International Journal

on Marine Navigation

and Safety of Sea Transportation

Volume 3

Number 2

June 2009

197

1 INTERNATIONAL MARITIME TRANSPORT

AND ITS GROWING ROLE IN THE GLOBAL

ECONOMY

1.1 The international seaborne trade and world

maritime transport in the global supply chains

Maritime transport remains the backbone of interna-

tional trade and the global economy, supporting

strongly the ongoing processes of globalization. It

has strong position in global supply chains, deter-

mining to great extent their effectiveness and elastic-

ity (see fig. 1). In 2007, the volume of international

seaborne trade reached 8.02 billion tons. It means

that over 80 per cent of world merchandise trade by

volume is being carried by sea.

The recent growth

in trading commodities volume transported by sea –

a 4.8 per cent increase year-on-year – was higher

than recorded in the last decades. Indeed, during the

past three decades, the annual average growth rate of

world seaborne trade is estimated at 3.1 per cent.

Still relatively strong demand for maritime transport

services is fuelled by growth in the world economy

and international merchandise trade being stimulated

by dynamic increase in production and consumption

in the main world centers (see fig. 1). In 2007, the

world gross domestic product (GDP) grew at 3.8 per

2008. Review of Maritime Transport 2008. Report by the

UNCTAD secretariat. UNCTAD/RMT/2008, New York and

Geneva 2008, p. 14.

Ibidem, p. 17-18.

cent while world merchandise exports expanded by

5.5 per cent over the previous year.

In the recent years economic growth was driven

primarily by emerging developing countries and

transition economies. It has proceeded, despite rising

energy prices with their potential implications for

transport costs and trade and despite growing global

risks and uncertainties. There were many other fac-

tors determining increase in economic activity

worldwide. Among them factors such as soaring

non-oil commodity prices, the global credit crunch, a

depreciation of the US dollar, and an unfolding food

crisis should be count. The world economy and trade

have, so far, sustained all these negative tendencies

with sufficient resilience.

As a result of growing world economy and con-

sequently international seaborne trade, the world

merchant fleet expanded by 7.2 per cent during 2007

to 1.12 billion deadweight tons (dwt) at the begin-

ning of 2008. It means that the world tonnage grew

1.5 times faster than the word merchandise trade in

volume terms carried by sea. In 2007 historically

high demand for shipping capacity was reached. The

shipping industry responded to growing needs of the

global supply chains by ordering new tonnage. It ap-

plied predominantly to the dry bulk vessels. All

types of vessel orders were at their highest level ev-

er, reaching over 10,000 ships with a total tonnage

of almost 500 million dwt, including 222 million

Ibidem, p. 21

Maritime Transport Development in the Global

Scale – the Main Chances, Threats and

Challenges

A.S. Grzelakowski

Gdynia Maritime University, Gdynia, Poland

ABSTRACT: International transport is a subject to many regulatory measures worked out by governments,

international organisations (e.g. IMO, ILO, EU), regional institutions and public entities. As a result, such

regulatory mechanism, which is getting throughout international, strongly affects the real sphere of maritime

transport as well as its productivity and efficiency. Maritime transport operators have to apply to many new

standards and rules set by international public regulators aimed mainly at improving and enhancing safety and

security at sea. It is sometimes very painful process in terms of costs and time but inevitable to survive in the

highly competitive environment. The author analyses the nowadays existing regulatory mechanism in mari-

time transport and tries to evaluate it in terms of its impact on effectiveness of maritime transport processes.

198

dwt of dry bulk carriers.

Such a huge influx of new

tonnage into the world fleet over recent years has

contributed to the decrease in the average age of the

world fleet to 11.8 years. This tendency, despite the

ongoing global financial and economic crisis will be

continued in the next years.

It is to some extent a result of very high dynamic

of growth in container shipping. The world contain-

ership fleet reached in mid of 2008 approximately

13.5 million TEUs, of which 11.5 million TEUs

were on fully cellular containerships. This fleet in-

cludes 54 containerships of 9,000 TEU and above,

which are operated by five companies: CMA CGM ,

COSCON and CSCL, Maersk and MSC.

Figure 1. International maritime transport in the global logistics

supply chains

1.2 The main tendencies and occurrences in the

development of maritime transport in the global

scale

Characteristic feature of the contemporary maritime

transport, as far as vessels’ ownership is concerned,

is very high concentration of the world tonnage in a

relatively small group of countries. As of January

2008, nationals of the top 35 ship owning countries

The tonnage of dry bulk ships on order at the end of 2007 was

12 times higher than it was in June 2002; since mid-2007, dry

bulk orders outstrip those for any other vessel type

. See: Re-

view of Maritime Transpor 2008t. Op. cit., p. 45,

Twelve of them have a capacity of more than 10,000 TEU;

these include eight 12,508 TEU ships owned and operated by

Maersk, and four vessels of 10,000 to 10,062 TEU, owned and

operated by COSCON. Comp. Review of Maritime Transport.

