As the main arteries of global trade, economic entry points, and nodes of geostrategic power projection, ports are key to global and regional economies, connecting land and sea. In recent years, increasing Chinese investments in foreign ports have attracted media attention. The concentration of these highly strategic investments has lent legitimacy to fears that the means of global trade, once decentralised, have been slowly accumulating in a handful of Chinese state-owned enterprises (SOEs).

According to researchers from the United States Naval War College and Indiana University, Chinese and Hong Kong-based companies own or operate (in terminal leases or concessions) more than 90 ports in 53 countries. Other estimates suggest that China has investments or similar arrangements in over 100 ports with at least one in every continent except Antarctica.

China’s overseas investments in ports

Most of the port investments are along the National Development and Reform Commission’s three “blue economic passages.” The first passage links China to the Indian Ocean, Africa, and the Mediterranean; the second passage links China to Australia and the Southern Pacific; and the third passage links China to Europe via the Arctic Ocean.

The main Chinese investors in overseas ports and terminals are SOEs – prized national conglomerates with direct links to and controls within the Communist Party apparatus. One of the largest Chinese SOE investors in foreign ports is China Shipping Corporation (COSCO), the world’s largest terminal operator. Most of its port investments can be found in developed countries and along major global shipping routes. China Merchants Group (CMG), China’s other major port investor, by contrast has invested in emerging markets.

According to a 2020 Nikkei Asia report, between 2010 and 2019, Chinese companies, like COSCO and CMG, invested in 25 port projects in 18 countries, spending almost US$11 billion overseas.

Security concerns

These investments have raised concerns over Beijing’s potential to dominate international shipping and its concomitant ability to influence, and even control, important sea lanes and energy supply routes. This is alongside China’s overseas acquisitions of resources (such as water), technology, and infrastructure.

The Nikkei report noted that investments in foreign ports by Chinese SOEs have allowed China to gain access to strategic maritime hubs as part of the Belt and Road Initiative’s 21st century Maritime Silk Road, an “aggressive investment campaign that has raised concerns about Beijing’s growing clout across the world.”

Recently, the expansion of Beijing’s footprint at Khalifa Port (UAE), ownership stake in a fuels storage terminal at the Port of Fujairah (UAE), and investments in the Duqm Port in Oman have further stoked fears of what this centralisation of Chinese power and presence in the Middle East means, particularly near the Strait of Hormuz, an importat global chokepoint.

In response, various governments have sought to block Chinese companies from gaining ownership or majority stakes in terminals and ports. This includes the US, but also Bangladesh, which cancelled a contract with China to build a deep-sea port at Sonadia in 2016, believed to be due to pressure from the US and India. Meanwhile, Canberra has said it would review the 2015 grant of a 99-year lease of the Port of Darwin to the local unit of a Chinese SOE.

Concerns in the West

There are three main concerns in the West regarding investments in foreign ports by Chinese SOEs. The first is that these investments could give Beijing access to sensitive or classified information through surveillance (such as tracking the movements of communications and ships), spying, and data gathering capabilities.

Recently, in Israel, the management of a new private seaport at Haifa by Shanghai International Port Group was raised in the U.S. The Haifa naval base regularly hosts American warships, and the U.S. is concerned that the port operator could easily monitor U.S. ship movements, have access to equipment moving to/from repair sites, as well as supply chain vulnerabilities.

The second concern is the obvious influence Beijing can now exert through its many port investments. In Greece, for instance, COSCO has increased its stake in the enormous trans-shipment port of Piraeus to 67 percent. COSCO has also developed rail infrastructure reaching countries like Germany, strengthening China’s growing dominance in commercial maritime and land routes across the eastern Mediterranean. Chinese SOEs already preside over the trans-Mediterranean, commercial maritime artery linking Egyptian ports to the European mainland in Piraeus.

The third fear is the potential establishment of logistics centres and even military bases next to the foreign ports its SOEs have acquired. New basing arrangements would make it easier for Beijing to service and sustain a growing blue-water navy. Beijing’s agreement to maintain a military base in Djibouti, near the commercial multi-purpose Chinese-operated Port of Doraleh, and close to the U.S. Navy’s Camp Lemonnier, exacerbates these fears.

Challenges and implications

China’s interest in foreign ports is driven by national security concerns. The Port of Gwadar in Pakistan offers a good example. Operated by China Overseas Ports, the port’s geostrategic location (and control) helps China avoid the strategic chokepoint of the Malacca Straight, also referred to China’s “Malacca dilemma.” Given China’s continued reliance on imported energy sources, this remains a geopolitical and geographic concern for Beijing. As around 80 percent of this imported oil and 40 percent of global shipping travels through the Strait. Any disruption to shipments would harm Beijing’s credibility and economic interests.

