Labor reform in the Australian merchant marine: an analysis of recent progress.

Shipping is a major part of the Australian transport infrastructure. On a kilo/tonne basis, the Antipodean continent ranks as the fifth largest shipping market in the world.(1) Half of the country' s non-urban domestic freight is carried by coastal shipping, and about 90 percent of bulk commodities

The international trades to and from Australia are largely serviced by foreign flag vessels. In 1988-89, Australian flag shipping carried only approximately 3.3 percent of Australian seaborne exports and 6.2 percent of Australian seaborne imports. Apart from a handful of vessels in the international trades, Australian flag shipping is employed on the protected coastal and trans-Tasman routes. With twenty shipowners in the fleet about 84 percent of tonnage is owned by vertically integrated ore, coal, and oil producers.(3) Since 1982, an unprecedented series of systematic labor reforms has been aimed at reducing costs and promoting the modernization of the domestic industry.

This article analyzes the development of reform over the past decade. The factors influencing the direction of reform are examined. Further, the activities of the various institutions involved in the reform process are assessed.

PRESSURES FOR REFORM AND ITS EARLY STAGES

The shipping reform movement was conditioned by a number of long-term factors. Pressures for the reform of Australia's tariff system and the promotion of modernized export industries had begun to develop in the 1970s. Confronted in the 1980s by relatively more intense balance of payments and foreign debt problems, the Commonwealth government supported the reform of the transportation industries as an inseparable component in the drive for greater productivity and exports. A chorus of "economic rationalists" in government departments and business organizations clamored for further laissez-faire measures throughout the period. Even after nearly a decade of reform initiatives, critics of transport policy in the maritime, aviation, and road freight industries were highly vocal.

In 1992, the influential Business Council of Australian (BCA) published a consultant's report claiming that transport inefficiencies accounted for about a quarter of all spending on transport. The Industry Assistance Commission, which had replaced the historic Tariff Board, gave the figure of a 3 percent improvement in GDP if effective reforms in transport were achieved.(4) In shipping, producer and exporter groups in particular called for additional deregulatory reforms to remove the legislative under-pinnings of the cartels operating under the cabotage and conference systems. Additionally, a further overhaul of industrial relations in favor of perceived benefits to the employer arrived on the agenda of exporter and shipper groups in particular. While the protracted debate over shipping and waterfront reform continued in parliament and the media, shipping industry representatives claimed that the systematic labor reform program was successful and the industry did not require additional deregulatory measures. In Australian shipping, the strong deregulatory moves familiar in transport industries worldwide, and particularly in Australia's near neighbor New Zealand, did not materialize.(5)

The reform program had a long pedigree. It dated from the beginnings of the 1980s and even earlier. Although the advent of the Hawke Labor government to office in 1983 signalled an upsurge in industry planning as a matter of systematic policy, the initial moves in the overhaul of the shipping industry had already begun with the appointment of a committee of inquiry under the chairmanship of Sir Malcolm Crawford, a former senior economic bureaucrat. In 1982 the Crawford Committee recommended a new policy for the industry which linked investment in new tonnage with the rationalization of manning arrangements on new vessels.(6)

Crawford's core proposals and the resulting legislation related tax incentives and subsidies to shipowners who introduced new tonnage with fewer crew berths and manned by smaller ships' complements. Accelerated depreciation allowances and eventually grants were offered on a ten-year basis for stability and predictability. The 1987 Ships (Capital Grants) Act meant that decisions had to be taken at the ship ordering or purchasing stage about operating technology and work organization, and about berth provisions and other crew maintenance factors.

