Ports in Deep Water

Ports in Deep Water

18 Mar 2008

Peter Turnbull
Email: p.turnbull@latrobe.edu.au

The controversy sparked by the dredging of Port Phillip Bay is one that is being repeated in developed countries around the world. In Europe, for example, the European Commission is giving serious consideration to proposals that would dilute environmental protection enjoyed by coastal areas under the Birds (79/409) and Habitats (92/493) Directives. The fear is not that major European ports will become "backwaters" — to use the words of Victorian Premier John Brumby when justifying the dredging of Melbourne's principal access channel — but that environmental regulations now stand in the way of "economic interests". But what are these "economic interests"?

The world economy has grown rapidly in recent years — world domestic product increased by 69% between 1984 and 2004 — but this growth pales in comparison to the increase in world exports (195%) and the export of manufactured goods (241%). These goods are shipped around the world on ever larger cellular container vessels, especially on the dominant east-west trade routes. Container traffic has experienced double-digit growth over the last decade and the very largest vessels, depicted in the accompanying diagram, now have the capacity to carry in excess of 12,000 container boxes (measured in Twenty-foot Equivalent Units). In 2000 there were just 78 vessels in the world fleet with a capacity in excess of 5,000 TEU. This increased to over 500 in 2007 and by 2010 there will be well over 800 vessels of this class in the world fleet, constituting over 40% of world cellular fleet capacity.

The principal advantage of these ships is that they offer huge economies of scale — it is now claimed that it costs less to ship a container box from Shanghai to Southampton than it does to then move the box by road to Scotland. Globalisation might create a disproportionate growth in the demand for transport services, but innovations in transport fuel the growth of the global economy. The "freight factor" in developed countries is now less than 4%, so it is quite literally possible to make almost anything, almost anywhere in the world, and then ship it to almost anywhere else, without transport costs being a constraining factor. But while innovations in the transport sector are a catalyst for the growth of international trade, global transport and logistics companies invariably discourage any regulatory measures that might force them to internalise the negative social and environmental costs associated with transport activities.

One of the principal disadvantages of ever larger container ships is likely to be the detrimental impact they can have on the city-port environment. It is not simply the draft of these vessels that places much greater demands on our transport infrastructure — ports need larger and stronger stacking areas for more container boxes, bigger cranes with greater 'outreach' to un/load the ships, and better hinterland connections to cope with peak traffic demand. A major concern of environmentalists and the communities of city-ports in Europe is that the construction of ever larger container vessels is nothing compared to the costs of dredging access channels, investing in more extensive container terminals, buying new equipment to service post-Panamax vessels, and building new or improved access roads to the port. So who will pay?

In terms of the financial costs associated with port super-structure — which is typically defined as everything above, on and beyond the quay wall — only a handful of trans-national corporations have the wherewithal to make the necessary investments in facilities capable of handling the very largest ships. This group includes the five major international shipping lines that now control well over 40% of the world's fleet and the four global container terminal operators who now control more than a third of world container port movements. In Europe, the six leading port operators handle well over 70% of total throughput and the biggest players are now non-European companies.

In contrast, infrastructure costs — most notably access channels, quay walls, and landside connections such as road and rail links — are still a public responsibility in most countries. A major concern of many people in city-port communities is the accountability and transparency of the relevant port authority. In many countries around the world, these organisations have recently been granted much greater financial and operational autonomy as business relationships, as well as political relationships with the municipal authorities, state and federal governments and ordinary citizens, are redefined. In the EU, alongside the proposals to 'rebalance' economic and environmental interests in relation to new port developments, the European Commission is expected to issue new guidelines on the state financing of port investments. These changes are expected to further enhance the dominant economic position of global business.

Major European ports have traditionally been developed as Maritime, Industrial and Distribution AreaS (MIDAS) and the maritime regions still account for over 40% of the EU's gross domestic product. The 'golden touch' of Europe's major ports helped to make the continent the richest in the world, but today we're looking for a 'greener fingerprint'. In an age when immediate personal interest seems to prevail over long-term, inter-generational public benefit, even the selfish consumer should ask the following question: "If somebody, somewhere, in the transport chain saves a few dollars on the shipping costs of a container box from China to Europe, Australia, or anywhere else in the world, will the consumer now pay $99.95 for a pair of training shoes instead of $100?"

Peter Turnbull is a Visiting Distinguished Fellow in the Institute for Advanced Study

Further information

Peter Turnbull's Perspective on ABC Radio (18/03/08)

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