho Yang Shipping Co Ltd • Columbus Line • Compagnie Generale Maritime • Compagnie Maritime Marfret • Consortium Hispania Lines • Contship Container Lines • Evergreen Marine Corporation • Hanjin Shipping • Hapag-Lloyd Container Line GmbH • Kawasaki Kisen Kaisha Ltd • Lloyd Triestino de Navigazione Societa per Azioni • Maersk Australia Pty Ltd • Malaysian International Shipping Corporation Berhad • Mitsui O.S.K. Lines Ltd • Nippon Yusen Kabushiki Kaisha • Orient Overseas Container Line Ltd • P&O Nedlloyd Ltd • P&O Swire Containers Ltd • Pacific International Lines (Pte) Ltd • PT Djakart Lloyd • RCL (Australia) Pty Ltd • Wilhelmsen Lines AS • Yangming Marine Transport Corporation • Zim Israel Navigation Co Ltd Liner Shipping Services Ltd Submission Index to the Review of Part X of the Trade Practices Act page i INDEX page Executive Summary------------------------------------------------------------------------ i - Main arguments for retention of a modernised Part X regime----------- ii - Authorisation under Part VII of the TPA – not a viable option----------iii Chapter 1. Introduction -------------------------------------------------------------------- 1 - A brief history of Conferences----------------------------------------------- 2 2. International Liner Shipping Patterns/Operations/Competition----- 7 - Competition------------------------------------------------------------------- 10 - Freight rate comparisons ---------------------------------------------------- 11 - Pooling systems -------------------------------------------------------------- 15 - Future trends------------------------------------------------------------------ 17 3. Past Reviews of Part X and Regulation of Inward Shipping --------- 18 4. Regulatory Regimes for International Liner Shipping and Australia’s Major Trading Partners-------------------------------------- 24 - United States ----------------------------------------------------------------- 24 - Europe------------------------------------------------------------------------- 25 - Korea -------------------------------------------------------------------------- 26 - Japan--------------------------------------------------------------------------- 26 - Other countries --------------------------------------------------------------- 27 - OECD ------------------------------------------------------------------------- 27 5. Investigations by the ACCC Under Part X, and the Productivity Commission Issues Paper, March 1999 ------------------ 29 - Consequences to service if Conferences not allowed to operate-------- 31 - Implications of intermodalism for Conferences---------------------------32 - Comparison of Conference freight rates----------------------------------- 32 - Setting of freight rates------------------------------------------------------- 33 - Rate negotiations and settlement dispute procedures -------------------- 33 - Accords and Discussion Agreements-------------------------------------- 33 - Are there alternatives to Part X? ------------------------------------------- 34 - Possible modifications to Part X--------------------------------------------34 6. Conclusions-------------------------------------------------------------------- 37 - Difficulties if this legislative approach was abandoned------------------- 38 Liner Shipping Services Ltd Submission Index to the Review of Part X of the Trade Practices Act page ii Figures 1 Alliance Membership----------------------------------------------------------- 7 2 Cargo Volumes at 1994 -------------------------------------------------------- 8 3 Top Container Service Operators (at 1-9-98) ------------------------------- 9 4 List of International Liner Shipping Operators by Liftings----------------10 5 Conference Shares of Liner Trades ------------------------------------------ 11 6 Comparison of Freight Rate Movements Northbound--------------------- 12 7 Comparison of Freight Rate Movements Southbound--------------------- 12 8 Freight Rate Index for Bulk Meat in Cartons------------------------------- 13 9 International Comparison of Liner Freight Rates---------------------------13 10 Percentage Change in Freight Rates (table)--------------------------------- 14 11 Percentage Change in Freight Rates (graph)-------------------------------- 14 12 Summary Table of Maritime Subsidy Measures----------------------------17 13 Movement of Terminal Costs Compared to Freight Rates – Europe----- 30 Attachments A. List of Member Lines B. Various Arrangements in the International Liner Trades C. Liner Shipping Patterns D. Professor Crawford’s Opinion E. Inwards Shipping (extract from SCS 1993 submission) F. Regulation of International Liner shipping in Australia’s Major Trading Partners (extract from SCS 1993 submission) G. Unsuitability of using Authorisation Provisions Under Part VII of the Act (extract from SCS 1993 submission) Liner Shipping Services Ltd Submission Executive Summary to the Review of Part X of the Trade Practices Act page i EXECUTIVE SUMMARY Approaching this review, it is important that the Government determine first its objectives for its international liner shipping policy, and then examine the processes and system of regulation, if required, that would facilitate and support the achievement of those objectives. Some of these objectives are already clearly spelt out in Part X: “ a) to ensure that Australian exporters have continued access to outwards liner cargo shipping services of adequate frequency and reliability at freight rates that are internationally competitive; b) to promote conditions in the international liner cargo shipping industry that encourage stable access to export markets for exporters in all States and territories; and c) to ensure that efficient Australian flag shipping is not unreasonably hindered from normal commercial participation in any outwards liner cargo shipping trade." In addition, it is recommended that there be another objective: “ To develop and support the international liner shipping environment which will lead to a competitive advantage for Australia.” In fact, there is another objective buried in Part X, but it nevertheless protects and supports Australian liner exporters, and that is: “ Outwards liner cargo shipping services provided under registered Agreements must be: a) efficient and economical; and b) provided at the capacity and frequency reasonably required to meet the needs of shippers who use, and shippers who may reasonably be expected to need to use, the services.” A review of the operation of Part X over its thirty-three year history will show that these objectives have been achieved by a cost-effective and light-handed system of regulation and have been implemented in a manner compatible with the regulatory regimes of our major trading partners. Being made subject to Part VII of the Trade Practices Act would not result in a lower level of regulation, but in fact would significantly increase the level and cost of regulation of the international liner shipping industry serving Australia, at a time when freight rates are at an all-time low and level of services at an all-time high. Any system of regulation should also meet the following three major criteria: a) Certainty of application. The provisions of Part X are well understood and the regime has encouraged the massive investment of around three and a half billion dollars (being the estimated written-down book value, not replacement value) in the Australian international liner trades, especially given the technologically advanced vessels and highly specialised equipment employed. The effective automatic authorisation characteristic of Part X, subject to the threat of action being taken if there is misuse of any market power, has been the major reason for its success and the desire by the liner exporters of our Asian neighbours for similar legislation. Liner Shipping Services Ltd Submission Executive Summary to the Review of Part X of the Trade Practices Act page ii b) Flexibility. Part X has proved itself in dealing successfully with the many difficult commercial issues that arise between shippers and shipowners from time to time without the need for direct Government intervention. In the last ten years there have been only three major and formal investigations by the ACCC, and two of those have involved one trade area only. The Part X framework which encourages commercial resolution of disputes is well geared to meet foreseen challenges in the international liner shipping market; particularly if amended in the manner suggested in this submission. c) Efficiency. Part X is a relatively low-cost form of regulation, with A$570 registration fee per Agreement, and it is understood that there are approximately sixty Agreements registered at the present time, i.e. a total of A$34,500 compared to A$$450,000 if authorisation had been sought for each of those Agreements at A$7,500 per authorisation. Given the monitoring and oversight by the Australian Peak Shippers Association, Part X provides much needed transparency of Conference/Consortia operations, particularly in terms of minimum service levels and the impact on shippers of day-to-day operations. Main arguments for retention of a modernised Part X regime … Member Lines