Peter Dunne: Coastal shipping

Thirty years ago, after a marathon Parliamentary sitting, the Bolger National government passed the Maritime Transport Act which deregulated coastal shipping by abolishing cabotage. Cabotage was the practice which restricted the operation of sea, air, or other transport services within a country to that country’s domestic operators only.

The abolition of cabotage meant that New Zealand’s coastal shipping services were opened to direct competition from overseas shipping lines. According to the argument at the time, it was more efficient to allow foreign vessels coming here to transport their cargo around the coast themselves, rather than requiring them to unload at major ports to smaller, New Zealand-operated coastal vessels. Abolishing cabotage, it was said, would cut transport costs, make deliveries more efficient through greater economies of scale, and provide a better service overall to consumers.

It was predicated on the assumption the overseas shipping companies would welcome the opportunity to compete directly around the New Zealand coast, and that the days of slow and sometimes unreliable local services were over. Conveniently overlooked in this argument was New Zealand’s previous experience with the Conference Lines – the cartel of mainly British-owned shipping companies that had dominated New Zealand’s maritime trade from the 1880s through to the advent of containerisation in the late 1960s. The Conference Lines had set charges and determined tonnages to be shipped to Britain on their terms and always in their own interests.

The naïve assumption of the 1990s was that a more competitive international shipping environment brought on by containerisation would be different. It would not lead to the type of restrictive practices of the Conference Lines once coastal shipping was deregulated, or so it was said. Implicit in this was a view that the New Zealand coastal market was big enough for overseas shipping companies to want to play in. What was overlooked was that New Zealand is a small market at the end of most trade routes, and therefore unlikely to be sufficiently attractive to international shipping companies to invest too much effort in. They simply wanted to arrive here, unload their cargoes, reload, and sail to their next overseas port, as quickly as possible.

The first casualty of coastal shipping deregulation was the local shipping industry itself. The small coasters that had served provincial ports up and down the country quickly disappeared. They were replaced not by overseas ships bringing cargoes to those ports, but by rail services between ports in some cases, but more commonly by trucks that could operate more flexible services. The Cook Strait ferries, unreliable as they have become, are now our only significant coastal shipping services.

Over the years, overseas shipping companies have steadily reduced or terminated their services to New Zealand, making our supply lines even more vulnerable than already determined by our geography. The disruption caused to international trade by the pandemic has massively intensified that problem.

At the same time rising concern about carbon emissions has raised questions about the environmental sustainability of large container vessels sailing around the New Zealand coast. The devastation to regions like Tairawhiti and Hawkes Bay during the recent cyclones, and disruption to road and rail transport networks have raised their own concerns about whether our shipping network remains fit for purpose.

The recent announcement by global shipping giant Maersk that it is terminating its national coastal shipping service from next month after less than a year in operation introduces further uncertainty into the domestic shipping market. Maersk is intending to ship goods to New Zealand through an Australian port on a weekly basis, rather than several New Zealand ports, which it says will lead to better and more flexible services and connections to overseas markets. Maersk will be continuing its direct services to west coast North American ports from New Zealand.

The promises of better services to New Zealand consumers have a familiar, if unbelievable, ring to them, going back to the days of the Conference Lines and the “home boats” serving the British market. Our already vulnerable shipping links are likely to become more tenuous as a result.

The combination of rising concern about emission levels and the environmental safety of big container vessels (remember the Rena?), the vulnerability of regional communities to adverse weather events, and the apparent indifference of international shipping companies to New Zealand’s circumstances, raise the question of whether, and how, a more responsive coastal shipping service could be re-established. A return to cabotage is unlikely and undesirable, but there is a case for reviewing the Maritime Transport Act and looking afresh at the feasibility of establishing a modern coastal shipping service.

Our state highways are deteriorating because of increased heavy usage, our rail services are perennially struggling, with their vulnerability to adverse weather and the consequences for regional communities now dramatically exposed. Therefore, reconsidering the role and place of coastal shipping must surely be a priority for the next government as part of its approach to climate change, reinforcing community resilience and developing national infrastructure.

Peter Dunne, a retired Member of Parliament and Cabinet Minister, who represented Labour and United Future for over 30 years, blogs here: honpfd.blogspot.com