In January, the Trade Facilitation Agreement (TFA) and the Trade Facilitation Group (TFG) Discussion Agreements were terminated. This follows soon after the termination of the Australia and New Zealand – United States (ANZUSDA) Discussion Agreement at the end of December 2017. This represents a monumental change to liner shipping in Australia.
The decision to terminate these selected Discussion Agreements (not consortia agreements) is significant given that conferences/DAs serving the North East and South East Asia markets have existed for many decades so we are moving into a new era for those trades. The core reason for the decision to terminate these agreements is their declining membership caused particularly by industry consolidation that impacted upon their market influence and the perceived value of membership. In December ’17, the number of members had declined to only 3 for TFA and 2 for TFG which clearly brought into question their effectiveness.
The reasons for the declining memberships of the DAs that led to this point are a bit more difficult to pinpoint; there are a number of factors:
- One factor is the increasing attention by national competition regulars on liner shipping activities globally. Rightly or wrongly this had created the impression that members of Discussion Agreements are more likely to be targeted for anti-competitive investigation. Consequently, a number of them have made global policy decisions to withdraw from all discussion agreements.
- Another is the growing size of individual lines through the recent spate of mergers and acquisitions. The larger shipping corporations are less dependent on the cooperation of other lines in the various trade lanes and therefore see less value in Das.
- A third and significant reason is the repeated threat over a number of years, by the ACCC in particular, to remove the protections of Part X. This has caused uncertainty in the industry and lines may well have withdrawn from the DAs now rather than hold on until the rug is pulled from under them, so to speak. Lines have seen the withdrawal of competition protections for Discussion Agreements in other jurisdictions (most recently New Zealand in mid-2017).
In the immediate future the termination of these agreements are not expected to have an impact upon capacity or sailings to North East Asia or South East Asia where the services of the various consortia will continue unaffected and underpinned by agreed minimum levels of service negotiable with APSA. Additionally I should point out that new Discussion Agreements may be created should some of the above uncertainties be clarified and trade conditions show this to be beneficial to the industry.
There is still a lot going on in liner shipping policy and despite the current withdrawals from DAs, shipping lines are still strongly supportive of retention of Part X of the CCA . Shipping Australia is preparing for negotiations with the ACCC and Shipping Regulator over the content of a potential block exemption for liner shipping that the ACCC is now empowered to provide under the legislative changes passed near the end of last year.