Op. cit., p. 45,

together controlled 95.35 per cent of the world fleet.

It is a slight increase over the previous year figure.

All external factors unequivocally indicate that such

tendency will gradually go ahead in the next years,

partially as an effect of still growing international

competition and already achieved position of the

main shipping countries (economies of scale).

Greece continues to maintain its predominant posi-

tion, followed by Japan, Germany, China, and Nor-

way; together, these five countries hold a market

share of 54.2 per cent.

Due to the still ongoing flagging out practices in

the world scale, the controlled by nationals of the

ship-owning countries tonnage is, however, spread

in second and many open and international registers

run by foreign countries, so called flag of conven-

ience. Due to that, 32 per cent of the Greek con-

trolled fleet use the national flag, versus 68 per cent

using foreign flags. The Japanese-controlled fleet is

93 per cent foreign flagged. The German-controlled

fleet uses a foreign flag for 85 per cent of it tonnage.

More than half of the German controlled fleet is

comprised of containerships (50.7 million dwt). As

regards the Norwegian-controlled fleet with 46.9

million dwt, which still maintaining its fifth- place

ranking. 69.7 per cent of this tonnage, is registered

under a foreign flag, and the remaining 30.3 per cent

mostly under the Norwegian International Ship Reg-

ister (NIS). The Chinese-controlled fleet is 40 per

cent registered in China, versus 60 per cent that uses

a foreign flag.

The 35 economies with the largest fleets regis-

tered under their flag account for 1,033 million dwt,

corresponding to 92.42 per cent of the world fleet.

The top 5 registries together account for 49.3 per

cent, and the top 10 registries account for 69.5 per

cent of the world’s dwt. It means that the level of

concentration of worldwide flagged out tonnage and

reregistered in the countries running open, interna-

tional ships registers is almost similar to the group of

main ship-owning (controlling) countries.

The 10 largest open and international registries

that cater almost exclusively to foreign-controlled

ships are Panama, Liberia, the Bahamas, the Mar-

shall Islands, Malta, Cyprus, the Isle of Man, Anti-

gua and Barbuda, Bermuda, and Saint Vincent and

the Grenadines. Although they are in principle open

to vessels from practically any country, most of

them in fact specialize in some countries of owner-

ship, or in certain vessel types.

Among the top 35

E.g. more than half the tonnage registered in Antigua and

Barbuda is on containerships, mostly from German owners.

The registries that cater mostly for dry bulk carriers are Ber-

muda, Cyprus, Malta, Panama and Saint Vincent and the Gren-

adines; Panama alone accounts for 33.3 per cent of the world

dry bulk tonnage, mostly from Japanese owners. Oil tankers

account for the largest tonnage in the registries of the Bahamas,

199

registries, 15 cater almost exclusively for nationals

of their own country. They are e.g. Greece, China,

the Republic of Korea, India, Germany, Japan, Italy

and the United States. A low participation of for-

eign-controlled tonnage may be due to two reasons.

First, the country’s laws may not allow for the use of

its national flag if there is no adequate “genuine

link” between flag and ownership. Second, although

the country’s registry might in theory be open to for-

eigners, its tax or employment regime or other regu-

lations may make the registry unattractive to foreign

ship owners. Finally, among the top 35 flags of reg-

istration, there are three “second” or “international”

registries, i.e. registries that allow for the use of the

national flag, albeit under conditions that are differ-

ent from those applicable for the first national regis-

try. They include notably the Norwegian Interna-

tional Ship Register (NIS), the Danish International

tional Register (RIF). While the DIS is almost only

used by Danish-controlled ships, both the NIS and

the RIF also cater to some foreign-controlled ton-

nage.

The above indicated tendencies noticed in the in-

ternational maritime transport on its supply- and

demand side as well as in its contemporary existing

regulatory mechanism, especially relating to mer-

chant fleet distribution on the basis of tonnage own-

ership (real control) and vessels registration ( fleet

management ), have great impact on world fleet op-

erational productivity and its effectiveness. As mari-

time transport constitutes very important link in

global supply chains, servicing the primary markets

(see fig. 1), such trends and tendencies have to influ-

ence significantly efficiency and elasticity of logis-

tics supply chains and the international seaborne

trade. To examine the scope and intensity of their

impact on secondary and primary markets use by

global supply chains, indices of operational produc-

tivity for the world fleet need to be analyzed.