As a result of the fiscal developments, a new dimension entered negotiations between shipowners and maritime trade unions in contrast to the adversarial relationships of the recent past. Concrete incentives encouraged compromise with gains for both parties. The shipowners achieved not only reduced labor costs but also tax subsidies once manning levels on a new vessel were certified as acceptable by the then Ministry of Transport.(7)

For the maritime unions the Crawford Scheme meant new jobs on new ships at higher pay, coupled with new career structures and early retirement packages to compensate for the abandonment of the established manning scales. Despite a long history of grievances against shipowners, the stagnation of the industry and the lack of support among seamen for a number of intractable disputes which only benefited a minority of unionists made for the continuation of new and cooperative attitudes in industrial relations.(8)

In a new context of shipowner and trade union consensus, the shipping reform movement became focused on labor reform and was institutionalized in a series of managing committees set up under the aegis of the Commonwealth government's then Department of Transport. These bodies included representatives of the shipowners, the trade unions, and government departments. The 1985 Maritime Industry Department Committee (MIDC) crystallized the pattern which had originated with the Crawford Committee and which was to last in its essential structures and policy, with some modifications and name changes, until the present.

In essence, the MIDC oversaw the introduction into Australian flag tonnage of reduced manning scales and the "integrated rating" job classification which abolished the time-honored demarcation between deck and engine room hands. Although first introduced into major European and Asian fleets during the 1960s, the rationalization of traditional departmental classifications had not progressed in Australia. A handful of modest experiments in this direction in the early 1970s had failed to attract the involvement of the industry as a whole. By contrast, the MIDC successfully established industrywide manning manning formulas and managed compliance with the new framework of revenue and industrial subsidy law establishing financial concessions for smaller ships' complements.

The MIDC program was not without critics who claimed that the pace of labor reform was too slow. Mainly new tonnage was crewed according to the reformed manning scales. In addition, the reforms were initially only really intensive on the lower deck. Upper deck job classifications were rationalized later. Radio officers were done away with, but engineers and deck officers survived as job classifications although the numbers in these categories declined.(9)

In addition, the cost of reform was high. The training and re-training of personnel for the new ratings classifications, together with early retirement payments for the approximately 50 percent of the workforce shed over the ten-year period until 1992, called for substantial outlays from public funds and shipowners. The outgoings were not recoverable in the short time, and but 1992 amounted to approximately 11.5 percent of the 1990-91 aggregate labor costs.(10)

SHIPPING INDUSTRY REFORM AUTHORITY (SIRA): MATURITY AND DECLINE

In 1989 the reform process was consolidated by the establishment of the SIRA. The new body replaced the earlier tripartite committees and task forces. It continued previous policies but represented a new development in the scale of government intervention with defined responsibilities to oversee the administration of public funds released to the industry and the planning and implementation of the government's shipping reform strategy. The SIRA's charter terms contained a three-year sunset clause, which the organization's executive was, as it turned out, unable to avoid without complications.

The SIRA organized brainstorming sessions at which the targets and timetables for reform were hammered out with representatives of the shipowners and trade unions. New funding claims and initiatives were developed. After sponsoring an overseas study mission in July 1991 to expose the industry's leadership to "best international practice," the Authority reorganized senior management personnel as the Shipping Reform Negotiating Committee (SRNC). This body differed from predecessors in that membership consisted not only in shipowner, trade union, and government representatives, but also shipping users.

At the heart of reforms were crew reductions on bulk carriers and container ships negotiated through the Authority's committees on a ship-by-ship basis. By June 1992, the SIRA claimed that average manning levels on Australian vessels had been reduced from 27.7 to 20.9 in three years. In addition, the SIRA supported a range of new specialized committees, including the Towage Industry Reform Implementation Committee (TIRIC), which involved tug operators and unions in similar manning reduction negotiations to those occurring in shipping and stevedoring.

As the SIRA reached the end of its original lifespan, a series of "essential and achievable" new reforms were recommended in March 1992, shortly before the sunset clause in the original charter was due to take effect. As a result, the SIRA obtained a temporary reprieve until September 1992 while these plans for what was proclaimed as the last stage of labor reform were progressed through the Commonwealth bureaucracy for approval by Cabinet.(11)