It is worth noting that China does not have a network of bases overseas. Also, ports have not been militarised, and doing so would certainly violate legal norms around territorial sovereignty. As navy vessels are considered offensive state military vessels, they are usually neither welcome nor allowed without state permission to dock in sovereign territory. Furthermore, as far as is publicly known, Chinese SOE investment in overseas port facilities has not come with additional agreements that give certain rights to the Chinese military.

Others additionally point out that Beijing’s decision to deploy its military overseas and establish corresponding military bases is to protect its interests, including Chinese companies and nationals, rather than establishing a Chinese sphere of influence beyond Asia.

Given China’s continued large-scale commercial infrastructure investments in conflict-prone regions like Africa and the Middle East, it is not unreasonable to suggest that Beijing will seek to establish more overseas bases in future years, including near foreign ports that China’s SOEs have acquired, such as in Equatorial Guinea.

For the moment, host countries can prevent or block acquisitions of ports to particular states or companies, however the economic costs of doing so may be too difficult to deny.

Looking ahead

Overseas port investments and potentially military base access, particularly in countries of global and geostrategic importance near maritime chokepoints, could give China greater influence over key supply chain networks, and even reshape global and regional seascapes to its advantage.

Amid systemic U.S.-China tensions, concerns over the ease of surveillance, spying, and data gathering by Chinese SOEs in foreign ports will become increasingly more important.

Genevieve Donnellon-May is a master’s candidate in Water Science, Policy and Management at the University of Oxford. She previously worked as a research assistant at the Institute of Water Policy, Lee Kuan Yew School of Public Policy, National University of Singapore and at the Asan Institute for Policy Studies.

This article is published under a Creative Commons License courtesy of the Australian Institute of International Affairs.

To read the full article, please click here. 

The post China’s Overseas Ports Acquisition Program appeared first on WITA.

Representatives John Garamendi (D‑CA) and Dusty Johnson (R‑SD) introduced the Ocean Shipping Reform Act of 2021 (OSRA) with the intent of “modernizing” shipping law to improve port efficiency.

The bill does nothing to address any of the systemic issues affecting U.S. ports, instead it expands government overreach and discriminates against ocean carriers.

OSRA increases the Federal Maritime Commission’s (FMC) authority to regulate shipping, including expanding the FMC’s enforcement options and penalties. The bill proposes amendments to current shipping law that strikes language such as, “minimum of government intervention and regulatory costs,” and “placing a greater reliance on the marketplace.” That’s a bad omen but the contents of the bill are worse.

OSRA also aims to give more leverage to shippers (the person/​business that owns the products being transported) to complain about demurrage and detention fees which are basically late fees charged when cargo isn’t unloaded, or containers are not returned in the agreed time frame.

However, demurrage and detention charges are legitimate and important fees for maintaining fluidity in the supply chain as they incentivize shippers to pick up cargo in a timely manner. When there is a dispute about a charge, the contract terms are often settled amicably. The bill would undermine this incentive system and likely worsen the current port bottlenecks. If the incentive to promptly pick up cargo is removed, the time between when a container is unloaded and when the cargo is picked up would increase, thus exacerbating port congestion.

In determining the reasonableness of demurrage and detention charges, the bill proposes shifting the burden of proof from shippers to carriers. This shift means that the carriers would have to certify why the shippers did not return the equipment in the agreed time frame in order to charge a late fee. Furthermore, invoices would only be considered valid if carriers provide documentation that the charges comply with the relevant rules and regulations, including any subsequent rules and regulations.

This requirement would be the equivalent of the library having to certify why you returned a book late and illustrating that you violated the rules when they sent you an invoice. The librarian does not and cannot know your reasoning without you telling them. It does not make sense to shift the burden of proof to the carrier because they rarely know the reasoning for lateness and requiring proof of compliance increases costs, for example, by needing to hire lawyers. If the carriers cannot prove why a shipper returned equipment outside the time frame, or it is more costly to ensure compliance than the amount of the charges, this provision will prevent the use of this incentive system.

OSRA further penalizes carriers by mandating that they cannot decline export cargo if it can be loaded in a safe and timely manner. This provision stems from complaints made by U.S. exporters whose bookings were canceled. However, these cancellations were due to the scarcity of containers and carriers are choosing to return containers to Asia for reloading instead of sending them to export loading points within the U.S. Given the heightened demand for imports and scarcity of containers, carriers are essentially faced with the difficult decision of choosing between delaying imports or exports.

Nonetheless, the provision of the bill does not change the status quo. It’s a catch-22—mandating that carriers take exports would have the unintended consequence of delaying imports from Asia to the United States, but carriers right now are canceling exporter bookings which is also causing delays. Either way, there will be delays because currently there are not enough containers to meet demand. This provision of the bill is simply choosing U.S. exporters over U.S. importers, the opposite of what carriers are doing. OSRA does not solve the scarcity of containers or the other systemic problems causing delays and port inefficiency.