The main indexes of this kind are defined in tons

and ton-miles per deadweight ton (dwt).

They show

the still changing relations between the growth in the

supply of tonnage and the growth in total seaborne

trade as well as in ton-miles performed by the world

fleet, which corresponds with a distance one ton was

carried over. Consequently, as the growth in the

supply of the fleet outstrips the growth in total sea-

borne trade (it befell e.g. in 2007) the tons of cargo

carried per deadweight ton (dwt) decreases. In 2007

the global average of tons of cargo carried per dwt

of cargo carrying capacity was 7.7 (see tab. 1) ; in

the Isle of Man, Liberia and the Marshall Islands. Comp.

Review of Maritime Transport 2008. Op. cit., p. 62,

Grzelakowski A. S., Transport morski w gospodarce świato-

wej. ”Przegląd Komunikacyjny” 2008 No. 12, p. 6-7

other words, the average ship was fully loaded 7.7

times during that year. During the same year, the

ton-miles performed per deadweight reached 31.6;

thus, the average dwt of cargo carrying capacity

transported one ton of cargo over a distance of

31,600 nautical miles in 2007, i.e. 87 miles per day.

Table 1. Operational productivity of the total world fleet in the

period 1970 – 2007 ( selected years )

___________________________________________________

Year Tons carried Thousands of ton-miles

per dwt performed per dwt

________________________________________________

1970 7.9 32.7

1980 5.4 24.6

1990 6.1 26.0

2000 7.5 29.7

2006 8.0 32.8

2007 7.7 31.6

___________________________________________________

Source: Calculations on Lloyd’s Register-Fairplay, Fernleys

Review and Review of Maritime Transport 2008, p. 61.

The indices of operational productivity of the

world fleet presented in tab. 1 indicate that it varies

significantly on the yearly basis. It is a result of

freight markets dynamic which reflects the perpetual

changing in supply and demand for shipping ser-

vices (fig. 1) and indirectly is connected with the

level of overcapacity generated by shipping opera-

tors accomplishing a strategy of flexible and effi-

cient demand fulfillment on the highly competitive

freight markets. The level of world tonnage overca-

pacity ( tonnage oversupply ) presents tab. 2.

Table 2. Tonnage oversupply in the world shipping in selected

years (percentages).

___________________________________________________

Year 1990 2000 2004 2005 2006 2007

___________________________________________________

9,7 2,3 0,7 0,7 1,0 1,1

__________________________________________________

Source : Elaborated on data presented by Lloyd’s Register –

Fairplay and Lloyd’s Shipping Economics as well Review of

Maritime Transport 2008. p. 65

Explaining the changing operational productivity

in the world tonnage, it is worthy to note too, that

ship operators usually in response to high oil prices,

are interested in reduction the service speeds of their

vessels, thus saving fuel. Such a strategy was typical

for shipping operators, e.g. especially in liner ship-

ping in 2007. However, with lower service speeds,

more vessels are required on a given route, which on

one hand helps to reduce overcapacity, while at the

same time leading to a reduced operational produc-

tivity. Capacity constraints and congestion at ports

also have a negative impact on the fleet’s productiv-

ity, as ship capacity is tied up while queuing. All

these factors stemming from primary and secondary

markets ( fig. 1 ) – their dynamic and forms of exist-

ing connections have influenced the level of opera-

tional productivity of the world merchant fleet.

200

Eventually, as regards world maritime transport

development and global tendencies viewed in that

sector of the world economy, it is necessary to em-

phasise that it generates costs to shippers, i.e. ex-

porters and importers of goods carried by sea, hence

determining to some extend the final commodities’

prices in overseas consumption centers. Total

transport costs implicating costs of carriage goods

on sea routes, contribute significantly to shaping the

volume, structure and patterns of trade as well coun-

tries’ comparative advantages and trade competi-

tiveness (see fig. 1).

The share of global freight payments in import

value has reached on the average 5.7 per cent in the

world scale in the recent five years.

It was higher

than it the previous years due to the fact that the rate

of increase in the world total value of imports (c.i.f)

was more than two times lower over the foregoing

years than the growth rate of total freight paid for

transport services. Developing countries and econo-

mies in transition have recorded the highest freight

costs. Freight costs expressed as a percentage of the

value of imports for both country groups, have

reached almost 8.0 per cent, while developed coun-

tries have the lowest freight costs, which are esti-

mated at ca. 5.1 per cent of the value of imports in

last two years. It is a result of still existing signifi-

cant diversification in the commodity structure of

external trade between well and less developed

countries.

