Caribbean: Need for Overhauling Regional Maritime Transport

By Ryan Sullivan*

Container ship in freeport, Bahamas/ Corey Seeman/ Flickr/ Creative Commons License

A lack of coordinated policy and overreliance on a one-size-fits-all trade structure have long hindered the development of the maritime transport infrastructure that the Small Island Developing States (SIDS) of the Caribbean need to build a stable system for moving goods to and from the islands. The region’s current infrastructure, which carries more than 90 percent of its goods, is vulnerable to disruptions and inefficiencies.

  • Data published by the United Nations Conference on Trade and Development (UNCTAD) show the SIDS of most of the Caribbean have the lowest Liner Shipping Connectivity Index (LSCI) in the world (The Bahamas, Jamaica, and Trinidad and Tobago are the exceptions). LSCI was established to measure a country’s port connection to global markets by applying factors such as the number of regularly scheduled shipping services, the reach of these services, and vessel capacity. Connectivity in the Caribbean has been an issue for decades because global shipping companies believe the economies of scale and distance to major shipping routes make carrying goods in the region an unprofitable endeavor.
  • The growth in global container shipping has amplified connectivity issues. The shipping companies have steadily increased container capacity and employed advanced technology on vessels to the point that the port infrastructure in the region – the age of most port infrastructures in the Caribbean averages 50 years – is inadequate. Mega container ships call on only large transshipment hubs from which smaller, feeder ships pick up containers for delivery to islands – creating an indirect path to and from global markets that has been estimated to increase the costs of goods by 7 percent compared to the world average. In addition, shipping cartels have consolidated the power of these multinational shipping companies to the detriment of local companies dependent on their services.
  • The COVID-19 pandemic has created shockwaves across supply chains, affecting both developed and developing economies. UNCTAD reports note that SIDS were among the most affected by supply chain shocks, highlighting their trade dependency for critical foodstuffs and medical supplies.

Proposed solutions have mostly looked at encouraging free trade agreements to reduce costs of trade and at encouraging foreign investment to increase capital flows and drive demand for cargo capacity. But none addresses the inherent lack of connectivity and high costs involved in this critical mode of transportation. U.S. President Biden recently issued an executive order that has empowered the Federal Maritime Commission to actively investigate unfair competition and enforce antitrust laws in the maritime sector. This signals a failure in the current trade structure since companies are being bullied as they attempt to bring their goods to the global market.

  • These challenges have raised questions about the wisdom of continuing to rely solely on private shipping companies to provide logistics, fueling policy reviews aimed at increasing coordination among the governments of the Caribbean, with assistance from international development banks, to promote a network of interisland transport services and increase investment in infrastructure upgrades. Governments are seeking unprecedented cooperation in digitalizing customs document processes and streamlining delivery of vital goods to their destinations.
  • Some SIDS experts point to the European experience in subsidizing short sea transport services. Greece created a network of ferries with a hub-and-spoke model of logistics centered at the Port of Piraeus to transport passengers and cargo to and from islands in the Aegean Sea. However, the service has seen no profits and is only viable under a single trade regime without the headache of various customs laws. Other proposals have not led to action due to resistance from maritime nations to easing cabotage measures meant to protect their maritime industries. Using Europe as an example for coordinating a secure interisland transport system would provide a unified policy approach that the Caribbean governments have so far been unable to reach.

While technology has advanced operational processes, the major impediment for Caribbean SIDS is the lack of willingness, at least so far, to coordinate policy in establishing a resilient and sustainable maritime transportation network of their own. The Caribbean Community (CARICOM), whose 15 member states and five associate members bill themselves as the oldest surviving integration movement in the developing world, would be the best platform to promote comprehensive, strategic solutions, but there’s little sign of progress ahead.

  • One solution would be to encourage a multinational public-private partnership to create capacity for businesses to ship less-than-container-loads (LCL). The smallest container size available on the market currently is a 20-foot container. Most businesses are unable to fill one but are still obligated to pay tariffs of a full-container-load (FCL). The old one-size-fits-all approach is unrealistic for island logistics, and it imposes extra cost per good for the shipper and capacity issues for feeder ships. Additionally, efforts to streamline customs processes through digitalization should continue to be a priority beyond the pandemic, and concrete customs policies for seamless interisland trade would promote an environment for secure supply lines. Once the friction in interisland trade is reduced and capital and goods flow, the conversation can move toward developing a permanent maritime infrastructure – such as a regularly scheduled transport service with the sole purpose of serving the needs of the small islands of the Caribbean.

August 18, 2021

* Ryan Sullivan is a master’s candidate in the School of International Service, specializing in International Trade Relations.

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2 Comments

  1. How feasible would it be to revive the old West Indies Shipping Company launched in the early 1960s? In its heyday, it operated two ships which called port in most of the Caribbean islands a couple of times a month. It was subsidized by many CARICOM member states and seems to have disappeared in the early 1990’s when, ironically, efforts were being made to revive CARICOM.

    Reply
  2. Ryan Sullivan

     /  September 13, 2021

    https://www.wsj.com/articles/shipping-options-dry-up-as-businesses-try-to-rebuild-from-pandemic-11631439002?mod=djem10point

    Based on this article from WSJ, there may be further supply chain issues for the Caribbean as smaller vessels are being sought for long distance voyages to larger, more lucrative markets.

    Reply

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