Trade Wars and shipping
The immediate shipping response to the slowly intensifying trade war has been to increase movement so as to anticipate the entry into force of some of the biggest batches of tariffs in early August. It is not clear what the subsequent reaction will be. What is clear however is that the trade arrangements that have underpinned the creation of the global market are under threat. An irony is that just as the WTO has agreed on sweeping new rules to facilitate trade and reduce administrative barriers to customs clearance, the WTO members are busy erecting tariff barriers which all had presumed were nearly a thing of the past.
Like in relation to the first world war there is a feeling that this war ‘will be over by Christmas’. This is faith of the highest order as it is not clear what steps can be taken to end it. The US is in the business of undermining the WTO which would be the obvious locus for peace negotiations. The EU and China are not likely to want to discuss a new settlement without the inclusion of many other issues such as agriculture, subsidies, intellectual property, state owned enterprises, WTO decision making and the like. The number of issues needing resolution before there is an overall peace deal are such that the negotiations are likely to take years. The last successful WTO negotiation round, the Uruguay Round, took 8 years to complete. And while the peace negotiations are going on, the trade war continues. It’s not a rosy picture for trade or for shipping.
Brexit and Logistics
The Freight Transport Association, one of the main representatives of the UK logistics industry, and others have launched a campaign in the UK to get clarity from the government on the new trade arrangements between the UK and the EU. They argue that it is already too late to avoid disruptions at UK ports and in the Channel Tunnel. Many of the company’s immediate concerns are in relation to the lack of preparedness for a March 2019 exit and do not fully take into consideration the possible maintenance of the status quo during a two-year transition period. That being said the substantive concerns remain. The haulers point out that even the most sophisticated and automated customs clearance systems for trade between the EU and non-EU countries (which the UK will become) cannot match the current frictionless intra EU trade. The UK customs authorities have estimated that the cost to business of new border arrangements will be between Sterling 17 to 20 billion.
Russia, Trump and LNG
Russia has responded to President Trump’s assertion that Germany is captive to Russia because of its gas dependency by suggestion that Trump is trying to sell more LNG to Germany. The US claim was made as part of the longstanding US opposition to the Nord Stream 2 pipeline under the Baltic Sea. Russia pointed out that the US is also opposed to the Turkish Steam pipeline to bring Russian gas under the Black sea to Turkey. The US is building up its LNG export capacity in Eastern US ports.
Gazprom and Competition
Away from politics, the EU adopted a decision in May 2018 to impose on Gazprom a set of obligations to ensure the free flow of gas at competitive prices to Central and Eastern Europe. The commitments accepted by Gazprom are i) no more contractual restrictions on re-sale or cross-border sales; ii) the obligation to facilitate the flow of gas to and from isolated markets: iii) mechanisms to ensure that the prices in Central and Eastern Europe reflect price levels in Western Europe; iv) no leveraging of Gazprom’s dominance in these markets.
The Commissioner in charge of competition policy, Margrethe Vestager, said: "All companies doing business in Europe have to respect European rules on competition, no matter where they are from. Today's decision removes obstacles created by Gazprom, which stand in the way of the free flow of gas in Central and Eastern Europe. But more than that – our decision provides a tailor-made rulebook for Gazprom's future conduct. It obliges Gazprom to take positive steps to further integrate gas markets in the region and to help realize a true internal market for energy in Europe. And it gives Gazprom customers in Central and Eastern Europe an effective tool to make sure the price they pay is competitive”.
State Aids: public funding for links between Croatian island and mainland
The European Commission has found Croatian plans to grant HRK 250 million (€34 million) to ensure regular ferry connections on five routes between Croatian islands and the mainland to be in line with EU State aid rules. The public support will be granted to maritime companies, which will be selected through public tenders organized by the Agency for Coastal Lines and Maritime Traffic (Agencija za obalni linijski pomorski promet) and will cover the difference between revenues from ferry tickets and the cost of operating the ferries regularly throughout the year so as to allow, for example, the islands' inhabitants to commute daily to work or study. The Commission assessed the measures under EU State Aid rules in relation to services of general economic interest (SGEI) and on maritime cabotage that the State aid in question will contribute to the connectivity and development of the islands without unduly distorting competition in the Single Market. Commissioner Margrethe Vestager, in charge of competition policy, said: "For citizens living on Croatian islands, a connection to the mainland is essential. So, I'm happy that we are approving public support for ferry connections ensuring the link between five Croatian islands and the rest of Croatia not only during the peak tourist season in the summer, but throughout the year."
This article is for information purposes only and is not intended as a professional opinion.
For further information, please contact Bernard O'Connor.
