Sinews of War and Trade. Laleh Khalili

Sinews of War and Trade - Laleh Khalili


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governments of Qatar and Saudi Arabia).52 The alliance gives the companies access to one another’s ports, shipping arrangements, and routes and has changed each company’s steaming schedules, their destination ports, and the frequency of travel along some routes. CMA CGM’s dominance in the Middle Eastern and African markets also means that it has longstanding arrangements with terminal operators there, foremost among them DP World. CMA CGM ships are therefore more likely to take on or unload cargo at terminals operated by DP World (rather than, say, APMT).

      These alliances between shipping companies and agreements between them and terminal operators translate into discounted port fees, preferential treatment at arrival and loading or unloading, and lower freight costs for the shipping companies. Should they be able to secure such agreements with shipping companies, some ports or terminals expand at the expense of neighbouring ports. In return for these lucrative deals, the ports must accommodate the shipping companies’ hunger for ever larger ships. I will write more about this effect in the next chapter.

Container terminal operatorHeadquartersRelations with shipping companies
COSCO Shipping PortsHong KongThe company has become the largest container terminal operator after the merger of COSCO and China Shipping companies
Hutchison PortsHong Kong (but incorporated in the British Virgin Islands)
PSA InternationalSingaporeHas an alliance with COSCO
DP WorldDubaiPartners with many shipping companies, including CMA CGM and UASC
China Merchant Port HoldingsHong Kong
APM TerminalsNetherlandsAPM Terminals’ parent organisation is Maersk (whose shipping company of the same name is the largest in the world)
YılportTurkeyOwned by the Yıldırım Group which has long had mutual investment agreements with CMA CGM
Shanghai International Port GroupsChinaHas partnered with COSCO
International Container Terminal ServicesPhilippines
Terminal Investment LtdNetherlandsMSC (based in Italy)

      Table 1.2 – The world’s largest container terminal operators53

      Sea routes are constantly reimagined to accommodate geopolitical realignments, corporate alliances, and shifting calculations about ship sizes, route expediencies, and maritime power plays. Another set of ephemeral assumptions and imaginaries, often invented far from the ports themselves, also influences the making and unmaking of these oceanic highways: how routes are priced. Once they are priced, these price indices form the basis of speculations that in turn affect the underlying prices.

      Freight rates have historically been crucial components of how shipping routes were devised, traversed, and imagined. As they change, so do the fortunes of maritime countries. Between 1820 and 1913, freight rates plummeted by a factor of four, just as the volume of merchant shipping within and across empires quintupled.54 The primary beneficiaries of the decline in freight rates in the nineteenth century were Great Britain and other Western European countries. Because they imported foodstuffs and raw materials – bulky materials – in very large volumes, they profited from the ever cheaper maritime freight costs. Further, the ships that had imported such goods backhauled manufactured goods rather than travelling back in ballast, and therefore encouraged the expansion of markets for European goods.55 Freight rates fell in part due to technological innovations in shipbuilding and navigation, as well as improvements in port facilities over the course of the nineteenth century. But freight rates were also significantly influenced by such factors as ‘monopoly or collusion, navigation laws, the relationship between inward and outward cargoes on a route, and so forth’.56

      Around the Indian Ocean, for the vast majority of its history and until the introduction of European corporate shipping in the nineteenth century, freight rates were negotiable and fluctuated with the level of demand (both for particular goods and destinations), seasons, and the kind of ship that carried them.57 Coastal trade, tramp shipping (maritime transportation that does not have a fixed schedule or predetermined ports of call), and feeders (where goods are transported from a hub port to a smaller port) all commanded different rates. Price-setting for freight rates in the area was influenced by the forms of trade European firms engaged in. As Johan Mathew has written in his engaging account of illicit shipping in the Indian Ocean,

      British firms considered cartel arrangements more ethical than competition on price, which might deprive other [British] companies of their business. This form of business ethics derived from the idea that market competition was feasible only when a market was sufficiently developed. In this view, the Arabian Sea was too undeveloped an area to justify capitalist competition. To build up business and develop local economies, profits had to be secured by the coercion and collaboration of firms. This ensured that British companies would receive ‘handsome’ profit margins on a smaller but more secure amount of business.58

      Another effect was that, while the British firms monopolised more profitable oceangoing routes, local shippers were pushed into providing services on coastal or feeder routes where profit margins were smaller. This meant that among these smaller or more local shippers, more productive technologies (including steam) were adopted later because of their costs. In his account of travel in the Arabian Peninsula, Ameen Rihani describes Kuwaiti dockyards ‘from which are launched the dhows and baggalas that sail across the Gulf and beyond it, perpetuating trade between India and Iraq, as well as between the towns along the Persian and the Arabian coasts, which are beyond the reach of steam. For another reason, the low rate of freight, the sail is still indispensable.’59 Oral histories show the clever calculations that went into trading from port to port. One old sailor from Ras al-Khaimah recounted how at the beginning of the monsoon season,

      we picked up dried dates from Basra … We took these to India on the monsoon. Then we got a bulk cargo of roof tiles from Mangalore near Calicut on the Malabar coast. We waited until the monsoon changed and sailed to east Africa where we sold the roof tiles and bought building wood, especially roof beams, chandal, and big carved wooden doors. These were bulk cargo for the Gulf, and we sailed back here on the southwest monsoon.60

      This division of labour has continued with dhows – which began to be motorised from the 1940s onwards – traversing the Indian Ocean, the Red Sea, and the gulfs around the Arabian Peninsula on both longer and shorter coastal routes, responding to demand for specific goods in ports large shipping companies could not or would not serve.61 Their trade flourishes even if they are more vulnerable to piracy, their rates of profit are marginal, and the labour required to operate them is backbreaking and poorly paid. They draw on their longstanding relations of trust, extant legal frameworks for trade, and fine-grained knowledge of local conditions to offer everything from parcelled goods (like bulk packaged foods or notebooks) to electronics and household appliances to livestock, used cars, and sometimes contraband.

      Meanwhile, global shipping companies order increasingly larger ships, attempting to keep their costs down all the while. Until 2008, the larger shipping companies based in Europe benefitted from an antitrust immunity conferred on them by European Council Regulation No. 4056/86.62 The 1986 regulation allowed these shipping firms to act as cartels and coordinate in setting prices, polling cargoes, and harmonising schedules for trade. The repeal of the regulation in 2008 was likely in response to China and other rising Asian economies threatening to pass reciprocal protectionist shipping regulations. The effect of the repeal was a


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