While bulk trade, including tanker and dry cargo

dominates world seaborne trade, containerized trade,

as a fast growing market segment, is at the heart of

globalized production and trade. Containerized

goods are mostly manufactured goods, which tend to

have higher value per volume ratios than bulk car-

goes - like oil and other commodities - and travel

longer distances, as they are sourced more global-

ly.

Given their higher value, on average, transport

costs on valorem basis matter less for high value

goods than low value raw materials. Therefore, if

higher transport cost were to lead to regionalization,

lower value manufactured goods (clothing, textile)

Ports and International Transport Costs .UNCTAD

Transport Newsletter No. 31, March 2006 and Recent Trends

in Liner Shipping Freight Rates.Transport Newsletter No. 24,

June 2004, Hummels D., Transportation Costs and Interna-

tional Trade in the Second Era of Globalization, Journal of

Economic Perspectives. Volume 21, Number 3, 2007, p. 131-

154;

See: Review of Maritime Transport 2007. UNCTAD. New

York and Geneva 2007, p. 11.

In 2006, the share of manufactured goods exported globally

amounted to over 70 per cent of the value of world exports

($8.2 trillion out of a total of $11.5 trillion). Comp. World

Trade Organization (WTO), Statistics Database, Merchandise

Trade by Commodity, 2006 (www.wto.org).

would likely be much more affected than higher val-

ue goods or goods, the production of which involves

significant capital or start up costs.

Higher transport costs are of more relevance for

bulk cargo. To minimize the incidence of transport

costs on low-value/high-volume goods, importers of

bulk cargo are more likely to source from nearby

providers. For example, oil requirements in the

Americas are more likely to be sourced from loca-

tions such as South America or Mexico or, in Asia,

from neighbouring Asian oil exporting countries.

Future developments in transport costs, produc-

tion and trade patterns will depend, inter alia, on: a/

the rise in oil prices and other relevant factors in-

cluding the potential for substitution of oil by more

affordable alternative sources of energy; b/ the share

of transport costs in the overall production costs; c/

whether shifting production closer to the market is

cost efficient, i.e. whether transport cost savings

outweigh the potential rise in production costs (wage

differentials, cost of energy used in production, envi-

ronmental regulation) and, importantly, d/ the type

of goods traded/ transported (e.g. bulk or manufac-

tured), their value, weight, handling requirements.

2 REGULATORY MECHANISM OF THE

INTERNATIONAL MARITIME TRANSPORT

2.1 The main forms, mechanisms and instruments of

maritime transport regulation in the global

scale

The above indicated tendencies and occurrences typ-

ical for this link of international maritime supply

chains stem from many factors influencing this sec-

tor of the world economy. Among them the most

important one is a regulatory system of the maritime

transport, that in short, mid and long term plays a

steering role of its real sphere. In illustrative form its

structure and character presents fig. 2.

The regulatory sphere (system) of maritime

transport consists of two subsystems, i.e. public,

central subsystem and autonomous, market subsys-

tem (fig, 2). The first one, basing on public regulato-

ry mechanism, comprises in fact maritime transport

policy, being regarded as domestic (national) and in-

ternational regulatory instrument of the real sphere

in maritime transport sector. The role of internation-

Korinek J., Clarifying Trade Costs in Maritime Transport,

Working Party of the Trade Committee, OECD, 25 April 2008

14 See Rohter, L, Shipping Costs Start to Crimp Globaliza-

tion, International Herald Tribune, 2 August 2008:

UNCTAD/TC/WP(2008)10, Limão N. and Venables A J.,

Infrastructure, Geographical Disadvantage, Transport Costs

and Trade, Journal of Economic Literature,

201

al maritime transport policy formed by international

organizations (IMO, ILO, WTO, ISO) as well as

many regional and sub-regional organizations, insti-

tutions, associations, entities etc., such as EU, ES-

CA, EASA, EMSA, etc.) has been absolutely dom-

inant in the public regulatory mechanism in recent

years. It is due to the fact, that maritime transport is

one of the most internationally oriented transport

modes. It operates in the global scale and generates

global challenges and threats (maritime accidents,

oil spillage, waste disposal at sea, etc.) which can be

solved only by international organizations launching

binding international standards and norm with re-

spect to widely perceived safety at sea and security

issues.

