Economic science tends to consider the concepts of the regime of navigation and maritime commerce in very broad terms, including a vast complex of relationships within the framework of these major human activities.
The processes in this sphere involve acute and intricate problems.
Specifically, in recent years close attention has been given to problems of navigation and overseas commerce for the following worrisome reasons: over-production of tonnage, la id-up fleet, dwindled demand for the transport of certain cargoes, low and unstable freight rates, shipowners’ losses, and a fierce competition accompanied by monopolization of a large part of the merchant fleet and a vigorous expansionism of some states at all levels — from the manufacture of transport facilities to the distribution of cargoes. TNCs activities and the protectionist policies of some countries add to the division of an increasingly larger part of maritime transport and commerce into a sort of modern “feuds”, rather isolated economically and politically from other related shipping activities. The upshot of this is that a menace of “new feudalism” in the World Ocean is mentioned more and more frequently.
As a result, economic and other imbalances are intricately interwoven with political differences, causing disorganization of maritime transport and commerce which, in turn, adversely affects the world economy, the economies of individual countries and international relations. These problems acquire a global significance.
Over-production of tonnage is the main cause of the crisis in maritime transport. Excessive tonnage led to lower and extremely unstable freight rates. Low rates limit and even reduce shipowners’ profits, whereas technical progress and inflation send up the cost of transport facilities and, consequently, require increased capital outlays by shipowners. Rising prices for transport facilities and port equipment and increasing maintenance costs, as well as frequent changes in the pattern of spending combined with low rates worsen the financial situation of shipowners.
Something ought to be done either to limit the build-up of merchant fleets or ease up competition for transportation contracts, or to coordinate the solution of other problems in the context of sharp differences In maritime policies, for example between advanced Western nations and the developing states.
The long-standing sickness of maritime transport and the failure to stabilize navigation can be explained to a large extent by the pernicious effect of large-scale monopolization not only of transportation ^facilities, but also of cargoes. For example, whole shipping empires have emerged, often integrated with industries within intricate corporative structures seeking to operate independently of the general system Of international maritime transport. Mass shipments bf raw materials from many developing countries are handl- j ed by respective corporations. Vertical integration is achieved, : specifically, due to the fact that, in developing countries, corporations frequently control not only industrial enterprises, but also port; storage and transportation (above all, maritime) facilities^ Consequently, TNCs determine the tonnage and the commercial terms. Herein lies the profound contradiction between the sovereigns rights of the newly-liberated countries to dispose of their own natuSl ral resources, On the one hand, and the actual situation, on the’ | other. The latter is marked in many developing countries by prima-j ry good»!(cargoes) being immediately drawn into the institutionali structure of TNC’s after having been extracted (produced), thmf defying control by the respective producer states.
Transportation of crude oil, oil products and liquified gases may serve as a good example of this. Developing countries export over] 90 per cent of their oil, the bulk of all shipments is monopolized bjl the “big seven” oil TNCs. This means that roughly 90 per cent of the cargoes is handled by vessels actually owned by Western countries. To prove the point here is convincing statistics on the share of the OPEC countries in related activities (percentage of the world total): oil production, 45; international trade in oil, 76; and maritimeme transport of oil, 3.
A similar situation is observed in the maritime transport of iron ore, the largest dry bulk cargo movement. Over 90 per cent of iron ore production in the Western world is controlled by two dozen steel corporations, including “Haina Mining”, “United States i Steel” ana “Cleveland Cliffs” of the USA, “Hammerslay Iron” and “Broken НШ” of Australia, “LKAB” of Sweden, etc. Almost half of these companies are marked by clearly-defined vertical integration. Some two-thirds of the world maritime transport of iron ore are, in fact, an in-house movement. Over 85 per cent of imports fall to the share of Japanese. West German, US, British, Italian and Belgian companies.
Coal is handled by a larger number of shippers, but all of them are bound by long-term contracts to definite buyers and depend on them, including the option of tonnage. Japan is (he. large&t importer of coal. Up to 80 per cent of its coal imports is transported by vessels controlled by Japanese companies.
Five concerns (“Bunge”, “Continental”, eta) control not only the bulk of world maritime transport of grain, but also all grain movements from harvesting to consumption areas. They own ele- vators in grain-growing regions, internal transportation facilities, transshipping facilities and elevators in the ports of exporting and importing countries. They also control the world grain distribution network. They are more powerful than any of the exporting or importing countries of the Western, world.
