Cut tariffs to make sea trade smoother

The partial closure of the Ningbo-Zhoushan Port because of a single coronavirus case has understandably caused some alarm within the global shipping community. The port is the world’s third busiest and reflects the crucial role China plays in international cargo container shipments. While a potential shipment crisis and cargo-handling bottleneck seem to have been averted, it should raise alarm bells at a time when global shipping is tight and major economies are barely recovering from the pandemic.

A 34-year-old employee at the Meishan terminal tested positive on August 11. The terminal, which handles about 20 per cent of the cargo at the port, has remained closed. Management has redirected it to other Ningbo terminals while shipping companies have been alerted, with some deciding to avoid the port altogether.

Given the global shipment importance of the Ningbo-Zhoushan Port and the Meishan terminal in particular, there has been some criticism within international trade about China’s policy of zero-tolerance being an overkill. Of course, China is far from being the only one. New Zealand has just reimposed a lockdown after the first Covid-19 case was detected in six months. Closure of key ports, even if partial, may potentially disrupt global trade. Container shipping rates from China and Southeast Asia to the east coast of the United States have hit a record high of more than US$20,600 per 20-foot equivalent unit (TEU) – the standard measure for freight container volume – based on the Baltic global container freight index. The Ningbo-Zhoushan Port is key to this shipping route.

Any shipping congestion or disruption can contribute further to raising the prices of goods. This in turn can hurt people in poorer nations and cause inflation, which is already slowly rising, in developed economies. Governments and port managements at the heart of the global cargo trade must prepare contingency plans to minimise disruption. But, to encourage trade and reduce costs, to ease the pain of consumers and the threat of inflation, governments should lower or even scrap tariffs that have been kept artificially high, especially those raised as part of the Chinese-American trade war in recent years.