Figure 2. The regulatory mechanism of the international mari-

time transport

The regulatory sphere (system) of maritime

transport consists of two subsystems, i.e. public,

central subsystem and autonomous, market subsys-

tem (fig, 2). The first one, basing on public regulato-

ry mechanism, comprises in fact maritime transport

policy, being regarded as domestic (national) and in-

ternational regulatory instrument of the real sphere

in maritime transport sector. The role of internation-

al maritime transport policy formed by international

organizations (IMO, ILO, WTO, ISO) as well as

many regional and sub-regional organizations, insti-

tutions, associations, entities etc., such as EU, ES-

CA, EASA, EMSA, etc.) has been absolutely dom-

inant in the public regulatory mechanism in recent

years. It is due to the fact, that maritime transport is

one of the most internationally oriented transport

modes. It operates in the global scale and generates

global challenges and threats (maritime accidents,

oil spillage, waste disposal at sea, etc.) which can be

solved only by international organizations launching

binding international standards and norm with re-

spect to widely perceived safety at sea and security

issues.

Beside international maritime policy, the real

sphere in this transport sector, being a domain of

thousands shipping operators, acting in global scale

on the one hand but on the other being nationals of

many shipping countries with their own economic

interests in maritime transport development, has to

be regulated by domestic public body (governments)

in line with its national objectives. However, these

objectives need to respect international maritime

standards applying to technical, social, economic

and environmental standards in shipping industry.

Hence, nowadays the real magnitude of national

transport policy is peripheral and in practice limited

to those areas of regulatory mechanism which are

actually outside international interests (taxation, reg-

istration fees, etc.).

Irrespective of public regulation, the real

sphere of maritime transport is a subject of autono-

mous regulatory mechanism, i.e. mainly market

mechanism (fig. 2). It is key driving force for supply

and demand side, influencing short and long term

behavior of shipowners and shippers in terms of op-

erational and strategic decision making. Market

mechanism is regarded as a dominant resources allo-

cation instrument in maritime transport, which in

fact determines demand distribution and its allot-

ments to particular shipping operators and in the end

defines their competitive position (competitive ad-

vantage), economic effectiveness and finally their

financial yields.

Due to the significant demand fluctuations result-

ing from primary markets, the freight shipping mar-

ket mechanism is very dynamic, influencing consid-

erable demand and supply price elasticity. It is

generally relatively low (lower in liner shipping sec-

tor than in irregular – tramp shipping), being in fact

partially determined by the price elasticity of de-

mand for commodities transported by sea. Primary

markets – their dynamic on the supply and demand

side – being serviced by maritime transport - to great

extent assign demand fluctuation on secondary

freight markets and in that way determine their dy-

namic. It applies to other markets as well, that usual-

ly have great impact on freight markets and can sig-

nificantly indirectly influence the strategies of

shipping operators in the global scale, changing their

costs and incomes as well as their competitive ad-

vantages.

202

2.2 Freight markets as an autonomous regulatory

mechanism in the international maritime

transport

As it was earlier mentioned, market mechanism

regulates the real processes in the maritime transport

sector in short- mid- and a long run, influencing sub-

sequently the behavior of shipowners and their deci-

sion making processes (market choices). Its impact

on the real sphere in the global maritime transport

was especially pronounced in recent two years, in

that period, when bunker prices exploded, changing

the previous cost structure dramatically to shipown-

ers’ disadvantage. These market changes and the

forms of ship operators’ reactions against such glob-

al market events, are presented below.

Fuel costs determine indirectly trade costs, as di-

rect transport costs in the form of freight rates con-

stitute, as earlier indicated, a fraction of the entire

trade transaction costs. Maritime freight rates them-

selves are determined by many other factors, such as

trade imbalances, economies of scale, levels of com-

petition, port infrastructure, type and value of the

goods traded etc. When ship bunkering prices in

Rotterdam were 83 per cent higher in June 2008 than

in June 2007, and the bunkering bills of major ship-

ping lines were on average 67 per cent higher in the

first quarter of 2008 than in the first quarter of 2007,

fuel costs grew significantly, being estimated to ac-

count for more than half of the overall operating

costs of a shipping company at that time.

Accord-

ing to Germanischer Lloyd, by November 2007, fuel

accounted for 63 per cent of the operating costs of

an 8,000-twenty-foot-equivalent-unit (TEU) con-

tainer ship. It should be noted, however, that, be-

cause of the abundance of fuel oil in the world’s ma-

jor bunkering ports, ship bunker prices luckily did

not hit the record levels of crude oil prices.

