When shipping costs rise, island economies pay first

By Mr Bertrand Smith, Director General, Maritime Authority of Jamaica

When freight rates rise or a trading route is disrupted, the immediate focus is usually on shipowners, charterers, and cargo interests. In Jamaica, the effect goes much further. Higher transport costs eventually appear in the price of food, fuel, medicines and raw materials, as well as in the cost of getting Jamaican products to overseas customers.

The overwhelming majority of Jamaica’s international trade moves by sea. We cannot simply switch to road or rail when a shipping service is withdrawn or becomes more expensive. The sea is our connection to international markets and to many of the essential goods on which our people and economy depend.

This makes Jamaica particularly sensitive to the changes now taking place across shipping. The industry has to decarbonise, improve its cyber resilience, adopt new technology and prepare for greater digitalisation and autonomy. It must also respond to a shortage of qualified seafarers, more frequent extreme weather and continuing geopolitical disruption.

Much of this work is necessary. Cleaner fuels, better technology and stronger international standards should make shipping safer, more efficient and more sustainable.  

Jamaica supports that direction, but we must also be honest about the investment it will require. Ships will need new equipment, ports will need new infrastructure and seafarers, regulators and shore-based personnel will need new skills.

It is easy to discuss these costs at the level of an individual vessel or company. The picture looks different when they move along the supply chain and reach a country that imports much of what it consumes.

Small Island Developing States generally have smaller cargo volumes and fewer shipping connections than the major markets. They cannot offer the same economies of scale and may have limited scope to change suppliers or redirect cargo through another port. Longer voyages, higher insurance premiums, additional compliance costs or the loss of a regular service can therefore have an immediate effect on the landed cost of goods.

In the Caribbean challenges are compounded by underdeveloped transportation networks, low connectivity and an ageing fleet servicing the region have resulted in freight rates being on average  seven  percent (7%) higher than the global average.

UN Trade and Development has highlighted the pressure created by longer routes, volatile freight rates, environmental compliance costs and gaps in maritime infrastructure. Developing economies are among those most exposed as they neither own or control ships or the technology.

For an island state, this is not an abstract discussion about shipping economics. It affects food and energy security, business competitiveness and the cost of everyday life.

This does not mean international standards should be weakened. A patchwork of national and regional requirements would make matters worse, adding cost and uncertainty for shipping companies while placing a heavier burden on smaller administrations.

Global shipping still needs rules agreed through the International Maritime Organization and applied consistently across the international fleet.  It is only through multilateral institutions such as the IMO where no country is too small to be heard, that SIDS like Jamaica are able to participate and influence the development of international standards that govern shipping.

In supporting the work of the IMO Jamaica has maintained a principled yet balanced and practical position. This is necessary as the adoption of measures in response to developments in the shipping industry can significantly increase freight rates and threaten food security or provide opportunities to transition to a greener and more resilient economy. 

Multilateralism and diplomacy are key to the negotiation of the short term and medium measures to decarbonize the shipping industry by 2050. It is important that the rules adopted by the IMO not only implementable but deliver tangible benefits to all member states including vulnerable and import dependent states. 

This requires that the economic and social consequences of the measures being negotiated be assessed and considered before they are finalised.  The assessment cannot end with the cost of a new fuel, a piece of equipment or a change in vessel operations. It must follow that cost through to the ports and countries at the end of the voyage.

There is a phrase “you do not get what you deserve, you get what you negotiate” and a strong and unified voice representing  the  SIDS and LDc with the required technical support  is required to ensure that these member states are not unfairly penalized by the measures being negotiated.

During its 50 years of IMO membership, Jamaica has consistently supported strong international rules and constructive multilateral cooperation. We will continue to do so while making the case for the Caribbean, Small Island Developing States and other economies whose dependence on shipping leaves them particularly exposed to rising costs.

For Jamaica, the test is a practical one. Can we make shipping cleaner and safer without making food, fuel and trade less affordable for the countries that rely on the sea most? We believe we can, but this question should be answered before new measures are agreed, not after the bill arrives.