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Ports Would Like a Little Less Competition

Import News from the Importers Institute: Ports Would Like a Little Less Competition

The ports of Auckland and Tauranga, facing a decision by the Maersk shipping line, would like to stop competing with each other.

New Zealand, a country with a population of four million, currently has 13 international ports. This is partly due to geography (a long, thin country with high mountain ranges) and partly due to good old-fashioned parochialism aided by good old political pork-barrelling.

In the eighties, the port of Auckland (the major gateway for imports into this country) was corporatised and part of it was floated on the local stock exchange. At the same time, some regulations preventing off-wharf unpacking of containers were abolished. The stranglehold of labour unions, based on restrictive practises designed to featherbed their members, was broken.

These changes resulted in an immediate and significant improvement in service to the point where the port of Auckland went from being one of the worst to one of the best in international comparisons. Later, the port of Tauranga expanded its operations and set up an inland port in South Auckland, where most industry is sited. Tauranga attracted some import shipping business previously held by Auckland and ran a rail bridge to South Auckland. The service was not significantly longer and importers benefited from the cost reductions brought about by competition.

After the recent takeover of P&O Nedlloyd, Maersk became a dominant player in this market, carrying as much as 60% of all containers. That company has indicated that it wishes to reduce the number of port calls in this country. It is likely that it will select either Tauranga or Auckland as the single gateway for this part of country. If it selects Tauranga, that will suit the single milk powder exporter, as most of our dairy production originates in the Waikato region. If it selects Auckland, that will benefit mainly importers, who are sited closer to the Auckland wharf. However, concentrating the container trade in either port will inevitably result in a reduction of competition.

This impending decision is the probable reason why both ports are talking about a possible merger of their operations. New Zealand has a relatively robust anti-trust law and the legal barriers to anti-competitive mergers are considerable. For example, Air New Zealand was prevented from merging with Qantas. These barriers can be overcome through special legislation, and we would expect the ports to lobby politicians accordingly.

Importers certainly do not want a return to the days where a monopoly provider cosseted from competition simply charged what the market would bear and provided a service of indifferent quality. We appreciate that a commercial decision by a dominant shipping line like Maersk may well have a significant impact on the ports that miss out on its custom. However, even Maersk must be aware that, by neglecting either the Waikato farmers or the Auckland importers, it opens the door for competitors to come in and erode its market share.

Importers are also concerned that the infrastructure to carry goods between the two locations in large numbers is simply inadequate. Rail runs on narrow gauge and has been starved of investment for decades. No one in their right mind (that excludes Greens and other train enthusiasts) is seriously contemplating a significant investment in 19th century rail technology. Roads are inadequate and congested. New Zealand is afflicted by a predominance of eco-fascist thinking, which basically means that roads will not be built, lest we insult the environment gods with our climate-warming trucks.

The Importers Institute advocates the maintenance of an open, competitive environment for our ports. They will need to compete for the custom of shipping lines; politicians have no proper role in saving the losers from the winners.

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