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The Impacts of Globalisation on International Transport Activity over the past ten years

DLITSM501 – International Trade and Shipping Management

INSTRUCTOR: DR. ROBYN PYNE

NAME: ILIANA FOURNARI

STUDENT ID NUMBER: 13563

Globalization indicates a wider and broader outlook in regards to the opening of local and nationalistic perspectives to a unified and co-dependent world with simplified and free transfer of capital, goods, and services within countries.  

 According to Kumar and Hoffmann, “Transportation has been called one of the four cornerstones of globalisation, along with communications, international standardization, and trade liberalization” (Kumar and Hoffmann, 2002).  Maritime transport has a fundamental role in the economy around the world and it is estimated that over 90% of the world's trade is transported by sea.  Over the past decades the maritime industry is becoming more and more globalised, and as the countries expand their borders by trading and investing in foreign markets, the economy grows rapidly as well as the competition, which results in the adoption of new strategies, which have major impact on the maritime industry.  

“It has been said that arguing against globalisation is like arguing against the laws of gravity” (Annan, K).  In order for the maritime industry to be able to serve the demands of globalisation, it has transformed and developed its technologies, labour resources and national registries over the past decades.  Those changes show that globalisation has had various impacts in the international maritime industry, and those effects that globalisation has in the international maritime industry, will be the main focus of the essay. The movement of goods by sea and the design of networks will be discussed as well as the impact that this has on the maritime industry.  .  Furthermore, we shall examine the way shipping drives the economy by increasing the demands and the response that the industry has towards globalisation.  Another topic that will be analysed are the consequences globalization had on the environment and the ecosystems internationally and locally, and mention ways that the maritime industry can follow to contribute to globalized markets without having a negative impact on the environment.  

The movement of goods by sea is one of the most important elements when it comes to freight transportation systems that consists of various alternative modes of transport such as transport by air, road and rail.  The shipping transportation system connects locations by different ways that can function as alternatives. For instance, pre-carriage of a containerized cargo to a seaport using truck, followed by the main carriage to a seaport in another country by vessel and reaching the final destination by rail.  The international transportation has developed significantly during the last decades with the use of at least two different transportation modes, known as intermodal transportation which is about using separate modes together in the most dynamic method, which so far has resulted in an improvement of the economic performance of the transportation system.  Europe is the second highest in mode share and around 40% tonne-kilometres of the freight is moved by shortsea shipping.  Apart from being a reliable method of movement of goods by sea, shortsea shipping is also environmentally friendly, less prone to any damages and much more cost efficient than road transport is.  

Maritime transportation has a vital role in the global economy.  The world has become more prosperous and several countries are now able to participate in world trade because of the international shipping transportation.  The transport infrastructure that is transported in the maritime industry from factories to terminals to distribution centres and the way they interact with the maritime sector by been placed in key locations  is very important for the function of markets involved in the transportation network around the deep-sea services and therefore maritime transportation is an essential complement as well as an alternative for other modes of freight transportation.  Global transportation services are necessary due to the fact that resources and goods are not always in the place where the populations may desire them, and this is where transportation “steps in”.  Furthermore, another development that illustrates the importance of globalisation in the economy is the design of containerization for various merchandises in order to deliver cargoes in raw or semi-raw condition to as much closer to the markets, a development that significantly reduced the sizes in crew and labour requirements, as well as the cost of ocean cargo transport.  Moreover, with globalisation, the industries were able to identify markets around the world that offer lower manufacturing costs for semi-raw goods and products.  A good example is products such as electronic devices that most of the times are manufactured in a continent, such as China, where manufacture costs are lower even though they were designed in another continent such as the United States.  

Logistics has an increasingly important role in the global economy.  Firstly, logistics is defined as the sequence of actions that are been taken for goods to become available on the markets such as the purchase, the processing and the transportation.  As the manufacture of various products increased, maritime transportation systems had to adapt to the new changes and therefore various positive outcomes came out.  Firstly, the efficiency in transportation productivity expanded and the improvements in technology especially for intermodal transportation gave access to a more developed connection between different transportation modes.