Strong vertical integration is also typical of the production of trade in and transport of bauxites and aluminium oxide. The following six corporations — “Alcoa” (USA), “Kaizer” (USA), “Alkan” (Canada), “Reynolds” (USA), “Pechine” (France) and “Alusuisse» (Switzerland) — control up to 60 per cent of the extracting capacities for both products in industrial and developing countries, 65 per cent of alumina refining capacities and 55 per cent of primary-aluminium producing capacities. In this case, too, the bulk cargo movement is largely an in-house operation, though the above TNCs frequently use chartered transport for commercial reasons.
Maritime trade in phosphates stands apart in that their produc iion and export by developing countries are state-controlled. Nonetheless,, as the industry which manufactures fertilizers is inthe possession of TNCs, the latter have the last say in distribution and transport.; TNCs’ predominant position in the market enables them to purchase phosphates on the condition that they will be transported bv TNCs’ ivessels. Five countries (France, West Germane, Japan, the Netherlands and Britain) account for almost 40 per cent ol imported phosphates.
This is how things stand with the developing countries’ export cargoes. The situation in imports is similar. The world trade in industrial goods has also been monopolized by Western companies. The Automobile market is almost completely; dominated by monopolies. Over 40 per cent of motor cars are made by the three largest companies -— “General Motors”, “Ford Motor» and “Chrysler» (USA). Nine largest companies account for almost 80 per cent of passenger cars and 60 per cent of trucks made in the capitalist world.” Five US companies control over 70 per cent of the Western electronic computer market. Tractors and other farm machinery are controlled by “John Deer”, “International Harvester”, “Ford Motor» and “Allis Chalmers” of the USA, “Messi — Feorgusson» of Canada, etc. A similar situation prevails in the manufacture of industry1 equipment. For example, “General Electric”, and «Westinghouse Electric» of the USA and “Brown—Bovery” of Switzerland make over 70 per cent of turbogenerators. The production of bearings is largely run by “SKF” (25 per cent of the total output), “FAG”, “RHP” and “NSK”. Other industries also exhibit similar tendencies.
Organizationally, shipments arc often made by the base corporation to its subsidiaries or to companies with which it has financial arrangements in developing countries. The maritime transport of industrial goods is either an in-house operation, or at least a sales monopoly-controlled activity as numerous buyers in different countries have no other way out but to agree to suggested (actual) transportation schemes.
In the final run, the inconvenienced and hard-pressed developing countries respond by more active protective measures. As a consequence, access to cargoes has become a serious problem.
However, control over cargoes is not the only cause of the developing countries’ difficult position. Another one is ownership ol transport facilities. The present’day distribution of maritime and other transport facilities, as well as the maritime transport coastal infrastructure are unfavourable for the newly-liberated states. Shortage of resources and the lack of skilled labour are handicapping their programmes of merchant fleet development and operation. Four-fifths of the world tonnage is run today by Western shipowners and only some 10 per cent by the developing nations.
The sailing of vessels under “convenient” flags has a negative impact on the system of international relations in the sphere of maritime transport.
The changes underway in navigation and maritime commerce are largely caused by the diverging interests of industrial Western powers and the young nations of Asia, Africa and Latin America. It would be a mistake not to see that the current crisis and the general contradictory evolution of navigation are interrelated and interdependent. Against the background of the scientific and technological revolution the past decades have seen important structural changes in international navigation, the break-up of traditional relationships and the emergence of new ones. These processes have been accompanied by sharper economic and political struggle.
Changes in navigation and maritime commerce affect international economic relations and the world economy posing problems of a global nature. The real significance of maritime transport as a major sector of the world economy can be simultaneously evaluated in at least three aspects.
First, maritime transport is part of the world transport system, whereas navigation problems are part of more general transportation issues.
Second, carriage of goods by sea is part of the world trade and, in a broader sense, of the international economic relations.
And, third, navigation questions form part of the new global problem — that of exploitation of the resources of the World Ocean, with merchant shipping being classified as the use of a specific type of resource “space» resources.
Maritime transport is the ‘‘backbone’’ of the world system as it accounts for almost 70 per cent of the turnover by all types of transport taken together. la the riod maritime transport has turned into a major sector of the world economy; its normal functioning is an underlying factor of the development of all the main regions of the main regions the world, and of all countries and sectoral economies.
Of all modes of transport, shipping is the principal means of maintaining international economic relations. The volue of world maritime carriage totals 3,700 million tons, whereas the cost of the cargoes so shipped approximates $ 1.5 trillion. Up to 80 per cent of goods involved in world trade are delivered by the sea. The cost of shipping is added to that of the transported cargo, andconsequently, to the price of the goods, influencing thereby the r sales; tion and manufacture.
