Rebuilding our coastal shipping requires government intervention

If the Covid-19 response has taught us any­thing, it’s that our econ­o­my lives and dies by our sup­ply chains and that when push comes to shove New Zealand can’t always rely on the rest of the world.

But when it comes to ship­ping goods from one Kiwi city to anoth­er we are depen­dent on a hand­ful of multi­na­tion­al com­pa­nies run­ning crews who are paid at “inter­na­tion­al” rates far below those of New Zealand crews. That makes our econ­o­my vul­ner­a­ble.

It makes us vul­ner­a­ble to the whims of multi­na­tion­al ship­ping com­pa­nies that won’t com­mit to region­al New Zealand and our domes­tic pro­duc­ers.

We’ve seen small ports make expen­sive invest­ments to keep big ship­ping com­pa­nies hap­py only to be dropped.

Allow­ing for­eign-flagged ves­sels with low wages crews to car­ry goods between New Zealand ports makes it uneco­nom­ic to main­tain a New Zealand flagged coastal fleet.

Yet, hav­ing our own coastal ship­ping ves­sels is vital to our regions and cru­cial when dis­as­ter strikes or inter­na­tion­al ship­ping is dis­rupt­ed by eco­nom­ic crises. After the 2016 Kaik­oura quake the one NZ flagged coastal con­tain­er ship left in the coun­try was crit­i­cal to main­tain­ing sup­ply lines.

New Zealand coastal ves­sels used to trade trans-Tas­man and Pacif­ic routes, they will again if need­ed. Build­ing up our coastal ship­ping fleet would cre­ate more oppor­tu­ni­ties to move goods by sea and reduce con­ges­tion on our roads. That’s less dan­ger and wear and tear on our roads, and also less green­house emis­sions.

In their strate­gic work­ing paper “Green Freight 2020” the Min­istry of Trans­port notes that mov­ing road freight to coastal ship­ping pro­duces “sig­nif­i­cant­ly less GHG [green­house gas] emis­sions per tonne kilo­me­tre (tonne-KM) than road freight.”

Unfor­tu­nate­ly this state­ment was made in the course list­ing coastal ship­ping as “out of scope” of the report. This reflects how coastal ship­ping has been ignored by con­sec­u­tive gov­ern­ments.

The extreme free-mar­ket gov­ern­ment in the 1990s removed pro­tec­tions for our coastal ship­ping fleet and legalised for­eign-flagged ves­sels car­ry­ing good between domes­tic ports. New Zealand is unusu­al in allow­ing this.

Many coun­tries, includ­ing the US, UK, Cana­da, Japan, and the EU have laws in place to pro­tect their domes­tic-flagged coastal ship­ping indus­try. They have thriv­ing domes­tic ship­ping as a result.

The law change required to fix this is tiny. Sim­ply remov­ing one short clause – s198© – from the Mar­itime Trans­port Act would pro­tect our domes­tic ship­ping.

Once that’s done, we’d move to a “hub and spoke” mod­el. Ide­al­ly with one or two inter­na­tion­al ports on each island receiv­ing exports and deliv­er­ing import­ed car­go for dis­tri­b­u­tion by coastal ship­ping to small­er ports.

That would make it eas­i­er to pre­vent dis­eases enter­ing the coun­try by hav­ing few­er points of entry, and it would work for the ports too, with less dupli­ca­tion of biose­cu­ri­ty and cus­toms require­ments. The mis­placed pres­sure for ratio­nal­i­sa­tion of the ports would be gone.

It’s hard to imag­ine that the hand­ful of mega­lith­ic cor­po­ra­tions who dom­i­nate inter­na­tion­al ship­ping would care too much about los­ing domes­tic freight between the likes of Timaru and Gis­borne.

So if it’s good for Kiwi work­ers and ship­ping com­pa­nies, the roads, our ports and their local com­mu­ni­ties, our envi­ron­ment, and our econ­o­my why haven’t we done it already?

It’s not because the num­bers don’t stack up. Aside from the eco­nom­ic resilience coast ship­ping brings, there are also direct fis­cal gains in the hun­dreds of mil­lions to low bil­lions of dol­lars annu­al­ly.

Is coastal ship­ping ignored because we’ve lost the capac­i­ty we need to do it right away? There would need to be a lead-in time to build infra­struc­ture and skills. But nei­ther of these issues are insur­mount­able. Busi­ness rais­es cap­i­tal for new ven­tures all the time, and the Gov­ern­ment has allo­cat­ed bil­lions to skills train­ing.

No, I think the real rea­son we haven’t gone ahead with this is a lack of polit­i­cal will.

Recov­er­ing our coastal ship­ping indus­try after hav­ing it gut­ted by a bunch of blink­ered ide­o­logues in the 1990s requires gov­ern­ment inter­ven­tion.

It takes mon­ey, it means diverg­ing from the hands-off approach of the last thir­ty years and leg­is­lat­ing in the nation­al inter­est, it means ruf­fling a few feath­ers among the minor­i­ty of inter­ests that favour the sta­tus quo.

That kind of change is not some­thing that this Gov­ern­ment or any oth­er in the last three decades has had any taste for. Many in this Gov­ern­ment and pre­vi­ous ones will decry the destruc­tion of our coastal ship­ping indus­try. They have had work­ing groups on it, they have writ­ten reports, par­ties have made it their pol­i­cy. Busi­ness as usu­al.

Until now. The response to Covid-19 was instruc­tive. It showed that to get things done for New Zealan­ders the Gov­ern­ment needs to inter­vene with mon­ey and with law, and no mat­ter what you do some­one won’t like it.

The great­est les­son Covid-19 can teach us, if our lead­ers are will­ing to learn it, is that the free-mar­ket adja­cent con­cept of gov­ern­ment as lit­tle more than “capa­ble man­agers” should be over. Man­ag­ing the sta­tus quo isn’t how you do right by the New Zealan­ders who put your bums into Cab­i­net seats.

This les­son needs to be applied to the rebuild­ing of New Zealand flagged coastal ship­ping. We have been promised real change that makes us stronger as a nation. Let’s see some.