At such conjuncture shippers were trying to en-

sure that containers are fully loaded, and they are us-

ing more cross-docking and intermodal rail.

These

strategies are not only offsetting high energy costs,

but are also used to obtain more efficiency and long-

term sustainability from their distribution networks.

As a result, no mechanism is in place to deflect the

full effect of rising prices from maritime transport

end users.

Benamara H., Valentine V., Fugeza M., Fuel prices,

transport costs and the geography of trade. UNCTAD Transport

Newsletter. Trade Logistics Branch. No. 39, Second Quarter

2008, p. 5-6.

17 See: Weak dollar helps push bunker prices back to record

levels. Lloyd’s Ship Manager, May 2008 and DiBenedetto B.

Fuel burn: Rising energy costs are spurring companies to

reevaluate supply chains. The Journal of Commerce Online. 18

June 2008.

The maritime industry can, however, take action

to avoid spiraling freight rates. The industry has al-

ready reacted to rising oil prices by reducing sailing

speeds and by reorganizing services. It is estimated

that a 10 per cent reduction in speed can lead to a 25

per cent reduction in fuel consumption.

According

to Hapag-Lloyd, although a lower speed implied

“longer voyages, extra operating costs, charter costs,

interest costs and other monetary losses, slowing

down still paid off handsomely”.

Additionally, the shipping industry has been in-

vesting in more fuel-efficient technologies (hull de-

sign, propulsion, engines) and alternative energy

sources. More recently, wind energy is attracting at-

tention with giant kites being tested on some freight-

ers (e.g. MV Beluga SkySails). By using the Sky-

Sails system, a ship’s fuel costs can be reduced by

10 per cent to an annual average of 35 per cent, de-

pending on wind conditions. Under optimal wind

conditions, fuel consumption can temporarily be re-

duced by up to 50 per cent.

While the shipping in-

dustry may in some cases be able to absorb raising

costs without passing them on to shippers, in gen-

eral, cost- recovery measures in the form of bunker

adjustment factor ( BAF ) charges are introduced.

Moreover, new opportunities to realize savings in

transport costs may emerge in the context of global

warming. The effect of rising oil prices and transport

costs may be offset by savings that could be derived

from full-year operation of the Northern Sea Route

and the opening of the Northwest Passage.

The shortcuts offered by the new shipping lanes

would cut transport costs and therefore benefit glob-

alization and create further competition with existing

routes such as the Panama and Suez canals. The

Northwest Passage would offer a new route between

Europe and Asia that is 9,000 km shorter than the

Panama Canal route and 17,000 km shorter than the

Cape Horn route. Taking into account canal fees,

fuel costs, and other relevant factors that determine

freight rates, the new trade lanes could cut the cost

of a single voyage by a large container ship by as

much as 20 per cent, from approximately US$17.5

million to US$14 million and would save the ship-

ping industry billions of dollars a year.

The savings

would be even greater for very large vessels that are

unable to fit through the Panama and Suez canals

18 Kirschbaum E. Harnessing kite power to a ship. Interna-

tional Herald Tribune. 20 January 2008.

Additional information on SkySails systems and MV Beluga

SkySails can be found at

http://www.skysails.info/index.php?L=1.

Benamara H., Valentine V., Fugeza M., Fuel prices,

transport costs and the geography of trade. Op.cit., p. 8

203

and so currently sail around the Cape of Good Hope

and Cape Horn.

All above presented shipowners’ strategies and

forms of conducts and behaviors undertaken in re-

sponse to market pressure, aimed at better supply-

side applying to the new demand-side constellation,

clearly reflect the real regulatory power of freight

markets and their impact on maritime transport sec-

tor. Hence, in spite of growing globalization and in-

ternationalization of shipping industry, market

mechanism appears to be still dominant regulatory

power in maritime transport sector.

2.3 International maritime transport policy and its

regulatory role of global shipping industry

International maritime transport policy, created di-

rectly or indirectly by international organizations

(i.e. IMO, ILO, HELCOM, EMSA) and international

(regional) groupings of countries (EU, NAFTA,

BSSC, etc.), constitutes in contemporary world very

important and powerful regulatory mechanism of the

whole shipping sector. It completes the still func-

tioning, typical for this open, international transport

sector, autonomous regulatory mechanism. The lat-

ter, however, due to commonly known weaknesses,

is in fact unable to solve many nowadays emerging

serious threats caused by shipping activity in global

scale and problems affecting maritime transport

(safety and security, social and environmental prob-

lems and many others). Consequently, it has to be

supplemented by additional, public regulatory re-

gime worked out by strong and influential interna-

tional bodies.