An innovation that changed things towards the better in the maritime industry and played a vital role in the economy, is the switch from coal to oil that is now been used in the engines of the vessels, which apart from reducing costs it has also improved the vessel performance significantly.  From that change, a cargo “could save 78% in fuel and gain 30 per cent in cargo space by the adoption of the internal combustion propulsion and practically get rid of stokers and engineers” (Yergin, 2008).  Following the change in the fuel, more fuel efficient marine engines were implemented, and this had also a positive outcome as it resulted in increasing the efficiency of engines to over 50 per cent (Corbett, 2004).  

However, the impacts that globalisation has on the maritime industry are not always positive and they do not always bring positive outcomes.  Instead, globalisation came with several negative energy and environmental impacts.  Marine engine technologies that were initially developed in order to reduce fuel consumption, resulted in increased air pollution along with waterborne transportation and also contribute negatively to climate change on a global measure (Corbett and Koehler, 2004).  Moreover, ballast water that is been discharged by ships can impact negatively the environment as it contains a number of bacteria that can damage the ecosystems and also cause human health issues  .  Oil spills consist one of the most common way of ship pollution and unfortunately have shocking effects in the environment and the marine life due to the fact that they are high in toxicity and stay in the marine environment for years as it is almost impossible to be cleaned up once discharged in the water.  Another negative impact that globalisation has in the environment according to the International Maritime Organization, are the discharges from carbon dioxide which are expected to rise 50 per cent to 250 per cent if no actions are been taken to prevent the discharges  .  Also, the garbage that many people used to think that disappears in the ocean, can be as deadly as oil or chemical pollution in the marine environment and it is found in many places in the ocean due to the fact that ships most of the times find it more convenient to throw garbage in the ocean rather that disposing it in the ports.

In summary, several studies, according to the Organisation for Economic Co-operation and Development (OECD), indicate that the ship discharges will eventually lead to a net global cooling.  Most of the chemicals and oils that are been discharged by the ships have led to a dramatic climate change and scientists can already prove that the cooling effect is happening in the ocean areas  .  A phenomenon that will therefore have negative impacts on human health. A summarized examination on the UNCTAD 2016 review will be mentioned in the following paragraphs in order to discuss how the maritime industry will contribute in controlling and maybe eliminating the negative impact that ship transportation has in the environment as this consists the main negative impact of globalisation in the maritime industry.   

Despite the overall growth and improvement in the economy that globalised maritime industries have brought, according to the most recent review of UNCTAD 2016, the seaport industry experienced dramatic declines in growth.  A major decrease of 85 per cent in growth was seen on the twenty most developed ports by volume, a drop that in the year of 2014 was 6.3 per cent and dropped to 0.9 per cent a year later.  Moreover, the twenty most developed container ports showed a 95 per cent decline in growth dropping to as low as 0.5 per cent from 5.6 per cent in one year (UNCTAD, 2016).

However, as per UNCTADstat and as it can be seen from the chart below, goods unloaded had a 23% increase between 2006 and 2016 which can be easily considered as a significant increase. Globalisation is one of the factors that played a vital role in this raise since with globalisation the market became vast and the options unlimited resulting in higher demand and eventually more competition in the transport market.

Chart 1: Goods unloaded during period 2006 – 2016

Globalisation within the maritime industry has made significant improvements in the international maritime industry, such as forming partnerships and bringing closer global markets, increasing marketing efforts and expanding geographically.  Also, the increased competition as well as the high demand has affected the freights and resulted in faster, bigger and more technologically advanced ships.  In addition, a number of Legislations and/or regulations have been unified in an effort to address various issues which can be considered as negative consequences of globalisation, such as Marine Pollution, Collision etc. Furthermore, the high demand and competition “forced” the manufacturers to improve their services and quality of their products.

Significant changes are currently being reviewed in order to improve any negative impacts to the environment from the maritime industry.   

Marine Environmental Protection Committee (MEPC) according to the UNCTAD 2016 review, is working on ways to reduce further the discharges of toxic substances and, in fact, the International Maritime Organization has adopted specific measures that require ships to gradually generate nitrogen oxide discharges below a certain level.  The Marine Environmental Protection Committee has already set into force MARPOL and the Nitrogen Oxide Technical Code 2008, which include specific amendments that focus on the reduction of nitrogen oxide.  Moreover, MEPC is looking in adopting a report of the Correspondence Group that focus on the quality control measures of the fuel oil before it is delivered to a ship .  

