Negotiations on Free Trade

Progress towards the development of new global trade agreements has always been a standing item on the agenda of the ICS Shipping Policy Committee. But following the election of President Trump (and the decision of the United Kingdom to leave the European Union in 2019) these issues have assumed renewed attention. 

For many years, ICS has supported the successful conclusion at the World Trade Organization (WTO) of the ‘Doha round’ of trade negotiations and a new multilateral agreement to reduce or eliminate remaining obstacles to free trade, given that any boost to trade would also boost demand for international shipping. But ICS has also long sought the inclusion of maritime services in the new WTO agreement, as shipping (along with aviation) is one of the few major industries not covered by the General Agreement on Tariffs and Trade concluded in the 1990s when the WTO was established. 

In practice, a complex network of bilateral agreements between nations ensures that most shipping markets adhere to free trade principles, with few restrictions on market access. With the exception of government contracts and cabotage trades (between two ports in the same country), there is relatively little cargo reservation whereby national cargoes are protected for carriage on a nation’s own ships at the exclusion of other more competitive vessels. 

However, the reason why a WTO agreement on maritime services is still so important is that those maritime free trade commitments that have been made by governments have never been codified on a global basis. There is always a danger that governments could again become attracted to more protectionist approaches, viewing the benefits of trade as a ‘zero sum game’. If there was another economic shock like the 2008 banking crisis, there is a possibility that nations could come under serious domestic political pressure to renege on their commitments to free trade in shipping. It should be remembered that as recently as the 1990s, some parts of the industry were subject to the UNCTAD Liner Code which legitimised protectionism and the reservation of 40% of imports and 40% of exports on national flag ships. 

The WTO negotiations have in effect now been moribund for several years due to a lack of engagement by the United States and serious differences between developed and developing nations over issues such as agriculture. However, an attempt was made by a smaller group of nations to produce a Trade in Services Agreement (TiSA) which includes draft provisions on maritime services. However, the TiSA does not include China and the new U.S. Administration seems ill-disposed towards multilateral negotiations. 

One of the first actions of the Trump Administration was to withdraw the United States from the Asia Pacific Trans-Pacific Partnership (TPP). It also seems unlikely that the Transatlantic Trade and Investment Partnership (TTIP) between the U.S. and EU will go ahead in the immediate future. (The EU was hoping to make inroads regarding U.S. restrictions on international feeder services, which the U.S. defines as cabotage although the cargo is destined for a port outside the United States).

One question mark perhaps is whether China might try to fill the vacuum being left by the United States. But it seems unlikely that the U.S. would permit its political allies to participate in alternative agreements brokered by China, such as the Free Trade Area for the Asia Pacific promoted by China and Russia at the APEC Summit in November 2016.

Despite the change in atmosphere following the election of President Trump, it has to be remembered that nothing has fundamentally changed. Trade negotiations are always long term projects, often involving two steps forward and then one step back. However, in liaison with the Consultative Shipping Group of maritime administrations, which is committed to the maintenance of free trade principles, it will be important for the industry to be vigilant against any further moves towards protectionism.

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