To that group belongs primarily IMO, which

plays the most important role in composing such

regulatory subsystem in the world scale. The majori-

ty of conventions adopted under the auspices of

IMO or for which this organization is otherwise re-

sponsible, fall into three main categories. The first

group is concerned with maritime safety; the second

with the prevention of marine pollution; and the

third with liability and compensation, especially in

relation to damage caused by pollution.

Outside

these major groupings are a number of other conven-

tions dealing with facilitation, tonnage measurement,

unlawful acts against shipping and salvage, etc. Tak-

.Begerson S. G,. Arctic Meltdown – The Economic and

Security Implications of Global Warming. Foreign Affairs.

March/April 2008.

The full compilation of all IMO conventions and protocols

amending the conventions along with their status indicating the

date of entry into force, number of contracting states as well a

tonnage percentage covered by each of those lawful instru-

ments is listed on IMO website :

www.imo.org/Dynamic/Search /Index.asp

ing into account the number of the IMO regulatory

instruments existing in form of conventions and pro-

tocols amending the first ones, as well as number of

contracting parties (countries) and the percentage of

world tonnage covered by each of those legal in-

struments, it may be claimed that this organization

creates a real global shipping policy constituting the

backbone of the world maritime transport regulatory

mechanism.

In addition to IMO, in formation the widely un-

derstood economic, social, technical and environ-

mental order in the world shipping industry partici-

pates ILO, too. It prepares conventions and

recommendations concerning regulation of social

standards in maritime sector. The organization has

set out many minimum requirements for decent

work in the maritime industry. Recently, in 2006,

ILO has adopted a new consolidated Convention ( C

186 ) that provides a comprehensive labor charter

for the world's 1.2 million or even more seafarers,

addressing the evolving realities and needs of a sec-

tor that handles 90 per cent of the world's trade.

The new ILO’s Maritime Labor Convention,

2006 clearly sets out a seafarers' "bill of rights". Its

provisions will help to meet the demand for quality

shipping, which is crucial to the global economy.

The convention will apply to all ships engaged in

commercial activities with the exception of fishing

vessels. The new Convention consolidates and up-

dates 68 existing ILO maritime conventions and rec-

ommendations adopted since 1920, among them

convention 147 of 1976 /Merchant Shipping (Mini-

mum Standards) Convention/, convention C165 (

1987 ), C178 and C180 of 1996, simultaneously en-

forcing revision of 37 other ILO’s conventions.

The new convention is designed to encourage

compliance by operators and owners of ships and

strengthen enforcement of standards at all levels, in-

cluding provisions for onboard and onshore com-

plaint procedures for seafarers regarding the ship-

owners' and shipmasters' supervision of conditions

on their ships, the flag States' jurisdiction and con-

trol over their ships.

The Convention sets minimum requirements for

seafarers to work on a ship and contains provisions

on conditions of employment, hours of work and

rest, accommodation, recreational facilities, food

and catering, health protection, medical care, welfare

and social security protection.

Under the new convention, ships that are larger

than 500 GT and engaged in international voyages

www.namma.org/resources/iloNewCharter2006.htm

Countries that do not ratify the new Convention will remain

bound by the previous Conventions that they have ratified, alt-

hough those instruments will be closed to further ratification.

204

or voyages between foreign ports will be required to

carry a "Maritime Labor Certificate" and a "Declara-

tion of Maritime Labor Compliance". The Declara-

tion sets out shipowners' plans for ensuring that ap-

plicable national laws, regulations or other measures

required to implement the Convention are complied

with on an ongoing basis. Shipmasters will then be

responsible for carrying out the ship-owners' stated

plans and keeping proper records to provide evi-

dence of compliance with the convention. The flag

State will review the shipowners' plans and verify

and certify that they are in place and being imple-

mented. This will put pressure on shipowners that

disregard the law, but will remove pressure from

those that comply.

