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Industry, Innovation and Infrastructure
Note
The Review of Maritime Transport is a recurrent publication prepared by the UNCTAD secretariat since 1968 with the aim of fostering the transparency of maritime markets and analysing relevant developments. Any factual or editorial corrections that may prove necessary based on comments made by Governments will be reflected in a corrigendum to be issued subsequently.
World shipping fleet, services, and freight rates
Wide-ranging factors are shaping global shipping markets including the supply of ship carrying capacity and fleet patterns. In 2022 and the first half of 2023 the supply of shipping capacity and services was affected by global economic developments which determine the demand for shipping. The supply was also impacted by market sentiment and expectations freight rates financial liquidity shipbuilding capacity and ship recycling activity. In 2022 the global fleet continued to grow but was ageing amid rising uncertainty about fleet renewal timelines. In 2022 global ship carrying capacity expanded at an annual rate of 3.2 per cent with overall tonnage hitting nearly 2.3 billion dead weight tons. On average the global fleet was two years older in 2023 compared to a decade earlier.
Review of Maritime Transport 2023
The Review of Maritime Transport is an UNCTAD flagship publication published annually since 1968. Around 80 per cent of the volume of international trade in goods is carried by sea and the percentage is even higher for most developing countries. The Review of Maritime Transport provides an analysis of structural and cyclical changes affecting seaborne trade ports and shipping as well as an extensive collection of statistical information. The report calls for a “just and equitable transition” to a decarbonized shipping industry. The sector whose greenhouse gas emissions have risen 20% over the last decade operates an ageing fleet that runs almost exclusively on fossil fuels. As global leaders prepare for the next UN climate conference (COP28) UNCTAD advocates for system-wide collaboration swift regulatory intervention and stronger investments in green technologies and fleets. Full decarbonization by 2050 will require massive investments and could lead to higher maritime logistics costs raising concerns for vulnerable shipping-reliant nations like small island developing states. The report emphasizes the need to balance environmental goals with economic needs but underscores that the cost of inaction far outweighs the required investments. The report recommends policy actions to overcome supply chain hurdles African countries face including poor logistics low levels of technology fragmented markets limited capital sources and weak institutions and regulations. Beyond cleaner fuels the industry needs to move faster towards digital solutions like AI and blockchain to improve efficiency as well as sustainability. In its analysis of global maritime trends the report highlights shipping’s resilience despite major challenges stemming from global crises such as the war in Ukraine. Maritime trade is expected to grow 2.4% in 2023 and more than 3% between 2024 and 2028.
Port performance and maritime trade and transport facilitation
Port performance and trade facilitation are integral to ensuring the efficiency of maritime transport. Recent port performance indicators and data indicate that world ports have for the most part fared well during the recent global supply chain crises and disruptions. They have embarked on a path of recovery supported by policy reforms and digital innovations. In this context facilitating maritime trade has been crucial for seamless and efficient maritime supply chains including in ports and their hinterland connections. Trade facilitation generates efficiency gains and cost reductions in maritime trade procedures by streamlining and harmonizing regulatory procedures by border agencies involved in goods clearance at both ports and at hinterland borders.
Acknowledgements
The Review of Maritime Transport 2023 was prepared by UNCTAD under the overall guidance of Shamika N. Sirimanne Director of the Division on Technology and Logistics of UNCTAD and under the coordination of Jan Hoffmann Head of the Trade Logistics Branch Division on Technology and Logistics. Regina Asariotis Mark Assaf Celine Bacrot Hassiba Benamara Poul Hansen Jan Hoffmann Tomasz Kulaga Anila Premti Luisa Rodríguez and Frida Youssef co-authored the report.
Legal issues and regulatory developments
Important legal issues affecting international maritime transport and trade include regulatory developments to facilitate the use of electronic bills of lading and regulatory responses to environmental challenges - notably air pollution from shipping plastic pollution marine litter protecting the marine environment and biodiversity. In addition regulatory developments also include adopting a new international convention on the judicial sale of ships and an agreement on the conservation and sustainable use of marine biological diversity in areas beyond national jurisdiction. Also relevant are some developments and considerations relating to liability and compensation for bunker oil pollution from ships. Key ongoing developments under the auspices of IMO and the European Union regarding measures to reduce greenhouse gas emissions from ships are covered in chapter 3.