The proposals fell into three main categories and were designed to exhaust the realistic possibilities. First, further manning reductions in the size of operating crews were put forward as an appropriate goal. Second, "manning factor" reductions were proposed which would reduce payroll costs for ship operators by cutting back on leave and sick pay allowances which had become pegged way above OECD norms. Third, a resolution of the growing adversarial debate over company employment as opposed to industrywide pooling arrangements for hiring seamen was also proposed. Supporters of the labor reform process argued that once these three objectives had been achieved, then the capacity to do more would have come to an end. Shipping policy at this point would be re-directed into other areas: tax and investment subsidy reform, for example.(12)

The government delayed its response to the SIRA final proposals as preparations began in late 1992 for a federal election in early 1993. The Minister of Transport and Communications remained equivocal about shipping policy and refrained from firm direction, committing the government only to the support of further "commercial arrangements" in the industry, which suggested a new emphasis on the market and regulatory context.(13)

Adding to the climate of uncertainty at the close of the SIRA's initial three-year period, consensus became more difficult to achieve in the Authority's committees. Proposed measures supported by the particularly vocal shippers' groups included the dismantlement of the industrywide rostered hiring system in favor of company employment. The major lower deck industrial organization, the Seamen's Union of Australia, was particularly threatened by the possible abolition of the centralized Seamen's Engagement System and a return to what its leadership viewed as the bad old days when seamen were hired on individual contracts without the benefit of collective bargaining and wages and conditions minima set by arbitration and applicable to all employment in the industry.

In addition, proposals to liberalize cabotage and the Trans-Tasman conference arrangements raised not only the ire of the unions but also the hostility of Australian flag shipowners, who had reason to oppose the end of cabotage and the conference system. New and potentially harmful competitive pressures threatened both employment and profits in the domestic industry. Only the users of shipping services stood to benefit with reduced freight rates from the entry of non-Australian flag vessels manned with "crews of convenience" into the previously protected trades.

The shippers, who had not been involved in the early stages of the reform movement, carried the banner for market structural change and further deregulation of the labor market. Discussions in the SIRA's SRNC became greatly complicated. The SUA stood firm by the retention of cabotage and the existing seamen's employment system as nonnegotiable requirements for the protection of the domestic industry. Although the SRNC had uncontroversial proposals on the table for further early retirements and manning adjustments, the lack of consensus over market deregulation and employment made further negotiations through the same committee structure problematic without a firm government commitment on future policy and the continuation of labor reform.(14)

Although paradoxically promoted by government, the shippers' activities eroded the cooperative spirit of unions and domestic shipowners which bureaucrats and politicians had labored to create. The shippers had been encouraged to play a role in policy and the labor reform process. As part of measures announced by the Minister of Shipping in 1989 to ensure that reduced labor costs were passed on to users in the form of lower rates, the Department of Transport and Communication had promoted the organization of exporters and other shipping service users into lobby groups. The Department set up a consultative forum on the Trans-Tasman trade and announced that neither the Australian nor New Zealand ministries of transport approved the existing bilateral conference accords which reserved the trade to flags and crews of the two nationalities.(15)

Moreover, the Department fostered the entry of new shipper organizations into the consultative and negotiating bodies now under the umbrella of the SIRA. A formerly little-used section of the 1974 Trades Practices Act permitting shippers to form designated bodies to negotiate with ocean carriers was invoked initially in 1990 to establish seven sectoral shipper bodies representing different product classes such as horticulture and furniture removal services, together with regional groupings in south and west Australia. In addition, an Australian Peak Shippers Association (APSA) was organized with legally sanctioned powers to negotiate service levels and terms of carriage with the shipowners. Although the shippers' terms of reference were envisaged as purely commercial in the Trades Practices Act, in practice the new groups became vocal over internal shipping industry concerns, such as employment and crew costs, previously regarded as the exclusive domain of shipping employers, maritime unions, and if a labor dispute arose, the Industrial Relations Commission.