Minimal government intervention and reliance on the marketplace are not the cause of inefficient ports. In fact, the breadth of regulations currently in place are causing the problems. For example, the Jones Act prevents non‑U.S.-built, ‑crewed, and ‑flagged ships from picking up shipments in one U.S. port and unloading at another. This restriction reduces the frequency of service, slowing down trade. Prohibiting ships built abroad to be used in domestic trade also distorts prices. U.S.-built container ships cost five times the global price for a container ship, thus carriers must charge enough to cover these costs.

Other domestic policies and management issues have prevented the maximization of containerization. In particular, the Jones Act and the Foreign Dredging Act inhibit port improvements necessary to accommodate bigger container ships. These larger ships provide scale efficiencies that could lead to lower shipping prices and faster transportation as more cargo could be moved by a single ship. Labor unions have prevented port modernization by blocking efforts to automate cargo loading and unloading. As a result, U.S. ports are much less efficient than ports in Europe and Asia.

The pandemic revealed broader efficiency problems at U.S. ports. For years, a small number of beneficiaries have successfully lobbied the government for protection that has dispersed costs across the economy through higher prices, inefficiencies, and missed opportunities. Now, the United States is at an inflection point. Policymakers would do well to reduce rather than increase regulatory burden, which has artificially restricted essential inputs for port efficiency. Unfortunately, OSRA would worsen port efficiency.

The post More Regulation Will Not Improve Port Efficiency appeared first on WITA.

Castro Balanta became president of the Buenaventura Port Workers Union, and in 2011, he traveled to Washington during negotiations over the U.S.-Colombia Trade Promotion Agreement to testify to Congress about poor labor conditions. Around then, the death threats started, he recalled, speaking to Foreign Policy over the phone from New York City, where he is now seeking asylum after fleeing Buenaventura in November 2020.

Buenaventura, a city of roughly 460,000 people with rampant unemployment and gang violence, sits on the Pacific coast of Colombia. Over the years, more and more Colombians displaced from conflict in the country’s interior have ended up there, many of them living in abject poverty. The city’s main source of employment is the port, which handles more than half of Colombia’s imports and exports.

But resentment simmers among Buenaventura residents over the fact that little money flowing through the port enriches the city, where armed groups run rampant, controlling every aspect of the economy and hiking up prices for even basic food items. Castro Balanta and other Bonaverenses say locals are only hired for menial labor, don’t receive a living wage or social security benefits, and face death threats if they try to unionize. Employees often work 24 to 36 hours at a time, sometimes even staying 23 days without returning home until a ship is loaded, Castro Balanta said.

These labor abuses are what held up the U.S.-Colombia free trade agreement for years before it was eventually signed in 2012. Legislators had fiercely debated signing such an agreement with a country where unionists are regularly murdered with impunity. Some expected it might actually be the first deal of its kind to get voted down in U.S. Congress. To move forward, then-President Barack Obama and then-Colombian president Juan Manuel Santos signed an Action Plan Related to Labor Rights, which included a commitment to address violence against labor union members and bring perpetrators of such violence to justice.

At the time the accord was struck—around the time formal negotiations to end the war with the Revolutionary Armed Forces of Colombia (FARC) were beginning—the U.S.-Colombia Business Partnership said the agreement would “strengthen democratic institutions in Colombia that are under threat by violent actors in Colombian society—guerrillas, self-defense forces, and narco-traffickers” and bring “more legitimate jobs and opportunity.”

But as the countries mark nearly a decade of the plan, few of those promises have come to fruition. Gang violence, unemployment, and narcotrafficking have only increased. In fact, Buenaventura has gained notoriety in recent years for its “chop houses,” where tortured victims of gangs and armed groups later end up dismembered. Colombia was ranked the deadliest country in the world for human rights defenders in 2020, and 172 trade unionists have been murdered since the labor rights action plan went into force. Indeed, residents contend that increased trade has actually worsened gang violence as armed groups compete for control of territory designated for the planned expansion of the port.

Obama and Santos may have had good intentions with the Labor Action Plan, but it had no enforcement mechanism. “A lot of the institutional changes and a lot of the policies that had to start happening, they happened like halfway or they weren’t really implemented, and once the agreement was passed in Congress in the U.S., the Santos government didn’t do anything to continue these kinds of commitments,” said Daniel Rangel, Global Trade Watch research director for the consumer advocacy group Public Citizen. “Since the agreement wasn’t part of the main deal, then it was very hard for stakeholders to make the Colombian government accountable for this lack of enforcement of the obligations.”

