Will hauliers accept the discipline of 'Conference' rules?
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SHOULD ROAD haulage operators seize the nettle of Conference organisation on the lines of Shipping Conferences? For international operations certainly — and perhaps for domestic work—it makes excellent sense to do so on the grounds of commercial viability and customer service.
But no one should pretend that it will be a simple, straightforward matter to set up and maintain a Road Haulage Conference.
Shipping Conferences have flourished since their formation in the 1870s—there are no less than 365 covering virtually every shipping route in the world. The principles which have guided their organisation and operation are likely to be valid in international haulage, but the big ifs are likely to be: O Would participating hauliers accept the tight disciplines involved?
O And would they stand the very considerable costs of membership?
The workings of Shipping Conferences were described at a recent conference of international road hauliers and forwarding agents at Ipswich, When the Middle East Carriers Agreement (MECCA) was launched by Tan Brown of International Shipping Trustees. Mr Brown urged consideration of a similar type of controlling framework for international road 'hauliers. 1ST currently operates some 17 contracts With International Shipping Conferences.
However, the traditions of Shipping and road haulage are very different Although both industries have their share of freeboating entrepreneurs, there are many more road hauliers than ship owners. Far more capital is tied up in a Ship than in a small road haulage business. Because shipping as an industry is almost as Old as history, ship owners have for centuries enjoyed the type of high-level contacts with government and financial interests that road hauliers are only beginning to aspire to. Shipping, too, has always been involved in the international regulation of trade. The " 'shippers " of goods—the exporters and importers of the country—have built up a vast experience of negotiations with their own Government's top civil servants and with the governmental and commercial interests of trading nations abroad.
Snap deals
No one with any practical knowledge of road 'haulage in this country could pretend for a moment that there is any general support for a regulated conference system of rates control on domestic traffic. Road hauliers distrust bureaucracy and they have grown up in the type of thrusting market situation where snap deals are made between the sender of good's and the carrier With whom a contract is struck.
Road 'haulage is far from being a disciplined industry; indeed, when it was substantially nationalised for long-distance operations it was virtually impossible to administer it 'in any uniform way. The theoretically foolproof system of traffic exchange and traffic control points was never allowed to work properly because of local management and trade union hostility to traffic sharing.
In the shipping context a Conference is an Association of Liner Shipowners operating in the same trade Who agree to provide services sufficient for the normal requirements of the trade under terms and conditions to 'Which they must all conform. Their aim is to provide stable conditions of service and levels of freight.
The alternative to a well or ganised Shipping Conference is cut-throat competition and a constant movement of vessels to the most lucrative trades at any given time to the detriment of others.
There are 'analogous developments in air 'transport, which is subject to national and international 'licensing arrangements. Member airlines Of the International Trade Association (IATA) protect each other from undue competition from independent air services'. They maintain fares and freight rates at a high enough level to make their regular services profitable —though even that goal has proved too difficult for many airlines since the energy crisis.
If a completely unregulated, free for all system were allowed to operate there would be intense competition on the most lucrative routes and business men needing to fly to certain countries would have to wait until sufficient traffic built up; the regular airline schedules would cease to exist.
One obvious parallel between road haulage and shipping is that there are operators of various 'sizes. Mr Brown told the Mecca 'hauliers that the system provided for both the small Ship owner who might have only one or two ships operating in a particular trade and the massive liner fleet operators to perform under the same conditions. There are analogies here between the one-vehicle operator and the firm operating 200 or more vehicles.
Co-operation
The disciplined nature of a Conference is evident in its rationalised spacing of .saihngs to the greater benefit of the shipper. General co-operation of participating shipping lines provides the maximum numbes of opportunities to the shipper for cargo movements.
In agreeing to quote the same minimum rates for freight the member lines (companies) ensure that regardless of the tonnage to be shipped, the shipper of 5 tons will not be placed at any disadvantage with his competitor who may be shipping 1,000 tons of the same commodity. In road haulage, the large sender would expect a substantial cost-per-ton reduction.
The shippers who are the customers of Conference Line members enjoy other advantages in terms of freight rates. In the knowledge that shippers have undertaken to use Conference Line ships special discounts may be agreed. While freight rates may be reduced without notice •any increased charges are normally the subject of two or three months' forward notice, except under certain specified contingencies clearly set out in the Conference tariffs. Matters of this kind clearly are more difficult to arrange, in fairness to both sides, at a time of rampant inflation, but the essential idea is to provide to users of the services the greatest practicable stability of rates.
If there is no competition between member shipping lines on rates there is, in Mr Brown's words, "a constant endeavour by all lines to improve not only the quality and standards of their ships and equipment, but also their service to shippers before, during' and after shipment." Improvements on one service are quickly copied by competing services.
All transport operators face the menace of recession which, in a matter of weeks, can stand ships or lorries for an indefinite period. To encourage shippers to support Conference Lines the customer firms are offered a contract under which they undertake to confine their cargo to Confer
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ence tonnage and in return are granted an immediate discount on freight. If shippers are unwilling to sign the contract, provided they confine their cargo to Conference ships, in most trades, they may qualify for a deferred rebate after specific periods. But if the non-contract shipper "plays the market" and utilises non-Conference tonnage, then the right to deferred rebate is lost.