The shippers' focus on reduced freight rates was supported in the shipping policies of the major political parties. The Opposition Coalition parties agreed with the progressive deregulation of the coastal and Trans-Tasman trades and the introduction of company employment for seamen as measures likely to promote a more competitive and low-cost environment. At the same time, supporters of deregulation in the ruling Labor Cabinet, including the then Finance Minister and the Treasurer, were in favor of market-oriented initiatives which would lessen government influence and restore "commercial agreements" as the main method of fixing freight rate pricing and managing the industry's labor relations. None of the political parties gave unambiguous support to the SIRA and its program of managed labor reform.(16)

The SIRA went into limbo in September 1992 after Cabinet delayed the renewal of its terms. In November the SIRA chief executive resigned. It was not until the next year that a new commitment to the labor reform process was announced and a new SIRA chief executive appointed. Since Labor won the March 1993 election, the odds were in favor of a revival of the labor reform process, the moreso given the decisive rejection at the polls of the Coalition whose shipping policy had clearly articulated the deregulatory option.

THE REVIVAL OF MANAGED LABOR REFORM

However, the revival of labor reform made sense on a number of grounds. The gradualist de-manning of the Australian fleet had continued to draw support from Australian shipowners and the maritime unions. Influential analysts argued that the labor reforms had accelerated the introduction of more efficient vessels, coupled with greater competition and a reduction in both onshore and at-sea ocean transport costs.(17)

In addition, evidence was marshalled to demonstrate a connection between improved foreign exchange earnings and the maintenance of the Australian fleet by comparing cash payments and receipts of Australian and foreign flag vessels.(18) The maritime unions combined with the domestic shipowners to launch a public relations and lobbying campaign in favor of the retention of Australian flag shipping. The shipowners, who had formed in the mid 1980s a new policy and lobbyist body, The Australian National Maritime Association (ANMA), gave no support to the shipping users who continued to argue for the deregulation of the coastal shipping market.(19)

For their part, the maritime unions continued to support managed labor reform, which owed its strength in some measure to national policy trends. The shipping labor reforms were part of an extensive parcel of measures approved by the Labor government to promote national micro-economic reform and the overhaul of Australia's industrial relations through changes to the systems of compulsory arbitration and trade union organization. The Commonwealth reform package had obtained the broad support of the Australia Council of Trade Unions (ACTU) and was thus difficult for sectoral groups acting in isolation to oppose.

Not only was the structure of work in shipping being transformed but at the same time the organization of the maritime trade unions was being restructured by a similar process of government direction and subsidy. In turn, union amalgamation added to the difficulties of opposing centrally determined labor reform. These were no longer a number of independent occupational groups such as the Marine Cooks' or the Institute of Marine Engineers with autonomous decision-making and policy powers. By 1993, the new Federation of Australian Maritime Union (FAMU) had a single legal identity and covered workers in shipping, stevedoring, and the port authority industry. It offered economies of scale and centralized resources to compensate for declining membership levels.

For the first time the new federation covered both non-supervisory staff and ships' officers, and both ship and shore personnel. It began to embark on a number of common activities such as the representative appearance before the House of Representatives Inquiry into Ship Safety and the Department of Transport Warehouse to Wharf Committees. This latter body sought to complement crew and stevedoring labor reform with reforms of all aspects of port management, including the Dickensian paperwork involved in cargo and ship movement which had proved resistant to new electronic data processing techniques.(20)

Although now under the federation umbrella, the officials and active members of the traditional occupational unions expressed varying levels of support for the government-sponsored labor reform process. The membership of the old officers' unions in particular were threatened by the abolition of separate classification for radio officers and electricians. Proposals to train integrated watch-keeping officers with both deck and engine room skills did not sit well with seafarers who had invested their working lives in the old demarcated crafts. However, in the absence of any alternative policy emphasizing the survival of the domestic shipping industry, managed labor reform did not trigger concerted union opposition.(21)

But plans and moves in the direction of commercial reform were not entirely abandoned. Another inquiry began, this time into Part X of the Trades Practices Act; the legal framework for what critics characterized as a collusive conference or cartel system, imposing uncompetitive costs and discouraging exports.(22) At the same time, the use of a safety valve in the cabotage regulations was increased. This enabled an expansion in the number of permits granted to foreign flag vessels for trading on the Australian coast. But the small measures of liberalization stopped well short of any formal amendment to the cabotage provisions in the Navigation Act or the abolition of the Trans-Tasman Accord.

