As the date for our exit of the European Union draws closer each day, the talk of trade deals and negotiations should be captivating anybody within the freight forwarding industry. Teresa May hasn’t exactly had a lot of support for her vague rhetoric of a hard or soft Brexit, scuttling around some serious issues since the beginning of the talks. So, how these negotiations gone so far when thinking about ocean freight in the UK and Europe?
Well, what we know so far is that negotiations with the EU will not occur on a country-by-country basis. Any trade deal will offer a single set of conditions for all 27 remaining EU states. This is to try and maintain the consistent customs systems that is already in place between the UK and most of the other countries in Europe. Whilst this seems like it is a reasonable request for ocean freight forwarders to wait for this to be settled, we have less than two years to negotiate a very complicated issue, which isn’t a long time.
These unstable times could lead to withdrawal of investment throughout ocean freight. The Port of Tilbury, for example, has become a fast, modern distribution service, which benefits the south east of England and is a pathway into Europe. Offering excellent transportation links to a densely populated area, this port serves the UKs market in a vital way we cannot ignore. Prolonged talks regarding trade deals could eventually stop European business shipping to this port and damaging the UK economy.
It would be remiss of us to stay away from any of the positivises to come through Brexit talks already. A deal modelled after Norway would be the most beneficial for the UK. To gain access to the EEA, the country would have to re-join the bloc of European Free Trade Association (EFTA) states, and to do this they would need all the countries involved within the EFTA to agree to the UK’s membership.
This is achievable, however, much like the current trade talks, this could take some time, and stability is something the industry needs to keep creating revenue and continue to grow. Membership would allow access to the single market, but we would need to allow for freedom of goods, services, labour, and capital. Brexit supporters are spoken out about migration since we went to the polls, and the benefit of this would be that we could still look at tighter regulations when it comes to border control. It’s like having your cake and eating half of it!
44% of the UK’s total exports consisted of trade with the EU with goods and services amounting to £223 billion ($288 billion). This trade is currently not tariffed. If negotiations aren’t reached, a possibility for the UK would be that the WTO tariffs would become implemented, which isn’t great news for any forwarder, because these tariffs would start to tax items which currently enter the EU tax-free.
The British Shippers’ Council debated the impact of Brexit at a meeting in July and concluded that it is too early to tell what the outcome will be, because it will depend on what new trade agreements are negotiated with both the EU and non-EU trading partners. This isn’t great news for anyone in the industry. Every day of uncertainty that passes us by is a day that markets and trade fluctuate, leaving a growing sense of uncertainty for the industry and the UK economy.
Industry experts do, however, believe that the container lines will continue to call directly at UK ports. Even if the UK enters a small recession, UK cargo sizes are more than large enough to justify direct calls with mainline vessels. These calls come mainly from the South of England ports and are a positive note from all of the Brexit talks, leaving us slightly more confident that the UKs economy is self-sustainable and a reason for this is our strong ocean shipping trade.
Forwarders around the world must start asking, is this meandering attitude towards an industry, which spent over US$236 billion in more than a dozen countries purchasing new vessels, and one which is so vital to the UK in both an economical and consumer stand point, is enough being done to secure that our ports and customs still run smoothly between the UK and our European counterparts?
Moving away from the issue of Brexit, and having a look at the rest of the world, Liberia has become a staple of ocean freight and an important geographical destination for any forwarder. The smaller port has a throughput of more than 2.3 million metric tons, and with investments in the physical and human capacity of their out ports, making it a growing port for trade through to many destinations throughout Europe. However, the Spanish port workers strike may have a damaging affect in not just Spain, but in Liberia and surrounding ports.
The strike is due to the abolition of a dock labour scheme which grants port workers job security and improved wages. Spanish port workers’ strike disrupted goods transportation in southern Europe as carriers were forced to redirect their cargo to avoid logistical delays. For an up and coming port, such as Liberia, this could lead to damages. They could take the influx of cargo being delayed and create a temporary revenue stream, but the reality is that due to the delays and timescale issues, Liberia will suffer due to this.
The strikes affected many key Spanish ports including Algeciras, Barcelona, Valencia, Bilbao, and Seville. Whilst this may seem inconsequential, even the smallest delays at any of these major ports will have a knock-on effect for any forwarder using these shipping lines. Delays are to be expected, which means money will be lost. More strikes are expected throughout Europe as dockworkers of other European countries stand in solidarity with their Spanish counterparts as the issues related seem to affect a growing number of workers. This will mean planning for any forwarder shipping to these destinations, or, if possible, seeking an alternative route or end.
Several major shipping lines have also begun implementing no shows fines on shipments that fail to show up on the vessel. It appears that forwarders and the long-standing problem of no shows is still an issue we are facing today. Smaller-volume routes are being imposed with fines to start off the process in a testing period. The issue of no shows has apparently plagued the carriers for a long time and if being dealt with now to hopefully give a smoother transition between port workers and forwarders. Perhaps this will make the life of many of the strikers easier, and persuade them back to work quicker? Only time will tell.