International Journal
on Marine Navigation
and Safety of Sea Transportation
Volume 3
Number 2
June 2009
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
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.
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
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,
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
Register of Shipping (DIS), and the French Interna-
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-
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.
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
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-
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-
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 (
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.
2.1 The main forms, mechanisms and instruments of
maritime transport regulation in the global
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,
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
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
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-
2.2 Freight markets as an autonomous regulatory
mechanism in the international maritime
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.
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.
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.
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
Benamara H., Valentine V., Fugeza M., Fuel prices,
transport costs and the geography of trade. Op.cit., p. 8
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.
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 : /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
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
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.
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.
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-
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.
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-
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).
Begerson S. G,. 2008. Arctic Meltdown The Economic and
Security Implications of Global Warming. Foreign Affairs.
Benamara H., Valentine V., Fugeza M., 2008. Fuel prices,
transport costs and the geography of trade. UNCTAD
Transport Newsletter. Trade Logistics Branch. No. 39, Se-
cond Quarter, DiBenedetto B. 2008. Fuel burn: Rising en-
ergy costs are spurring companies to reevaluate reevaluate
supply chains. The Journal of Commerce Online. 18 June.
Grzelakowski A. S., ” 2008. Transport morski w gospodarce
światowej. ”Przegląd Komunikacyjny. No. 12
Hummels D., Transportation Costs and International Trade
ithe Second Era of Globalization, Journal of Economic Per-
spectives. Volume 21, Number 3.
Kirschbaum E. 2008. Harnessing kite power to a ship. Interna-
tional Herald Tribune. 20 January
Korinek J., Clarifying Trade Costs in Maritime Transport,.
2008. Working Party of the Trade Committee, OECD, 25
Limão N. and Venables A J., 2007. Infrastructure, Geograph-
ical Disadvantage, Transport Costs and Trade, Journal of
Economic Literature.
Merchandise Trade by Commodity. Statistics Database. 2006.
World Trade Organization (WTO) (
Ports and International Transport Costs. 2006. UNCTAD
Transport Newsletter No. 31, March.
Recent Trends in Liner Shipping Freight Rates. 2004.
Transport Newsletter No. 24, June.
Review of Maritime Transport 2007. 2007. New York and Ge-
neva. UNCTAD. p. 11-6.
Review of Maritime Transport 2008. Report by the UNCTAD
secretariat. New York and Geneva. UNCTAD.
Rohter, L, 2008. Shipping Costs Start to Crimp Globalization.
International Herald Tribune, 2 August
Weak dollar helps push bunker prices back to record levels.
2008. Lloyd’s Ship Manager, May. /Index.asp