The importance of navigation and maritime commerce explains the general concern about their future. The unprecedented crisis in world shipping seriously affects the interests of all countries and it is interrelated with the current changes in the regime of navigation and maritime commerce. Their restructuring takes place against the background of confrontation between Western and developing countries adding to the latter’s economic and political destabilization. Disagreements focus on problems of access to cargoes or on navigation proper —- the regime of marine areas. For instance, in order to protect their young merchant fleets handicapped by many cargoes being monopolized by largest corporations, the developing^’ countries have announced their ^sovereignty over cargoes’v’i.e. they have applied the practice of reserving the goods subject to maritime transportation.
At the same time, as the exploration and exploitation of the World Ocean assume larger scale, a tendency, which many authors characterize as appropriation of sea areas, becomes increasingly pronounced.
Hypothetically, there is a certain analogy between the right to cargoes and the seeking to appropriate sea areas. In the beginning, many countries established effective sovereignty over their natural resources. Then the process developed simultaneously in two ways. One of them was to extend effective sovereignty over the natural resources not only to the extracted primaries and then to these primaries as goods, but also to a subsequent stage when the goods are declared cargoes for shipment. This is a functional case. The other way was to seek an extension of the right of ownership not only to the natural resources of the land, but also of the coastal sea areas, which eventually led to the proclamation of the “sovereignty over resources” in a 200-mile zone of the World Ocean and the shelf. This process was accompanied by some attempts to turn “sovereignty over resources” into “sovereignty over the territory”, i.e. to appropriate the respective parts of the Ocean, which is a “spatial” case.
Another important factor increasingly emerges which is pertinent not only to the World Ocean. In the context of intensive exploration and exploitation of the surface of our planet for economic purposes, space in general (in the sense of absolute space in its classical meaning of “a pure receptacle of material objects”) becomes more and more limited, strongly stimulating claims for space and, consequently, for its alienation. Their tendency is evident elsewhere but in relation to the ocean it is at least less camouflaged than with respect to the land because sea areas have so far been less associated with the natural resources or man-made values “contained” therein; That is why areas in the ocean are often regarded as absolute space in a “pure” form.
With space being classified as an economic category, navigation | (as well as any movements of transport in general) may be viewed j as the use of “space resources”, which poses a number of very difftf! cult problems concerning the jurisdiction of “space sovereignty”, its | limits, possible rents, etc. As applied to maritime transport, such* problems are especially delicate because of the international character of its activities and the imperative need for the lawful interests! of all countries to be taken into account.
The above-mentioned and many other issues related to the current 1 changes in navigation and maritime commerce, including radical 1 restructuring of their regime, are very complicated and cannot bel given full coverage in one article. The author’s concept designed to I explain the causes, essence and implications of these changes in 1 navigation and maritime commerce is outlined in full in his recently ] published book entitled “Business and the Sea” (Mysl Publishers! 1982).;,)
On the whole, in connection with the reviewed problems it is 1 important to emphasize, that two conflicting tendencies seem to be ] increasingly active at work in the critical situation in maritime,5 transport caused by cyclic and other .crises in the world economy, «i as well as by crucial changes in the traditional patterns of navigation and maritime commerce. The first tendency is continued expansion of maritime transport as a vehicle for extension of world economic relations and internationalization of the world economy. The second opposing or counter-tendency is characterized by a queer combination of monopolization, with a fractional organizational structure of semi-isolated elements with resulting barriers of various kinds to navigation and maritime commerce.
A specific feature of this counter-tendency is that it affects an activity which is in the van of the process of internationalization of the world economy and which, by virtue of its production technology, boas* of an immanently inherent unity of its components, and of the cohesion and organic interaction of its elements. All the more negative are the effects of the fragmentation of the organizational structure and the breaking away of self-reliant elements from the economic entity: in’tercorporative transport, consortiums, shipowners’ closed5 shops, etc. Also, monopolization materialized in these forms seeks contributions of all kinds ranging from extra freight charges and various taxes to rents. The crisis phenomena in navigation and maritime commerce observed since 1975 are dangerous not only as such, but also because of their close relationship to the long-term changes in this sphere, to the process of the restructuring of the regime. Meanwhile, changes in navigation and maritime commerce «fleet the international economic relations and the economy of an overwhelming majority of countries. Consequently, the transformation of the regime affects the interests of all countries and the problem of the restructuring 0f the regime is of a universal, global cha- meter. It must be resolved on a mutually acceptable basis in the interests of all countries. To this end, use can be made of the positive experience of the 3rd UN Conference on the Law of the Sea which succeeded both in adopting important decisions on many international maritime law aspects of the World Ocean and in elaborating a constructive procedure for addressing these problems.