New order gets underway

Malcolm Latarche
Malcolm Latarche

29 March 2017


Today, the UK’s ambassador to the EU will deliver Britain’s notice advising it is leaving the EU making the process of withdrawal official and putting an end to the possibility that somehow the result of last year’s referendum might be overturned. Yesterday, president Trump signed the long anticipated executive order that puts an end to his predecessor’s climate change policies. The immediate effect of both will likely be further protests by those that oppose the two actions and it will be some time before the full implications of the measures become clearer. There has been much speculation as to what the effect of each may be on shipping but both appear to have set stock markets rising in their respective companies. There are however, differences between the two actions that will impact in different ways. The UK leaving the EU may well signal a short term downturn in trade between the UK and the rest of the EU but that is likely to be replaced by increased trade with the wider world. In turn that will lead to an increased demand for shipping capacity since a large proportion of the goods transported between the UK and the EU presently travel by road and rail rather than sea. The UK is also generally in favour of free trade so, while there may be some tariffs on trade with the EU if negotiations do not bring the best possible deal, there is a very good chance that tariffs on goods from elsewhere will be reduced, stimulating trade growth. The US by way of contrast is following a more protectionist trade policy. The latest executive orders will stimulate domestic energy production from coal and oil and gas obtained by fracking. This will mean less need for imported oil and gas affecting demand for tankers and bulkers. On the other hand, there will be potential for increased exports of those commodities which will take up the slack. US protectionism is more likely to impact the liner sector but if more employment is created as a result of reversing the decline of coal mining, then there will be more disposable income available to afford the higher cost consumer goods imported from Asia. Another impact on shipping can be expected if the US either withdraws entirely from the Paris Climate Agreement or remains inside but does not follow through on its voluntary emission reductions. That would almost certainly mean that other nations would follow suit leaving only the EU likely to remain dedicated to the Paris ambitions. Even that is not guaranteed as Poland is presently at loggerheads with the EU leadership and will not want to see its coal production put in jeopardy. A watering down of the Paris agreement will in turn filter through to the IMO’s attempts at regulating CO2 emissions although rules on SOx and NOx are less likely to be affected. Presently this is confined to the MRV rules that are not yet in force. Doubtless the EU will continue with its MRV regulations which apply to EU-flagged vessels and other flag ships calling at EU ports. If the EU was to follow up MRV with some form of market-based measure, the initial effect would probably be an exodus from EU flags of vessels above 5,000gt that do not trade regularly to the EU. There look to be interesting times ahead for shipping in terms of regulation and employment in a period when many expensive decisions concerning the ballast water convention and the 2020 sulphur cap will need to made.