Foreword
In a world rife with cascading crises – geoeconomic fragmentation retreating development and climate change – maritime trade serves as a stabilizing anchor holding fast against the turbulent currents of disruption. Over four fifths of all trade in the world flows through the high seas. This includes the crucial trade of food energy and other essential goods. As recent trade disruptions and most notably that of Black Sea food exports due to the war in Ukraine have shown in our interconnected world billions of people need open ports and steady ships to eat keep their lights on and have their hospitals well-stocked.
Decarbonizing shipping
The shipping sector is at the centre stage of the debate on sustainability. Like other economic sectors shipping generates greenhouse gas (GHG) emissions and must reduce its carbon footprint. International shipping which carries over 80 per cent of the world merchandise trade by volume is responsible for nearly 3 per cent of all global GHG emissions.
International maritime trade
Global shipping continues to confront multiple challenges including heightened trade policy and geopolitical tensions and is dealing with changes in globalization patterns. Additionally shipping must transition to a more sustainable future decarbonize and embrace digitalization. Being at the intersection of these forces will influence how the sector adapts to the evolving operational and regulatory landscape while continuing to effectively service global trade.
Globalized production processes and foreign governmental lobbies: Analysing the United States Foreign Agents Registration Act reports
This study examines two potentially opposing effects that the current state of trade globalization can have on foreign governmental lobbies in the United States. On one hand economic globalization and increased flows of goods may lead to more and more contentious issues between trading partners. On the other hand the growing networks of global value chains (GVCs) may mobilize interest groups in foreign lobbies’ target countries (the United States in this study) whose activities might substitute for those of foreign governmental lobbies. With such linkages an increase in lobbying activities by domestic producers may reduce the need for direct foreign lobbying on contentious issues. The study reveals different effects of forward and backward GVC linkages and the results have two main policy implications: first policymakers should be aware of the growing intricate nature of foreign influence; second more attention must be paid to political consequences of GVCs’ distributive effects particularly those from backward linkages.
Reshoring, nearshoring and development. Readiness and implications for Latin America and the Caribbean
This paper discusses the concepts of reshoring and nearshoring which are gaining increasing popularity. We contribute to the literature in three main ways. First building on previous theories we define a conceptual framework and consider how recent developments – the COVID-19 pandemic and Industry 4.0 technologies – may affect these patterns. Second we process some preliminary evidence to test whether Latin American and Caribbean economies are indeed participating in this reshoring trend. Third we propose a measure of “reshoring readiness” to assess whether these countries appear to be ready to host relocations and benefit from them. Overall we find limited evidence of nearshoring to the region so far except in Mexico and we highlight strengths and weaknesses of the region for attracting and benefitting from future relocations.
Articles: Are emerging market MNEs more attracted towards better patent enforcement regimes when undertaking greenfield R&D-focused FDI?
Multinational enterprises in emerging markets (EMNEs) owing to weak enforcement of intellectual property rights (IPR) face challenges when undertaking domestic innovation. As a result they may search for superior IPR environments in which to create greenfield projects focused on research and development (R&D) and innovation. We hypothesize that the likelihood that an EMNE chooses to invest in an R&D-focused greenfield project over other FDI projects is positively associated with increased levels of host-country patent enforcement protection relative to its home market. In addition we hypothesize that EMNEs many in the process of catching up through “springboard” FDI with developed-market MNEs (DMNEs) are more sensitive to IPR protection than DMNEs. Results of logistic regression modelling of 112908 greenfield projects largely support our hypotheses. We discuss implications for understanding EMNE theorizing and policy which has to date focused more on regulating technology-seeking mergers and acquisitions (M&As) overlooking the growing importance of R&D-related greenfield FDI as an effective firm-level catch-up strategy for EMNEs.
