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.