Common Cents

Tolls of the time

Ralph Murphy

(3/2) Tariff issues have taken a "back seat" to current East West political focus amid other ministerial concerns abroad, but a change or reduction in rates was implemented in February to car parts and steel or aluminum quotas from China based western providers. The rates remained roughly the same but the target or "subset" taxable output had it been realized would be halved yielding planners maybe a troubling $15 billion depending on market conditions. Amid that cost subsidy programs from the west to China have been reversed leaving legacy administrative control to a new group of officials that affect politics as well as transport fees in the others wake. They have to be addressed now and restored to domestic interests abroad amid real cost and turmoil at funding loss.

When assessing China’s rise from an impoverished insular pacifist communist opiate to world multi national or bank host it should be noted their officials are easily "bought". The catch is they will swallow the introductee with little return on their forays. To the America’s that meant massive but reversible bank transfers and unfortunately Japan was also dragged into the investor platform. Both lost a great deal of real resource equity but there was also an odd group alliance linked to the central government and its varied organs as foreign office, transport, defense, and economic ministries that signed base or port agreements which gave them political clout to varied host nations over which they had very little previous access.

The PRC foreign ministry issued a statement two years ago claiming investment and control, in some cases ownership of 42 sea ports in 34 nations from the Far East to Africa, Europe and even the Americas as "phase one" of consolidation to import or export trades from those regions. Further annexation to additional phases implied increased political leverage to officials to include China but troublingly western investors who fronted them for access as they were known bills abroad or had other venues shut down.

Their access and clout up to about four years ago probably surprised even them. The bank link was revealed, fund access frozen then reversed in Dodd Frank repeals by last year, and counter phase now includes the subsidy withdrawals mostly from western businesses there but there may have

been some direct investment to locals that did remain. It’s not apparent to the statistics. The issue now is lingering institutional debt or cadre support to very unlikely programs that did manage to remove more traditional ones, but those could or were older colonial legacy issues that didn’t approach optimal market signals amid official deals or leverage controls.

Optimal output presumes to precedent and theory private sector fidelity to profit maximization for top yields. Government management means stalled or primitive return given lack of incentive or ability to include market interest. An intrusion role where it deviates from market support to actual profit or resource control as an active player is an avoidable problem. If a symbolic use of a "choke point" as resource funnel by design or circumstance to policy manipulation for undue profit can be sourced one of the best would have to include transportation links to supply and demand interests.

The ideal market would have supply very close physically to demand and that was the case to primitive societies. External trade opportunities provided the chance for diversified goods but required more extensive social contacts out of the regional cultures or understandings and a unique type of trade official who could broker the accords. Unfortunately they could be very manipulative without clear " ground rules" to what was expected in the dealings and their actual roll limits. It should now be linked to quotas or bans of sought relevant imports to trade policy, with the currency exchanges reflecting the trade balance but otherwise detached.

There’s a security aspect that can take the form of coercion depending on defense system deployment, but the governing authority can simply watch and defend the system to standards There an " invisible hand" that that sorts out labor and guides optimal yields as coined by Adam Smith in the 18th century but remains relevant today. The issues now that have emerged are administrative legacies legally afforded the Chinese linked mostly western officials as they replaced for example a Singapore Port Authority that was less intrusive but still outsourced interests linked to commodity dealing from the Far East to Europe. It’s transport role included heavy or avoidable fees and lengthy accords that again were politically problematic.

That Chinese group until about two years ago controlled both the ports and through a subsidiary known as the China Ocean Shipping Company or Cosco the actual transport links for the goods shipped. The further problem with them was the official shore role as through affiliates they gained access to internal transport, ownership and even production facilities with the phasal objective of internal political placement. It also seemed formally official in other host policy matters by virtue of access alone. That was bought control at limited cost with some physical violence or threat of it likely playing a role. They lost that leverage when western banks pulled as did most intelligence that probably unwittingly supported the programs as they were vulnerable to the right pitch men.