To a considerable extent, the absence of government support for commercial reform reflected the respect of the Keating Labor government for the interests of the trade unions and the domestic shipowners. But paradoxically the lack of enthusiasm for the abolition of cabotage also related to other aspects of Commonwealth commercialization and privatization policy. The sale of the publicly owned Australian National Lines (ANL) had been under consideration for several years. But even with an upturn in the world maritime economy, the national fleet would be much less attractive to buyers without its protected domestic markets. The successful privatization of this public asset appeared to require that commercialization proceed at a lower and more restrained pace than the exporters and their political allies in the Coalition Opposition favored.

At the same time, aspects of commercial reform became less attractive to uncommitted but powerful interest groups who had the power to influence the shipping equation. Ship founderings and environmental disasters associated with flags of convenience (FOC) tonnage achieved wide media coverage. The Morris Report, named after the chairman of the parliamentary inquiry into ship safety, who had also pioneered the managed shipping labor reform process while Minister of Transport in the early and middle 1980s, also drew attention to "ships of shame" and the potential for disaster which deregulation might enhance. For the time being, Australia remained a traditional mercantilist operator, with a publicly owned national fleet and protected coastal and Tasman trades; this was in contrast to much of the South Western Pacific, where flag-of-convenience registries flourished in micro states such as Vanuatu and the Marshall Islands during the 1980s.(23) As a corollary to the overarching policy of national flag shipping retention, managed labor reform developed as the most complimentary strategy in the employment relations and human resources field. In the absence of acceptable policy alternatives, managed labor reform was difficult to abandon, as its revival demonstrated.

CONCLUSION

The process of labor reform has survived although at varying levels of intensity since its inception in 1982. By 1993, the final goals of labor reform had been clarified by the parties, and the institutional structure necessary for their realization had been revived following the re-election of the Keating Labor Government. The industry's planners were already looking beyond labor reform toward the advocacy of new investment and tax policies for shipping in order to promote the survival of a lean and labor-efficient domestic industry in the face of international competition.

Labor reform had accomplished a wide inventory of manpower and work practice change without significant industrial disputes. The tripartite committees of maritime unionists, government bureaucrats, and shipowners' representatives established a pattern of consensus in industrial relations decision making. This stood in sharp contrast to the historic traditions of industrial conflict between employers and unions characteristic of the late 1970s and early 1980s before the threat to the survival of the domestic industry from market and technological developments in the world maritime economy was widely perceived. To some extent, the entry of the shippers into shipping policy formation circles disrupted the general shipowner and maritime union consensus over aims and methods, but sufficient support for labor reform remained among the main players.

Moreover, the labor reforms were and continued to be effective in rationalizing work practices and reducing crew size throughout all units in the Australian fleet. The problems associated with linking devolved enterprise bargaining with industrywide standards did not occur in shipping. New manning scales were worked out on a vessel-by-vessel basis by central negotiators who were prepared for enterprise level variations in manning and pay, but who were committed to the preservation of an overarching industrywide framework of conditions and procedures. These common standards included matters such as early retirement, leave, and hiring.

At the same time, labor reform did not entirely dominate shipping policy. Commercial and market structure reform attracted advocates. Not only shippers, but also politicians, business groups, and economic rationalists in the media, academia, and government supported cheaper freight rates through deregulation, which in the shipping context meant new competition and the removal of cabotage provisions. The monitoring of freight rates by the Prices Surveillance Authority and the significant increase in the number of permits enabling foreign flag vessels to avoid the cabotage regulations were evidence of the appeal of alternative policies.

Indeed, the temporary demise of the SIRA put labor reform in limbo during 1992-93. Had the Coalition parties won the March 1993 election, an upsurge in commercial reform was safe to predict on the basis of their election manifestoes. The aggressive reduction of cabotage and other market reservation arrangements may well have created a more adversarial climate in which managed labor reform would be difficult to revive.