Due to the fast growth of seaborne trade, about 3-5 billion tons of ballast water every year are being transported internationally by ships (The Maritime Executive, 2015).  Ballast water, as mentioned on a previous paragraph, usually carries a variety of organisms that can harm the marine life and the human health, therefore the BWC convention has been recently adopted by the International Maritime Organization, in order to prevent and eventually eliminate the risks that come with ballast water.  

Globalisation is, with no doubt, a necessary practise for the international maritime industry.  From containerships to delivery trucks, the transportation and distribution systems have combined, bringing the industrial activities much closer to the global markets.  Maritime transport, has been developed and influenced by the evolution of world trade (Stopford, 2009).  Apart from the positive changes that came with global shipping, in previous paragraphs various environmental problems were also mentioned and this should be the main focus of maritime industries.  As they are looking for new ways to increase economic growth, at the same time they must be looking at the precautions that need to be taken in order to reduce the environmental pollution, in order to take full advantage of the economic growth as the economic effects rely on the improvements that are made.  Technology is a key element of globalisation and the developments in technology are essential to the success of transportation.  However, there is always need for improvement, in order to control, and even better, eliminate the negative impacts that globalisation has on the environment and human health and at the same time continue developing the maritime transport in the global markets.  A suggestion for improvement, amongst the ones mentioned in previous sections, might be for the Governments to efficiently train their Port State Officers. In addition, ship management, ship owning Companies to train staff in order to gain knowledge of the new modern developments and practices of the maritime industry, as the global market expands and changes fast. The main focus should be on the fact that it is up to the people to eliminate any negative impact of globalisation and benefit to the maximum from all positive impacts of globalisation.

References:

 Branch, A., and Robarts, M. (1996). Elements of Shipping. 9th edn. London: Springer Science and Media B.V.

 Stopford, M. (2009). Maritime Economics. 9th edn. New York: Routledge.

 The Maritime Executive, 2015. Shipping and the Law Debates “Brave New World” (online). Available at: https://maritime-executive.com/pressrelease/shipping--the-law-2015-debates-brave-new-world(Accessed December 11th, 2017).

 OECD. Globalisation, Transport and the Environment (online). Available at: https://www.oecd.org/greengrowth/greening-transport/45095528.pdf (Accessed December 12th, 2017).

 OECD. The Impacts of Globalisation on International Maritime Transport Activity, 2008 (online). Available at: https://www.oecd.org/greengrowth/greening-transport/45095528.pdf (Accessed December 11th, 2017).

 Rodrigue, J., Transportation and Globalisation (online). Available at: https://pdfs.semanticscholar.org/5446/b2ddd85d34456d4c4a7abab0d738762b8740.pdf (Accessed December 14th, 2017).

 The Role of Maritime Transport in the Development of World Economy, 2014 (online). Available at: http://www.orizonturi.ucdc.ro/arhiva/2014_khe_62_pdf/khe_vol_6_iss_2_177to184.pdf (Accessed December 12th, 2017).

 UNCTAD. Review of Marine Transport, 2016 (online). Available at: http://unctad.org/en/PublicationsLibrary/rmt2016_en.pdf (Accessed December 14th, 2017).

 Our World in Data. Oil Spills (online). Available at: https://ourworldindata.org/oil-spills/ (Accessed December 15th, 2017).

 European Shortsea Network (online). Available at: https://ourworldindata.org/oil-spills/ (Accessed December 17th, 2017).

 Yergin, D. (2008). The Prize: The Epic Quest for Oil, Money and Power. New York: Free Press.

 IMO. Marine Environment (online). Available at: http://www.imo.org/en/OurWork/Environment/Pages/Default.aspx (Accessed December 14th, 2017).

 Corbett, J. J., and Koehler, H. W., (2004). Considering Alternative Input Parameters in an Activity – Based Ship Fuel Consumption and Emissions Model Journal of Geophysical Research.

 Corbett, J. J., and Winebrake J. J., (2010). International Maritime Shipping: The Impact of Globalisation on Activity Levels. Chapter 3. Organisation for Economic Cooperation and Development (pp. 55-79).  

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