Transportation of the goods themselves is a key issue as discussed and to physical goods given the bulk weight maritime shipping is generally preferred to available or relevant options in world trade. The problem again is the channeling aspect of the goods for market. Water borne cost is measured by twenty foot equivalent units (TEUs) similar in size to what you might see on a highway semi truck. A fairly average sized merchant or container ship can store a thousand of them to size and weight dispersal. Some far more than that. The same weight allowance for a large freight plane as a C-17 can transport about three TEUs.

If speed isn’t a factor most import or exporters do use maritime freight, through container ships or tankers that carry liquid in compartments. Weight, and value as optimally inverse is a cost concern. Speed and distance obviously factor into price or earnings too. Transporters are very vulnerable to pricing both of the port authority and the major transport shipping companies. Maersk is noted to the west as a traditional Dane line, but Cosco became far too controlling to that Far East group and in name run the ports per agreement as part owners to the 34 affected nations. Their shipping role to included fees and troubling seem linked to canal tolls. There’s a tripartite " Alliance" that controls most shipping that has to be broken up to allow increased competition and lower costs. The varied government payment curtailed and force suasion severed would likely be enough.

Toll reviews have bothered the defense department as well and that seemed to imply an unspecified enforcement or possible blocking role to civilian authority. There used to be Congressional hearings that bemoaned grey areas of transport aboard Naval vessels for non lethal programs that became cargo ones. If the money is tracked ashore and it’s not directly linked to military security requirements it should be closed. Other concerns include blockade politics which is a factor in the Yemen conflict with sales a possible angle as military blockade to lethal ordinance is possible if allowed to circumstance while allowing civilian goods to market.

Another choke point worth mentioning is the Suez Canal as well as Panama Canal fees. The Suez Canal Authority was routinely charging over $475,000 for a commercial carrier without any real docking interests, it was a passage fee and seemed paid by the host government. Panama was similar and could be far higher though while tied to Cosco which is likely without cash. The group if found can still legally trade per treaties in political socials so should reviewed to closure.

That type business is high profile and very low complexity, of importantly inelastic need and exactly the type a governing authority can and do take control credit. They yield largely unchecked earnings. There are port fees and arrangements that can vary drastically from almost no charge in free ports to a cut or even confiscation of the cargo in others, but the policy concern should be local understandings. Locals add "dim" fees linked to their own tax policy or ordinance so should be assessed as standard in that sense. The port authority role ideally would be one of monitoring the legal flows of goods without an actual equity transfer or further interest beyond security or incidentals as docking.

Another problem with the current system involves consolidation of the transport carriers and again it is mostly water freight of issue. Beyond light loads as with mail or passenger delivery air freight again isn’t viable cross oceanic. There was a London based Baltic Exchange that seemed to serve almost an OPEC type broker role for the transport concerns linked to freight rates of the TEUs and other cargo or commodity transport costs. The Baltic Dry Index for example would provide tariff rates which since hedge fund control of the major investors had taken arbitrary cost features that didn’t reflect the values of the very simple role transport needs lend the market. They had a cost lock on to to the pallets and reflected the major maritime transport groups that by last year were consolidating rather than diversifying ownership.

It was bemoaned as that in a Geneva ministerial conference. The market cartel controls on shipping have to be lifted and it is reflected by that exchange to those spheres. Here to the United States coercion is less clear though a Port Authority of New York and New Jersey as World Trade centered seem strongest at least to the east coast until very recent foreign penetration weakened the fee and union links ashore.

Major banks to China included JP Morgan and Japanese direct transfers which did seem more closely linked to their finance ministry. With repatriation of the funds JP Morgan has taken on a retail program that wasn’t part of their prior portfolio as Chase bank it’s slick in appearance but I’d bet linked to tariff cadre concerns. It’s dispersal may even be tied to traceable grant money from the that lingering political program. If an outlet appears near your community local officials should beware the clientele could be arbitrarily or dangerously applied.

The government has a support role to provide legal assurance against theft, trespass or damage applicable to predictable opportunism. When it plays an actual equity transfer or business role that type of personnel and program cost routinely creeps in and can be very hard to root out depending on the system and oversight. Awareness of the potential for theft and the means and conviction to counter it through legal means is usually enough to further private sector objectives and optimal production. They can then concentrate on output improvements and less on avoidable defense concerns foreign or domestic but as state sponsored otherwise hard to cast off.