Australia Debates Coastal Shipping Rule Changes

By MarEx 2014-09-19 18:38:00

Australia’s minister for infrastructure and regional development Warren Truss has released the Australia Sea Freight 2012-13 report amid claims of errors from the Maritime Union of Australia.

The report indicates that the vast majority of Australia’s international trade, by volume, is transported by ship (99.5 percent). Over $400 billion worth of international cargo moved across Australian ports in 2012-13, and some 4,900 cargo ships made almost 14,000 visits from overseas to Australian ports.

In contrast, coastal shipping is not competitive or productive, says Truss. Australian ports handled 97.4 million tons of coastal freight during 2012-13, an almost 2 percent decrease on 2011-12. This continues a longer-term trend of decreasing amounts of coastal trade.

“There were almost 1,000 fewer coastal voyages and almost 2 million fewer tons of freight moved by foreign flagged temporary licenced vessels in its first year of operation. The Australian trading fleet also continued the downward trend, with the number of major Australian registered ships with coastal licences declining from 30 in 2006-07 to just 13 by 2012-13,” says Truss.

While the number of vessels has marginally increased in the last year since the period of the report, the deadweight tonnage, or carrying capacity of the coastal fleet, is a shadow of its former self, plummeting by 64 per cent over the two years of previous government’s Coastal Trading Act, he says

“Maintaining competitiveness in coastal trading is not a new problem. A witness to a Royal Commission into the Navigation Act said that it was remarkable that goods could be transported more cheaply from New York to Western Australia than from Sydney—and that was in 1924.

“Today, shippers tell me that container rates from Melbourne to Brisbane are almost twice the cost of those from Singapore to Melbourne; that bulk freight rates on the east-west route have doubled in the past year alone and that transporting sugar from Thailand is cheaper than shipping it from Queensland.

“As noted by the Minerals Council of Australia in their submission, for some dry bulk commodities producers the cost of shipping final product around Australia is the same as shipping it from Asia to Australia.”

In July, the government returned the Protection of the Sea Levy back to its original level of 11.25 cents per net registered ton. This reversal of the previous Labor government’s increase is saving the industry more than $9 million a year, says Truss. “We’ve also abolished the carbon tax on the fuel used in domestic shipping saving the industry millions more each year.”

The government’s options paper on approaches to regulating coastal shipping was released in April this year and it is still evaluating submissions. “I want to be quite clear—no one with any sense wants to see workers exploited—anywhere—let alone in Australia or on Australian waters. Yet, we operate in a global arena. Global businesses like shipping need labour arrangements that are competitive—both to attract the right people and to ensure the business remains afloat.”

We need a shipping industry that can meet competitive challenges—not be sheltered from them, says Truss. “Protectionism is a mirage provided by strangling red tape at excessive cost to the industry, its customers, and to the nation.

“Operating costs, particularly labour arrangements, are uncompetitive when compared with operating costs for foreign ships. For example, Cristal Mining has submitted that the difference between using Australian and foreign ships costs their business an additional $5 million every year.”

However, in response to the report the Maritime Union of Australia (MUA) has urged the government to protect Australian jobs, the maritime skills base and the environment when considering changes to laws covering coastal shipping.
Fresh on the heels of killing off Australia’s submarine industry and car industry, Truss has signaled an end to cabotage, which sets rules that level the playing field for Australian ships, using flawed data from the report, says the union.
MUA national secretary Paddy Crumlin pointed out that cabotage is not industry assistance in that no taxpayer funds are directed to the Australian shipping industry.
The cabotage changes could directly impact the jobs of around 1,500 seafarers in the blue water sector and a further 500 in towage and other industries that services the blue water fleet. So, in total around 2,000 direct jobs and up to 8,000 associated jobs are on the chopping block. Many of those are in north-west Tasmania.
“Australia needs a viable, vibrant shipping industry which employs Australian workers and the Abbott government needs to give the laws passed in 2012 time to work,” Crumlin said.
Crumlin said the 2012 changes to the Navigation Act and introduction of the Coastal Trading Act were the biggest maritime reform since the passing of the Navigation Act 100 years ago.
“The reforms have the potential to create employment, sustain business opportunities and productivity and build the national interest through an industry that is critical to the quality of Australia’s economy, environment and way of life,” Crumlin said.
“We need to maintain a regulatory framework that provides an access regime built on the principle of fair competition that provides for both Australian ships and foreign ships to meet the coastal freight needs of shippers. What we don’t want to see is more Flag of Convenience (FOC) ships, with their poor standards and exploited crews, take over our ports and displace Australian vessels.
“A revitalised Australian shipping industry will enable us to protect our environment from the risks posed by FOC ships, like the ones that have damaged our Great Barrier Reef.”

The MUA provides examples of how it sees Truss misleading the Australian people:
From Minister Truss’ speech to Shipping Australia on September 18, 2014:
“Under Labor’s flawed, bureaucratic and protectionist tiered licencing system, there were almost 1,000 fewer coastal voyages and almost 2 million fewer tonnes of freight moved by foreign flagged temporary licenced vessels in its first year of operation.”
This is incorrect because there were 776 voyages in 2011/12 that did not carry any cargo. The number of vessels which did not carry any cargo was not included for 2012/13. This reduces the difference between the two years to 118.
Also, the numbers do not include the permit voyages that were carried out during the transition period, where permits were given under both systems. In effect, voyages during the first four months under the existing system are not counted.
In addition, the MUA has copies of applications for both single voyage and continuing voyage permits for the period 1/7/2012 - 31/10/2012 which are not included in the report.
In other words, Minister Truss is deliberately fudging the numbers to prove a political point. It is highly likely the number of voyages actually increased after the legislation was introduced.
From Minister Truss’ opinion piece in the Australian on September 18, 2014:
“It does not help our national cause when coastal shipping is bound by regulations where a ship has to wait idle in port for a day before loading can begin.”
No such regulation exists.
From Minister Truss’ opinion piece in the Australian on September 18, 2014:
“Meanwhile, our trading fleet continued its downward trend, with the number of major Australian-registered ships with coastal licences declining from 30 in 2006-07 to just 13 by 2012-13.

The number of major vessels (defined as over 2,000 tonnes) is currently 16, indicating that the Coastal Trading Act is beginning to work. The number of ships licensed under the Coastal Trading Act has increased by 11 to 61 since the 2012 changes.