Bureaucratic activism looms to threaten liner capacity management as well as international software trading
 Bureaucratic activism has become an acute concern among ocean carriers as freight rates soared in the summer and autumn months on the transpacific routes. Meanwhile, western powers are restricting, if not banning, Chinese software exports.
Beijing, in a precedent-setting manner, has shown no reluctance in limiting if not forbidding capacity management in container shipping through its use of blank sailings.
State interference been prompted by record spot rates seen on Asian transpacific containers bound for the east and west coasts of America recent weeks, pushing US rates to US$4,000 per FEU, and sparking alarm among shippers in China, South Korea and the United States.
Thus, Beijing has stepped in, demanding carriers add more capacity on trade lanes to ease price increases, with both state-run Cosco - and its Hong Kong unit OOCL - as well as Maersk agreeing to the Chinese government to end rate increases. The US Federal Maritime Commission (FMC) has expressed similar concerns.
Said the FMC communique: "If there is any indication of carrier behaviour that might violate the competition standards in section 6(g) of the Shipping Act, the commission will immediately seek to address these concerns with the carriers. If necessary, the FMC will go to federal court to seek an injunction to enjoin further operation of the non-compliant alliance agreement."
The other area of concern involves high tech transfers from China to America, which has lately made itself a European concern as well. In the States, these involve software imports by Shenzhen's Hauwei and Beijing's TikTok, suspected of collecting data from western customers and relaying back to China to be processed in nefarious ways that threaten US national security.
"This has not been proven and almost certainly not true in the way it is presented. TikTok does have two serious failings, though, and both should give its hundreds of millions of users reason for concern," said a report in Forbes magazine.
"TikTok occasionally releases software with security vulnerabilities. Cyber sleuths at market-leader Check Point issued a warning over a "severe" risk in the way TikTok messaged its users. The same Check Point team has flagged a similar problem with Microsoft, WhatsApp and even Philips Hue lightbulbs," said Forbes.
Although both software and freight rate concerns relate to bureaucratic activism, ocean carriers fears arise from news that Beijing is considering forbidding shipping lines to cancel announced sailings from China as prices soared to an eight-year high.
"We have seen indications that rates have continued rising on routes from Shanghai to both US coasts, with east coast rates rising more than west coast rates," said BIMCO's top analyst Peter Sand.
China's ministry of communications has openly discussed refusing to allow carriers to increase spot rates from China to the US, and that cancelled sailings must be reinstated from October 12, reported London's Loadstar.
In response to these threats Maersk, the world's biggest container line, announced it was cancelling all blanked sailings on the transpacific, because of surprisingly strong import volumes in North America, which they expect will continue into November - that is, until the end of this year's peak season.
A big jump in box volumes into the San Pedro Bay ports of Long Beach and Los Angeles raised imports 13 per cent and 18 per cent respectively in August, compared to the same month last year. The increase stands against an average of 17 per cent decline in container volumes in February, March and May this year.
In the ocean carrier realm, China threatens to ban blank sailings from the tool box of liner capacity management though given the start date of October 12, it doesn't appear too worrying as it would not take effect until the slack season begins when there is less to ship.
In the area of high-tech Chinese imports, it is likely the issue will more enduring and likely to spread to Europe. As tensions mount between Washington and Beijing, companies in Europe increasingly risk becoming collateral damage in the crossfire as new rules and restrictions are applied to them, but were not necessarily designed for them.
The Chinese government has imposed tighter restrictions on artificial intelligence exports, a move that gives it the power to block a sale of Beijing's ByteDance Ltd's TikTok app to American firms like Microsoft or Oracle.
But the broader nature of the restriction could also complicate plans for other foreign companies. That includes European ones, which might want to acquire Chinese AI (artificial intelligence) technology or other products, and which now need government approval to do so.
The new rule comes at a time when European tech deals in China have been steadily rising, according to a report by investment banking firm GP Bullhound.
One example of the fallout in Europe over US-China tensions is the ongoing battle over Huawei Technologies. At first, Washington's restrictions on Huawei, which it deems a national security threat, appeared to be a gift for European companies, thwarting US chipmakers and giving EU rivals an edge. A large slice of the components in Huawei smartphones are made by European companies.
On an earnings call in July, Kurt Sievers, chief executive officer of NXP Semiconductors, said US-China trade tension "keeps being a door-opener very clearly," and added that NXP's position as a European company was "definitely a positive lever" in doing business with China.
But in August, the US expanded restrictions against Huawei, requiring foreign companies to obtain a licence if they want to supply Huawei with products based on certain American technology. If the new rule hits Huawei sales, which analysts expect it will, European chipmakers will be particularly vulnerable.
Also, if China chooses to retaliate by targeting Apple, which would also pose a threat to European companies that rely on the iPhone maker even more than they do Huawei.
Last year, the Dutch government held back from renewing a licence chip-gear maker ASML needs to export its extreme ultraviolet lithography machines to China, following an extensive campaign by American officials to block the sale, according to Reuters.
And European telecom operators are among those who will be squeezed by the UK's order to excise all 5G equipment made by Huawei from the country's network by 2027.
The EU hasn't followed Washington's lead in all things, though. Unlike US President Donald Trump, European authorities have not promised to ban TikTok. As a result, ByteDance does not appear to be selling TikTok's European assets. And in a gesture toward European privacy rules, TikTok said it would build a data centre in Ireland to house European users' information.
Of course, not much about the EU's tech policy is simple. Europe has its own intricate relationships with both China, an important trading partner, and the United States, a key geopolitical ally. Those relationships are made even more complex by the bloc's efforts to boost European tech companies and rein in activity by both US and Chinese giants.
But one thing is becoming increasingly clear about the US-China trade war: It's going to be expensive, and Europe is not immune. |
