In brief - the distance between the opposing sides of the national and foreign-flagged fleet debate may be narrowing.

Even those of us who are passionate about the transport and logistics sectors and all things supply chain would have to concede that national shipping and maritime policy:

  1. isn't a headline grabber, even at election time; and

  2. rarely garners bipartisan support or consensus.

On the surface at least, that might have changed last week.

Covid and Ukraine highlight supply chain vulnerabilities

The backstory is well known and trite - we are girt by sea, a nation of shippers not shipowners, shipping accounts for 99% of our trade by volume and less than 1% of that trade is on Australian-flagged ships.
 
The vulnerabilities of that situation were highlighted in 2020-21 when COVID-19 wreaked havoc with global supply chains. Export ports closed, ships were prevented from docking, volumes of consumer goods skyrocketed and domestic ports became heavily congested. More recently, the war in Ukraine has had further impacts both on supply chains and fuel security around the world. China's efforts to re-establish the Nine Dash Line in the South China Sea and its more recent moves in The Solomons remain a threatening backdrop.

A national fleet

All of this has reinvigorated a debate long championed by the peak industry group of Australian-based ship owners and operators, Maritime Industry Australia Limited (MIAL).
 
Since as long ago as 2016 (and indeed long before), MIAL has been bemoaning the ease with which foreign-flagged ships can trade on the Australian coast and the lack of support for the Australian maritime industry.  
 
The local industry has called for greater tax incentives to promote a national fleet and a more restricted coastal trading regime. There is of course a chicken-and-egg situation here - restricting foreign access to the domestic coastal shipping task won't work if there is no substantial national fleet to undertake that work. Furthermore, companies won't invest in a national fleet if they will be undercut by low-cost foreign-flagged ships with largely unfettered access to the coast.
 
Progress in this conundrum has been hamstrung by the traditional political divide. The right blames the perceived high cost of Australian shipping on the unions, and the left blames the erosion of coastal trading protections for the parlous state of the national fleet.

Towards consensus?  

The distance between the opposing sides of the debate may be narrowing.
 
In a press release on 3 January 2022, the ALP announced that:

"An Albanese Labor Government will strengthen Australia's economic sovereignty and national security by building an independent Strategic Fleet to secure our ongoing access to fuel supplies and other essential imports.

As a first step, an incoming Albanese Labor Government will appoint a Taskforce to guide it on the establishment of the fleet as quickly as possible. While these ships will likely be privately owned and operate on a commercial basis, we will ensure that they are available for use by the Defence Forces in times of national crisis, whether that be natural disaster or conflict.
 
This Taskforce will include representatives from the shipping industry, major charterers, unions, Australian business and the Department of Defence.
 
An Albanese Labor Government will also act immediately to close loopholes in the existing regulatory framework to help rebuild Australian shipping. The Taskforce will also advise on how best to enforce existing coastal shipping laws and what legislative or regulatory reforms are necessary to reinvigorate Australian shipping."

At his National Party policy launch at the National Press Club on 11 May, the Deputy Prime Minister, Barnaby Joyce announced:
 
"That a re-elected coalition government will within the first six months after the election, introduce measures to increase Australia's merchant capacity. The government will review Australia's tax arrangements for Australian ship owners to ensure they can compete on an even footing with foreign ship owners. This will include assessing the current income tax exemptions for companies and seafarers and exploring changes that will promote Australia's sovereign merchant capacity. We'll put arrangements in place to encourage ship owners to look to our regional neighbours for workers to complement the Australian workforce. We will implement changes to the Coastal Trading Act to remove red tape and increase the speed with which ship owners can service Australia."

Opposition from an expected quarter

Unsurprisingly, Shipping Australia Limited, the representative body of foreign-flagged operators in Australia, has cautioned against "government support for protectionist maritime policies".

This caution is based partly on drawing a false parallel between the ALP and Nationals proposals and the US Jones Act. The Jones Act requires ships carrying goods between two US ports to be US-built, owned, crewed, and flagged. There is nothing in the current announcements that suggest a model similar to this. No one is seriously suggesting that only Australian-built vessels should be allowed to engage in inter-state trade.

SAL does correctly point to the failure of the 2012 Coastal Trading and tax incentive regimes (and a number of other historical initiatives) to have had a material positive impact on domestic shipping.

Many questions to answer

At least it looks like both sides of politics are putting domestic shipping - not the sexiest of topics in an election campaign - on the agenda and recognising it's a problem to be addressed. Although a positive move, both announcements raise more questions than they answer:

  • Establishing "taskforces" inevitably sounds like kicking the can down the road;

  • The Joyce speech was distinctly a Nationals announcement - we don't know what the senior coalition partner thinks about it;

  • The Nationals make no mention of the national fleet being "available for use by the Defence Forces in times of national crisis";

  • Both parties talk about changing the tax landscape to encourage domestic operators - but there have been advantageous tax laws in place since the 2012 Gillard/Albanese reforms, and they have had a negligible impact;

  • The Nationals' proposal that owners "look to our regional neighbours for workers" is guaranteed to excite the maritime unions.

It will be interesting to see what, if anything, comes of this after the election. Shipping reform rarely elbows its way onto the crowded legislative calendar, but certainly at least the ALP and Nationals have got it back on the agenda.
 

This is commentary published by Colin Biggers & Paisley for general information purposes only. This should not be relied on as specific advice. You should seek your own legal and other advice for any question, or for any specific situation or proposal, before making any final decision. The content also is subject to change. A person listed may not be admitted as a lawyer in all States and Territories. © Colin Biggers & Paisley, Australia 2022.

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