Discussing international maritime transport poli-

cy, it should be noticed that EU is strongly commit-

ted in setting-up such regulatory mechanism and not

only within the Community. The European Commis-

sion’s transport policy aims at the harmonious per-

formance of the European maritime transport system

as a whole. It has performed at once two strategic

goals. Over the years, the Commission has built a

quite comprehensive regulatory framework encour-

aging the efficiency of ports and maritime transport

services, inter alia reinforcing market position of

EU fleet flying member states’ flags and strengthen-

ing competitive advantages for EU shipowners in

benefit of all other economic sectors and of the final

consumers on one hand and safety as well as securi-

ty in shipping activities on the other. The Commis-

sion supports actively the efforts of the EU member

states to promote a European merchant fleet offering

quality shipping services in Europe and, what is im-

portant, all over the world. The Commission is also

promoting short sea connections between all the

maritime regions of the European continent, as this

transport mode represents an opportunity to solve

road congestion problems while reducing signifi-

cantly the environmental impact of the overall

transport and supply chains. Thanks to the Commis-

sion's decisive action, Europe is protected today with

very strict safety rules preventing sub-standard ship-

ping and reducing the risk of environmental catas-

trophes (i.e. strict requirements for double hull tank-

ers, accelerating phasing-out single-hull tankers,

etc). The recent EU actions and regulations concern-

ing maritime safety will, hopefully limit the number

of the maritime accidents. The packages Erika I,

Erika II or the newest third package of maritime

safety measures should yield gradual but significant

improvement of maritime safety

. The Commission

also works actively against piracy and terrorism

threats. Other important field of activity of the EC

concerns the social dimension, looking after working

conditions, health and safety issues and professional

2006. Maritime Transport Policy. European Commission.

qualifications of seafarers. Finally, the EC works for

the protection of citizens as users of maritime

transport services, ensuring safe and secure condi-

tions, looking after their passengers rights and exam-

ining the adequacy of the public service maritime

transport connections proposed by EU member

states. Last but not least, due to the growing envi-

ronmental constraints, maritime transport is also re-

garded in the EU as the potential area of the internal-

ization of external costs its generates in the global

scale. Admittedly, it participate in total sum of ex-

ternal costs at relatively low level, but some cost

categories relating to air pollution (SO

, NO

, etc.)

and ships’ accidents ( mainly oil spills) regarding as

typical maritime externalities amount to quite signif-

icant sums in global scale. Due to that, in close co-

operation with IMO, EC intends within the EU’s

sustainable maritime transport policy to include this

sector into its regulatory framework concerning in-

ternalization of external costs.

In case of accom-

plishing that objective, it would be the deeper every

known form of public intervention into the real

sphere of international maritime transport.

3 CONCLUSIONS

Currently functioning maritime transport regulatory

system with its typical dual mechanism interacting

international shipping’s real sphere, strongly affects

both operational sphere and development of mari-

time transport in global scale. There are widely seen

numerous global effects of its regulatory activity,

such as:

1 creation of international order in this transport

sector based on common, widely accepted inter-

national standards relating to technical, opera-

tional, economic, social and environmental as-

pects,

2 growing safety and security at sea as well as secu-

rity of maritime supply chains; it means, that

shipping is getting less risky and more reliable as

a mode of transport, strongly supporting the de-

velopment of seaborne trade,

3 enhancing intermodal competitiveness of mari-

time transport operators, especially against road

haulage carriers by promoting short sea shipping,

development of intermodal transport and new

concepts of logistics supply chain management.

Consequently, maritime transport will be stronger

committed in accomplishment widely promoted

strategy of sustainable development (EC concept

of Greener Transport),

4 increase in maritime transport operational produc-

tivity which should bring about its higher effi-

Greening Transport. COM(2008)433 final. Brussels.

8.7.2008

205

ciency and effectiveness in term of time and costs

of handling seaborne trade,

5 encouraging technical and technological progress

in shipping industry as well as widely perceived

innovation; among others in the area of the fleet

operation and management (logistics concepts),

6 reduction of vessels’ life cycles in purely tech-

nical and economic terms, speeding up imple-

mentation of digressive methods of ships depreci-

ation,

7 growing purchasing costs of new tonnage as well

as exploitation costs of the existing fleet (results

of necessary technical conformity), which will

undoubtedly strengthen the competitiveness in

maritime transport and subsequently the pressure

towards further capital concentration both vertical

and horizontal in this transport sector.

The existing (dual) regulatory mechanism in

shipping sector, consisting of two in their nature dif-

ferent subsystems, needs to be internally coherent

and not self-contradictory. As a result of growing

international public regulation (safety and security

reasons), maritime transport sector is getting more

international even in that sense that its globally dis-

persed markets become more international and uni-

fied. Consequently, autonomous regulatory subsys-

tem in maritime transport becomes more

homogenous and coherent as well. The process of

relatively extensive pervading public regulatory

mechanism into autonomous one will have to last as

long as freight markets being under the growing

pressure of international maritime transport policy

wholly accumulate and in the end incorporate main

objectives of public regulation. It may abide very

long, being determined to some extent by the devel-

opment of commodity markets (primary ones).

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