It will be seen that Shipping Conferences are sustained by the joint co-operation of interested parties. The liner operators can make forward investment plans for new ships, berthing and handling facilities, even collection and delivery vehicles, The shippers gain the advantage of regular service and reliability and they can trade in world markets knowing that ships will be available to service these markets. But the shippers must recognise that they are paying a price which is certainly higher than the lowest possible alternative freight rates offered by " outsiders " or opportunists whose wish is to cream off a heavily trafficked route, while offering no guarantee of permanence.
Without a contractual " tie " between shippers and Conference Lines the system would not work. When outside competition exerts downward pressure on freight rates member lines may have to follow suit, with a disastrous effect on their services.
Road hauliers, as Mr Brown stressed, are well aware of the effect of such competition, and responsible customer firms must also be fully aware of the ultimate effect of "rat race" competition, even though there is the temptation to patronise the cheapest services on offer.
Even in shipping, where Conference lines have had a century's experience, the frequent allegation that the Conferences are monopolies is disputed. A monopoly has been defined as "exclusive possession of the trade in some commodity." No Conference can claim "exclusive possession" of a trade.
Although discussion of Conference lines is rarely associated with that of licensing restrictions, in effect the two ideas are associated. For obvious reasons, a workable international licensing system for freight movements is hard to organise between two countries and if 20 or more coun tries are concerned it may be quite Utopian to imagine a workable system.
In the road haulage context, the West German Government is said to be planning a Conference system for hauliers engaged in Middle East operations. Ultimately a European-wide road transport Conference system is conceivable, though Mr Brown thinks it would be more rational to attempt to get a Conference line going for British hauliers Just how complicated a matter would it be to set up a viable system? Clearly, a topheavy secretariat would be beyond the financial strength of British international hauliers. Yet a very informal association could be so loose in its effect, and its disciplinary powers so derisive, as to make the experiment doomed to failure. What is to happen if the West German conference gets going charging rates substantially different from anything the British could stomach ?
Mr D. F. Foot, managing director of 1ST (Shipping Inspectors) Ltd Enforcement Division (associated with International Shipping Trustees) has now prepared a draft Conference Agreement for MECCA and in an accompanying letter to the organisers he spells out some of the practical difficulties.
A key problem is the role of freight forwarders, those transport middlemen who are not universally beloved by road hauliers. Mr Foot thinks it would be difficult to allow a freight forwarder to be a full, participating, member of a road haulage Conference, unless the firm concerned owns some hardware which plies on the route to the Middle East. This , conclusion may not be to the liking of Anglo Balkan Carriers, the principal organisers of the Ipswich meeting setting up the MECCA organisation. Mr Foot fears that if freight forwarders with no vehicles of their own were allowed into Conference membership it would be a case of "the tail wagging the dog."
In some Shipping Conferences freight forwarders are allowed in as associate members, but they are not entitled to vote and they are excluded from some vital meetings.
Mr Foot's draft Conference Agreement suggests that each member firm should have one vote irrespective of fleet size. The problem of owner-driver members, who would not find it easy to attend meetings, could be dealt with if the conference was run by an executive committe, with representation of the ownerdrivers. (Small member firms in the International Air Transport Association are represented in this manner).
The Conference chairman could be a person with no connection with any member firm or the alternative of a rotating chairman, drawn from the membership, is said to work reasonably in many Conferences.
The cost
In Mr Foot's view, a simple Conference secretariat, administering the 'agreement and providing members With necessary information, would cost from £50,000 to £75,000 per year, depending upon the quality of personnel, location of offices, etc. In addition, provision would have to be made for policing the conference. 1ST would charge an extra fee of £25,000 to £30,000 a year for this service. Hence, the total cost to MECCA members would be from £70,000 to £100,000 a year. While this 'is a considerable sum, it is put in perspective if the estimated total value of the market is put at £15m as the UK share, With an annual cost per vehicle of £40 or £50.
Anyone reading through the draft Conference Agreement would see many points deserving of detailed discussion. Article 1 talks of membership to individuals, firms or corporations operating road units regularly in the Middle East trade, or furnishing "substantial and reliable evidence" of ability and intention so to operate. Casual adventurers, on this formula, would be ruled out.
Article 4—expenses of the Assodation—leaves open the basis on Which expenses would be borne by members. Mr Foot suggests a pro rata payment on the number of units, tonnage, or journeys. Article 6 touches on the alignment of MECCA conference rates with other Conference rates, so that the rate 'structures of different conferences bear reasonable comparison. While this Article would commend itself to governments, hating to see discrimination, it raises the possibility that a German or other country's) conference could have a very different rating philosophy from the British MECCA.
An important article (7) insists that Where a sub-contractor or affiliated company is invdlved all the Conference tariffs, and rules, are .complied with. Article 8 stresses the objective of regular services as a benefit to shippers. There could be no question of "on demand" services, with lengthy gaps between services.
Discipline
Perhaps the most controversial are the Articles relating to the disciplining of member firms. There is little or no experience of self-policing, by trade association members, in road haulage and it would be a novelty for a Conference of road hauliers to employ an enforcement authority to detect malpractice. The authority would have sweeping powers to investigate the documentation of member firms and their agents and to present detailed findings to the Conference for action—which could include heavy fines.