Editorial | Trump and the logistic hub

In Jamaica, the focus on Donald Trump’s rampaging start to his second presidency has been on his rounding up of illegal immigrants, and the prospect of hundreds of Jamaicans being bundled home. That is a real concern.

But tensions this week at Kingston Freeport Terminal (KFT) over a contentious job evaluation exercise should draw attention to how other of Mr Trump’s policies – such as his threat to confiscate the Panama Canal; his mercantilist proposal to raise tariffs on imports from China; and proposed legislation by Trump’s backers in Congress to increase costs of ships from certain foreign countries that call at US ports – might disrupt Jamaica’s bid to transform itself into a global logistics hub.

The issue could be further complicated by the ownership of KFT, which has the concession to operate the port. Its majority owner (51 per cent) is the France-based shipping/logistics company, CMA CGM. The remaining 49 per cent is controlled by China Merchant Ports Holding.

Mr Trump has been rallying against the Chinese port management in the Americas, including claiming, incorrectly, that a Chinese operator runs the Panama Canal.

The logistics idea is one of the few initiatives on which the government and the opposition agree on, even though they remain at odds on how to proceed. Either claims that the other has made a hash of the project.

In the face of the potential threats, the governing Jamaica Labour Party (JLP) and the opposition People’s National Party (PNP), looming parliamentary elections notwithstanding, should find a common ground from which to respond to any action the Americans might take. They should define the issues relating to the logistics project that should be off-limits in the election campaign, except where Jamaica’s interests would otherwise be obviously compromised.

TRANSSHIPMENT PORT

Jamaica has been a relatively significant regional transshipment port for nearly a half century. But the idea of graduating to being a major hemispheric logistics hub took root during the PNP’s 2012-2016 administration. It proposed to rapidly expand existing port infrastructure, passed a new export free zone law, and talked of building out special economic zones, including, controversially, one at the ecologically sensitive Goat Island off the island’s south coast.

The JLP has continued with most of the ideas during its nine years in office, although, not as yet, with the ambitious breakthrough it hoped for.

However, Prime Minister Andrew Holness has consistently declared his mission of leveraging the island’s geographic position “at the intersection of the east-west and north-south trade routes”, as well as Kingston’s large natural harbour, to make Jamaica “the fourth global logistics node, comparable to Singapore, Dubai and Rotterdam”.

Last November he announced that ground would be broken in March by the island’s Port Authority at Caymanas, near the harbour, “to become the new centre of logistics in Jamaica”.

The opposition party claims that the government has mismanaged the initiative, causing its slow development.

There are myriad causes, including an insufficiency of technical skills and high cost of energy, that has retarded progress on a logistics build-out. The initiative could possibly be further frustrated if Mr Trump carries through with his plans. In that case, Jamaica should be aware of the potential risks, and how it might position itself for opportunities, should they arise, without surrendering its sovereignty.

For instance, Mr Trump has claimed that American ships are charged too much to traverse the Panama Canal, which the United States handed back to Panama a quarter of a century ago, after nearly 90 years of US control.

BREEDS UNCERTAINTY

Mr Trump’s muscle-flexing, including his declared willingness to grab the canal by force, breeds uncertainty. Which is likely to dampen investor appetite for Jamaica’s logistics initiative, until there is clarity.

No one knows, for instance, if under Mr Trump, there would be differential pricing for use of the canal, with lower charges for American ships and higher ones for, say, Chinese carriers.

There is the possibility, too, that should Mr Trump’s threat materialises it will cramp global supply chains, as is possible, too, with his intention to hike tariffs on all imports into the United States, including up to as high as an additional 60 per cent on goods from China.

Even before Mr Trump’s election victory, the Americans were complaining about the decline of their ship-building industry and the rise of China’s, causing the US Trade Representative (USTR) to open an investigation into presumed subsidies and other unfair practices by the Chinese.

The law that went to Congress last year, if passed, would subject Chinese ships to heavy port taxes, tonnage fees and lighthouse levies. The money earned from these would go towards the resuscitation of the US shipping industry.

There is little doubt that these costs would be disruptive to the global shipping industry, possibly causing vessels to change flags and adding to the murky environment of so-called “dark fleets”. That, too, could have consequences for Jamaica’s ports and logistics ambitions.

When Mr Trump was previously in office, his ambassador in Kingston, Donald Tapia, publicly ranted over a domestic lottery company’s plan to use Chinese technology to run its games. That was a subset of the US pressure against countries that employed Huawei’s technology in their 5G mobile telephone networks. Mr Tapia also complained about other Chinese investments on the island.

Now, the focus is on ports. The Americans have concerns that Hong Kong-based CK Hutchison Holdings operates ports in the Canal Zone.

It is possible, even though it doesn’t have controlling interest in KFT, the Americans will attempt to apply pressure on Jamaica over China Merchant Ports Holdings.

Jamaica, the government, opposition, and all stakeholders, should open a conversion of this matter. They should also involve their partners in CARICOM.