Wednesday, 19 September 2007 00:00
Shippers’ council in Asia will start to press their governments for carrier antitrust immunity reforms in the coming year, Asian Shippers’ Council Chairman John Lu said Tuesday at the annual meeting of the Global Shippers’ Forum in Singapore.
Lu said he’s confident that governments in Asia will be convinced that allowing ocean carriers to collectively decide rates and ancillary freight charges will hurt shippers to the point that it will negatively impact the economies of ASC’s 18 member nations.
Progress is moving apace in the region as shippers worldwide count down until October 2008, when EU regulations banning conferences go into effect. Lu said China may very well enact similar legislation within the next year, while a representative of the West India Shippers’ Association said that antitrust immunity is now the top priority for the India’s competition commission, which will come into being in mid-2008.
“We have set the rock rolling down the hill, and it will not stop, whether you talk about intra-Asian trade or anywhere else,” said R. Venkatesh, vice president of WISA.
Changing government attitudes in the varying 18 nations within the ASC will not be easy, Lu admitted, but the plight of shippers in the region will be aided by two factors: the new EU regulations will already affect carriers and shippers serving the Asia/Europe trade as of next fall; and the goals of shippers throughout Asia are similar no matter which country they reside in.
Lu broke the ASC nations into three distinct categories -- service buyers, service sellers and facilitators -- and said the likelihood of antitrust reform depends upon which category they fall.
Service buying nations -- where national liner capacity is lower than the nation’s demand for capacity -- include countries like China and India. Here Lu expects fast results, as those nations aim to protect the health of their exporting industries. Service selling nations, like Japan -- where fleet capacity far outstrips cargo demand from the country -- will push for the status quo, because it’s in their interest to have foreign countries paying higher rates and surcharges into the Japanese economy. Lastly, facilitators like Hong Kong and Singapore will take a wait and see approach -- earlier this year, Singapore overhauled its antitrust laws, but gave an exemption to liner carriers.
“In their hearts, Hong Kong and Singapore will like to see shippers be successful, because that will help international trade,” Lu said. “The decision in Singapore is a short-term decision because they don’t know what to do and they don’t want to be at the forefront of this.”
He estimated that the first few dominoes in Asia -- China and India -- will fall in the next year, but that it will take longer for governments in facilitating and service selling nations to follow suit.
“But it won’t take 20 years like it did in Europe,” Lu predicted.
In fact, China appears well on its way to abolishing liner antitrust exemption soon. Lloyd's List reported Tuesday that a new antitrust law passed last month includes no exemption for liner shipping, according to Cai Jiaxiang, vice president of the China Shippers’ Association.
For his part, Japanese Shippers’ Council Managing Director Ted Kawamura said his members are waiting to see what happens with regard to rates and service in Europe before pushing its government for antitrust reforms. He said Japan operates under its own system -- derived from the European conference regime -- that allows carriers to cooperate, but protects shippers as well.
“We are supportive of the initiative of the ESC, but our current system wasn’t handed to us,” Kawamura said. “We took this position.”
Meanwhile, Andrew Traill, a consultant for the ESC, said that progress on ending liner antitrust immunity in Asia is critical to the success of the EU ban on conferences.
“The EU regulations mean no collective pricing and no collective surcharges,” he said. “We talked about collusion in terms of sitting in a smoky room in Europe, but why not come to Asia, sit in a smoke-filled room and collectively set rates in a way that isn’t apparent? These are global companies. That’s why it’s important to get these reforms in Asia as well.”
But Traill cautioned that ESC will be “breathing down the necks” of the carriers if collusion persists after the ban goes into effect.
“If shipping lines wanted to go down that route, they should look at what happened to the airline business,” he said.
Peter Gatti, National Industrial Transportation League executive vice president, said he sees actual regulation of carriers under the new EU systems mostly paralleling what occurs in the United States, where the Ocean Shipping Reform Act allows private negotiations between carriers and shippers, and allows carriers to jointly set surcharges, but does not allow them to collectively set base rates.
“The (Federal Maritime Commission) doesn’t monitor,” he said. “It’s a complaint-driven process and that’s how it will probably be in Europe.”