Both Rangel and Castro Balanta surmise if U.S. Congress had waited longer, it might have been able to incentivize the Santos government to make more concrete changes by leveraging the trade agreement. “The trade agreement could have helped, but I think that in their eagerness or because of pressure from the big businessmen, the big multinationals, that both governments turned the page,” Castro said. “Colombia was lying that it was complying, and the U.S. government turned a deaf ear to the various statements of NGOs and unions and workers’ commissions that came and expressed that things were not getting better.”

Beyond the lack of an enforcement mechanism, residents, researchers, and activists say the Colombian government has felt free to neglect Buenaventura and similar regions because they are majority of Afro-descendant, a group that has historically faced worse social conditions, lack of public services, and discrimination compared to the country’s white-mestizo majority.

“The national government invests in Buenaventura through the port infrastructure,” said Danelly Estupiñán, an activist who works with a local nongovernmental organization called the Process of Black Communities. “It does not make investments to the Buenaventura society, to the people of Buenaventura.” The city’s population is about 95 percent Afro-descendant and Indigenous. “From our judgment,” the lack of investment is “precisely for that reason.”

Estupiñán travels under constant protection of two bodyguards and an armored car ever since a report she worked on five years ago exposed links between the city’s port and rising violence and poverty. “Because they don’t conceive of us as people, they conceive us as things, and that is a colonial legacy,” Estupiñán said. “In the colony, people of African descent, Indigenous people were not seen as people. They were not even human. They were seen as things that were marketed, things that were sold, things that were controlled.”

In 2017, anger in Buenaventura led hundreds of thousands of people to take to the streets in a massive Civic Strike. After a wave of violence in December 2020 and January of this year, hundreds of residents demonstrated, claiming lack of government attention even after it made concessions to fund the city’s lack of basic services in the wake of the 2017 strike. These February series of demonstrations blocked access to the port and called for government intervention.

The unrest and recent wave of violence is perhaps what led the U.S. Labor Department to announce a $5 million “cooperative agreement” in January to improve labor rights for Afro-Colombian port workers in Buenaventura and other ports. (Neither the U.S. nor the Colombian Labor Department responded to requests for comment.) But at a time when Colombia’s government is undoing old agreements and facing criticism for its antagonistic relationship with international human rights bodies, there is little reason to trust it will live up to its word.

The landmark 2016 peace accords with the FARC was supposed to reintegrate former paramilitary members and bring economic development to Indigenous and Afro-Colombian regions, which were affected disproportionately by the conflict with the militant group-turned-political party. But the current conservative government under President Iván Duque Márquez campaigned on dismantling those peace accords and has dragged its feet on implementing them.

Indigenous and Afro-Colombian groups, as well as the United Nations’ human rights body, have demanded action from the president to fully implement the peace accords and tackle lawlessness and poverty in remote and poor regions. If he doesn’t, violence will continue to rise and push people toward cities like Buenaventura, which are already on a knife’s edge.

Many displaced people have ended up in neighborhoods like Isla de la Paz, where roughly many families hail from different violence-ridden regions of the country. The port is set to expand to accommodate free trade agreements with 17 countries, including the United States, and it is neighborhoods like this that are under threat of being razed.

One mother of three from Isla de la Paz, said that residents are unable to expand to build houses for more neighbors because, in the middle of the night, men will come to knock down any houses under construction. She said utility companies don’t want to provide services like internet because they know the community is soon to be displaced and spending money there would be a “lost investment.”

“What’s happening in a lot of those areas has been, first, the real hesitance from part of the national government and departmental governments to really provide people in those areas with basic things like potable water, sewage systems, or what have you,” said Gimena Sánchez-Garzoli from the Washington Office on Latin America. “And really pressuring them to get out of those areas so that they can rebuild those areas for the port infrastructure.”

The mother of three, who fled violence and kidnappings from armed groups and fumigation of coca crops from the town of Buenos Aires in Cauca province when she was 12 years old, said armed men often came and threatened residents, including the children, putting them always on the defensive

“We’re slaves to our own surroundings,” she said.

With national demonstrations planned for April 28, Sánchez-Garzoli predicts they will restart protests in Buenaventura—and eventually trigger another repressive response. The current conservative administration has been reluctant to engage with the leaders of social movements, and she anticipates they might only pay lip service to the Labor Action Plan—if that.

“They just don’t see the importance of engaging or trying to find solutions for those sectors,” she said. “Their priority really is the private sector. I just think that’s all going to explode.”

Genevieve Glatsky is a journalist in Bogotá. Her writing has appeared in Politico, the Independent, and more.

To read the full commentary from Foreign Policy, please click here. 

The post In Colombia, Free Trade Has Come With More Violence appeared first on WITA.