UNCTAD Insights: Internationalization of small and medium-sized enterprises (SMEs): A new assessment
The contributions of small and medium-sized enterprises (SMEs) to domestic economies are sizeable. The most productive and dynamic ones venture abroad and internationalize by exporting or by investing overseas. For smaller firms foreign direct investment (FDI) implies the commitment of a high level of resources potentially increasing the risk of failure. This study empirically assesses the question of whether outward investment is a valuable growth strategy or whether engaging in FDI might hurt performance. The results show that while displaying higher revenue growth rates than their larger counterparts SMEs experience a bigger shock after their foreign investment: the sales growth of SMEs decreases by about 6 per cent during the first three years after a cross-border greenfield project; it starts recovering only after the fourth year. Larger MNEs show no significant change in growth rate after an investment. The decrease in revenues in SMEs occurs mostly in manufacturing enterprises and less so in services companies. This is primarily because for services companies a foreign affiliate which almost by definition is market-seeking tends to make an immediate contribution to sales and sales growth whereas many manufacturing affiliates require a start-up period and may engage in activities that contribute less to sales growth such as supply chain activities.
Intrafirm transactions and tax haven linkages: Evidence from Indian manufacturing
This study aims to assess the pattern and prevalence of intrafirm activities in foreign exchange transactions of foreign affiliates in the manufacturing sector in India. The related-party foreign transactions of selected foreign affiliates are analysed for two years and the shares of financial payments directed to tax haven locations are identified to appraise the vulnerability of these outflow transactions to potential risk of corporate tax avoidance. A majority of foreign exchange earnings and expense transactions were found to be conducted within firms. The major part of intrafirm payments for the key expenditure types was made to various tax haven locations having different levels of tax avoidance risk. Close to half of all expense payments were traced to tax havens with several firms reporting predominant shares of intrafirm import financial or services payments linked to certain significant tax havens. The data indicate active involvement of foreign affiliates in India in the use of tax havens for foreign expense transfers which could be motivated by tax avoidance aims. This tendency is noted to be high for specific channels such as services interest payments and other miscellaneous transactions suggesting that these channels may be used for transfer mispricing and tax avoidance strategies by foreign-affiliated firms.
The United Kingdom Modern Slavery Act: Are we making progress? A look at organizational commitment to eradicating modern slavery
This study examines the effect of regulatory outreach actions on modern slavery statements by the United Kingdom. More than 30000 policy entries in the United Kingdom Modern Slavery Compliance Registry from 2020 to 2022 were reviewed using analysis of variance and multiple regression to determine predictors of policy statement robustness. The results reveal that policies have become more robust following regulatory efforts. Private conglomerate groups which can include multinational corporations are the largest publishers to the registry. However the role of the chief executive officer as the authority approving the statements has diminished in impact while company turnover has emerged as a more reliable predictor of impact. Furthermore the presence of International Labour Organization indicators in the policy statement shows that concern for child-related issues can vary depending on the geographical focus of risk but that it does not predict a focus on women. The steady improvement in the robustness of modern slavery policies signals some progress following regulator outreach.
Glossary of Market Surveillance Terms
This glossary provides a comprehensive list of terms used in legislative practice related to market surveillance in English French and Russian. Market surveillance policies have a strong impact on business competitiveness international trade and economic development. To build an effective market surveillance system requires cooperation among the system stakeholders both nationally and internationally. For this purpose a common terminology is a prerequisite. A first multilingual glossary of market surveillance terms was published by the Working Party on Regulatory Cooperation and Standardization Policies (WP.6) in 2011. Since then there have been new terms and procedures that have come into effect. This revision integrates terms such as “conformity rate" “information society service provider" “online interface" and “corrective action." This revision also proposes modification to some terms such as “market surveillance" “withdrawal" “technical regulation" and “technical specification.
Foreword
Many companies across the world are rethinking their supply chain strategies in order to address gaps and mitigate risks. The disruption effects on global production and supply chains of recent global shocks and geopolitical dynamics such as the Covid-19 pandemic and the war in Ukraine have fueled the need for companies to minimize exposure to global distresses and reduce reliance on geographically concentrated suppliers and buyers.