Economy relies on partner ports

Comment: This week, Ibec published a major report on the Republic's containerised trade with the rest of the world. The story was extensively reported in the media, including this newspaper, with coverage focused on the urgent need for Government decisions on capacity provision in our major ports.

This was the main message that we wanted to convey. In setting the wider context, the report also looks at the emergence of containerisation and considers its impact on world trade in the 50 years since the introduction of this technology.

Looking at container freight distribution, Ibec draws attention to the emergence of a relatively small number of ports as dominant freight hubs operating on a continental scale. Hence, the regional economies in Europe, including the Republic, Scandinavia and the Baltic States, have a strategic dependence on hubs such as Rotterdam in the Netherlands and Felixstowe in the UK.

The port of Rotterdam is deserving of special attention from an Irish perspective as it accounts for more than half of box movements to and from this island.

These freight movements account for the bulk of our trade with more distant markets, especially Asia and North America. Thus, any failure to deliver on the part of Rotterdam would have a serious downside for Irish trade, which obviously would impact negatively on the wider economy.

Happily, the Dutch continue to deliver for the Republic and Europe, which leads to the conclusion that in many respects our partner ports are just as important as our trading partners.

The latest phase in Rotterdam's development is for a 2,000-hectare extension into the North Sea. Contracts for developing this facility (which on its own could easily accommodate every port in the Republic) have been awarded and the new container terminals are expected to open for business by 2012. This represents a triumph for the Dutch planning system, where environmental and other impacts are recognised and dealt with in a rational manner.

Historically, much of our container trade was directed through Felixstowe, the UK's largest container port. The recent history here provides an abject lesson in the consequences of dysfunctional planning - now a major issue for the Blair government.

In a close parallel with the position in Dublin, Felixstowe was planning to expand, but failed to secure the approval. As a result, growth in trade was inevitably accommodated elsewhere - and particularly in Rotterdam. This represented a loss of key strategic trade for Britain. Felixstowe, after a long and frustrating delay, is now set to proceed with a 100 per cent expansion in capacity. Their ambition is to recover the transhipment trade lost to continental ports - but it may be 10 years too late. Anticipation with action is always preferable to hopeful prevarication.

While the immediate issues for Ibec relate to capacity and investment planning, we also recognise the wider impact of the freight container in the global and local contexts. A key consideration is that the adoption of containerisation as the standard mode of conveyance in international trade was the decisive spur for the explosion in world trade in the 1960s. Ultimately, this resulted in the phenomenon of globalisation in terms of capital and labour movements, as well as trade.

In terms of world trade, the World Trade Organisation (WTO) figures show that in the decade after the container came into widespread international use, up to 1966, the volume of trade in manufactured product grew twice as fast as the volume of global production.

By providing a relatively seamless, secure and low-cost system for delivering large-unit cargos, containerisation allowed for the development of flexible supply chains that linked international markets in ways that previously could not be contemplated.

The Republic was a major beneficiary of this process and it transformed our industrial and employment landscape. In retrospect, Ireland's achievement can be interpreted in terms of playing the supply chain system to our own advantage. Instead of submissively adopting, we actively managed a process whereby many supply chains converged on the Republic, with significant manufacturing value-added at the convergence point.

In many ways this was an accident of history - we set out to attract US companies who were supply chain consolidators. In addition, these companies were early adopters in respect of the evolving supply chain technique. The Republic embarked on this process at the precise moment - this was the early 1970s - when the revolution in shipping made global supply chains effective and economically feasible.

This was, in many ways, an accident, but as someone remarked recently, "all history is the history of unintended consequences".

What does the future hold? The economics of shipping dictates that unit costs fall as vessel size increases, so container ships grow larger. For feeder services operating between global hubs and secondary ports such as Dublin, ship speed is possibly more significant than size. Dublin to Rotterdam currently takes around 40 hours. A reduction to 30 hours would have enormous positive benefits in terms of capacity utilisation - and time to market - as shipping companies could offer a more frequent service to major hubs. This would entail cruising speeds that are not viable using conventional "displacement" hulls. One answer is the multi-hull approach favoured by fast-sailing craft and this is one direction of current research.

Reg McCabe is director of Ibec's transport & logistics council.