The cost of overseas shipping : who pays?

Abstract

The overseas freight bill for New Zealand is estimated for the year ending 30 June 1980 to be $1.2 billion. The burden of this freight charge predominantly falls on New Zealand exporters and importers. Since a high portion of this charge is incurred in foreign exchange, the escalating sea freight bill contributes significantly to New Zealand's poor balance of payments position. The paper addresses a number of questions: Q1. Have shipping freight rates increased faster than other costs in our economy? The answer to this question is yes. Q2. What has led to such high freight rate increases? The answer to this question is associated with a high level of capital invested in cellular containerships over the past decade and the increasing cost of oil based fuels. There would appear to have been few productivity gains to compensate for such increased costs.

Q3. How do these freight rate increases affect farm gate returns? The answer to this question is that any increase in sea freight rates results in a corresponding drop in farm gate returns. Q4. What are the arguments for and against sole use of the Conference Lines? Seven arguments used in support of sole use are detailed. Two arguments used by those opposed to exclusive use of the Conference Lines follow. In my opinion the balance of argument favours those opposed to sole use but more investigation is required before a specific policy change can be recommended. Q5. What course of action should be pursued? Producer Boards and Government Departments must put New Zealand in a position of strength by investigating alternative shipping systems in a serious manner. Over the next year or so every support should be given to those who are probing the present shipping system.