Tasman freight under scrutiny

Press, 31 August 1985, Page 18

Tasman freight under scrutiny

By

MICHAEL HANNAH,

in Wellington

The Government has been thrown a provocative challenge by a former Foreign Affairs divisional chief to give a lead in opening up transport competition across the Tasman.

At stake are the prime objectives of closer economic relations with Australia, of increasing trade, and of improving the efficiency of the Australian and New Zealand economies, according to Ms Charlotte Williams.

Ms Williams, now employed by a leading sharebroking firm in Wellington, is a former head of the Australian Division of New Zealand’s Ministry of Foreign Affairs, and has 10 years’ experience in trade policy. Her recently-pub-lished study, entitled “New Zealand Transport Policy and Closer Economic Relations with Australia,” was commissioned by Victoria University’s Institute of Policy Studies. In it, she spotlights three crucial areas in which the Government could give the private sector a lead, because it is still one of the bigger operators in internal and trans-Tasman transport. The three areas of immediate concern are:

© The maritime unions’ ban on non-New Zealand and Australian crewed ships from carrying transTasman trade; © Existing restrictions on competition from new air freighters;

@ The failure of the Government to run its own shipping operations according to commercial performance criteria and without subsidy. In her 171-page study, liberally laced with figures and tables to back up her case, Ms Williams argues that progress in reducing on-shore costs is essential, because

they account for a big proportion of total shipping rates. Trans-Tasman shipping costs could be expected to be higher than costs on longer runs, she admits, if only because the total fixed costs, including on-shore costs at either end of the voyage, as well as capital and the fixed costs in running a vessel, must be allocated over a lower mileage. Nevertheless the trans-Tasman run turns out to be even dearer than these costs would account for. Ms Williams maintains.

Quoting the Union Steam Ship Company, she notes that importers and exporters have required that sea transport services must be both frequent and regular. This has reduced their investment in inventories, but has also introduced a significant element of cost in transport as it determines the size of a vessel and its operating cost per tonne. According to the Union Steam Ship Company, “the geographical spread of population and industry in both countries has resulted in a demand from the market place for a service to a large number of ports in relation to total volume carried.”

That, the company says, is a further extra cost to the transport operator.

Ms Williams questions the accepted wisdom that the transTasman haul is best served by the company’s roll-on-roll-off vessels, introduced in the 19705. “It is moot whether the distance across the Tasman, somewhere between a long and a short sea haul, is better served by roll-on-roll-off vessels or cellular container ships,” she concludes.

What adds to the cost of the trans-Tasman run is that it is a

dedicated, relatively short-hauls, low-volume service with directional and seasonal imbalances, under conditions of protection from competition, she says.

So, what is the alternative? One option would be to make available spare capacity on ships running between Australia and New Zealand on round-world voyages. This is prevented by the maritime unions' ban on ships carrying trans-Tasman trade when they are not crewed by New Zealanders or Australians. Ms Williams traces this ban back to the dominance that the Union Steam Ship Company gained over New Zealand’s coastal trade, under which the unions also gained a stranglehold on crewing coastal vessels. When the company expanded to take over most of the trans-Tasman trade — it still accounts for 70 per cent of the general liner cargo, but a smaller proportion of the container trade — the unions followed suit.

The result, according to Ms Williams:

“As a result of the union ban, however, other non-New Zealand and Australian manned operators do not offer services on the Tasman. In particular, spare crossover capacity east and westbound currently available on ships plying the other major routes to North America, Europe, and Asia, is not open to Australia and New Zea-land-bound tonnage.” She argues strongly that the Government must address the barrier to entry for shipping on the Tasman posed by the maritime unions’ ban.

“It is not in the Government’s gift simply to lift the ban,” she admits, "but it is the natural candidate to give the lead in discussions with shippers, shipping companies, and the various unions

on the means and the timing for opening up the Tasman to competition.” She considers competition could be opened up by allowing entry from operators servicing a wider Asian-Pacific market, and encouraging New Zealand shipping to enter this market.

State trading corporations which dominate the on-shore and coastal trade should operate according to commercial performance criteria, enabling them to sell transport services at their “true, unsubsidised cost and in response to market demand.” Ms Williams would like to see all transport subsidies to the New Zealand industry, both hidden and direct, removed, and she opposes subsidies on any particular activity or trade, such as New Zealand shipping or exports to Australia. The latter point is particularly timely, as New Zealand exporters to Australia have seen their returns diminish by the appreciation of the New Zealand dollar in recent weeks against the Australian dollar.

Subsidy of any particular trade or activity, says Ms Williams, can be done only at the expense of some other activity or trade in another market.

By the same token, she argues that the Government should not liberalise selectively between trading routes or between modes of transport. That takes her argument to air transport, and here she hits out against the lack of freedom to new air freight operators on the Tasman runs.

The freedom of access negotiated between the United States and New Zealand Governments for their carriers to offer services between the two countries, should, she says, be matched by a similar

objective for New Zealand to pursue in aviation discussions with Australia. The Government should actively explore the deregulation of external aviation both as a general policy and, through.negotiation with its partners, in bilateral air agreements. Ms Williams says that recent trends in internal transport show ’ road and rail freight rates to be « lower than they were before dere- * gulation. Service has also im- S proved, but it may be some years - before the market settles at its “ true point of equilibrium, she says. On the Tasman, competition has increased with the advent of the Shipping Corporation of New Zealand (now the New Zealand Line) joint venture with A.N.L. of Australia. The Union Steam Ship Company has trimmed its costs; and demand for air freight grown. The cost of shipping across the Tasman is still apparently unduly high, according to Ms Williams’ studies. “That is ... it is above the price > that would clear the market under ’ conditions of free competition,” she says. She says also that it is impos- - sible to measure the “excess” cost, and evidence that high shipping - costs are unduly high is “hard to " come by.” • The danger is that, if the costs '• are unduly high, then they will impede the achievement of the objectives of C.E.R. to increase ~ trade and to improve the effi- - ciency of the Australian and New Zealand economies. It could also deflect investment. Ms Williams argues for more >1 discussions between Australian and r New Zealand Governments to re- - move impediments to competition, and for more analysis of the true "■ costs of transport borne by New ■ Zealand industry.