Another key point about micro-economic labor reform in shipping is that the process had a different chronology from the typical Australian industry. It was well into the second half of the decade of the 1980s, following the 1986 balance of payments crisis, that productivity linked wages growth and enterprise level bargaining became the master industrial relations policy. But shipping had begun to go down this route in the early 1980s with the crew rationalization and labor costs containment strategies of the Crawford Committee and MIDC recommendations. Certainly in the case of shipping, the role of the national industrial relations system in initiating labor reform, through wage rulings and the like, was not much in evidence. In a real sense, shipping labor reform was to a considerable extent independent of the central labor regulation system.

In shipping unavoidable technological change, most obvious in the size maximization and automation of new ships, also played a role in reform. It was no longer physically possible to fit the relatively inflated crews of yesteryear's vessels on new tonnage built with reduced provision for crew berths and accommodation facilities. At the same time the world shipping glut of the early 1980s exposed Australia's shipowners and maritime unions to competitive pressures in advance of other sectors of the economy. The pattern of unit labor cost minimization and productivity enhancement organized by negotiating committees became established in shipping before the economywide shift to decentralized collective bargaining over productivity/wages tradeoffs became established in the new wage fixing principles of the late 1980s. Sure enough, the Commonwealth government and the ACTU supported shift to enterprise bargaining and managed micro-economic labor reforms deepened in shipping during the later 1980s with the establishment of the SIRA. But the process was already fairly well advanced.

From available indications and the expressed intentions of government and the industry's principal decision makers, the labor reform process has still some years to run until the vein of possibilities is exhausted. In all probability the fiscal and investment strategies, or the commercial and market structure reforms which will then become central to shipping policy, will offer less of a role for Australia's maritime trade unions and thus the labor-management consensus of the past decade or so will not necessarily be so salient. But in retrospect, the era of labor reform has arguably improved the health of the Australian flag carriers by reducing labor costs. At the same time the managed reform process has preserved the security role associated with national carriers and has contributed to the maintenance of the national transport infrastructure. Had the hard competition policies of national deregulation been adopted, then the survival of the national flag fleet would have been in jeopardy.

As it was, managed labor reform gained the active support of key decision makers in shipping policy and planning circles. It acquired the consent of maritime unions and the approval of shipowners in a formerly adversarial work culture. In contrast to the risks and uncertainties of deregulation, managed labor reform offered the major players a safer policy which complemented national economic priorities and policies of tripartite direction and labor-management cooperation.

ENDNOTES

1 Hansard (Australian Parliamentary Proceedings). Canberra, Australia: Government Printer, 4 November 1992, p. 2641.

2 "Australian Shipping: An Industry In Its Own Right," Melbourne: Australian National Maritime Association (ANMA), 1991, pp. 22-43.

3 Ibid, p. 5-6.

4 Sydney Morning Herald, 23 November 1992, p. 5.

5 ANMA News, Melbourne, November 1993, pp. 1-2.

6 R. Morris, "Shipping's New Industrial Relations: The International Context and the Australian Experience," Journal of Industrial Relations, 32(3), 1990, pp. 317-333; also "De-Manning the Fleet: Federal Government Reforms and Australian's Shipping Debate," Maritime Policy and Management, 20(1), 1993, pp. 67-75; also C. Donn, R. Morris and G. Phelan, "Reforms of Work Practices and Industrial Relations Procedures in the Maritime Industry: An Australia-USA Comparison," Industrial Relations Journal, 22(2), 1991, pp, 130-141.

7 Department of Transport and Communications, Annual Report, Canberra: Government Printer, 1991, p. 41.

8 W. Bolitho, Chairman Australian National Lines, Staff Address, 28 October, 1983, pp. 1-6.

9 Shipping Industry Reform Authority (SIRA), "Shipping Reform: Past, Present and Future," Canberra (June 1992), pp. 2-3.

10 ANMA, Industry Report, 1993, p. 24.

11 SIRA, Final Report, 1992, pp. 1-5.

12 ANMA News, May 1993, p. 3; also author interview, ANMA chief executive, 12 May 1993.

13 Australian Broadcasting Corporation News, 10 November 1992.

14 Seamen's Journal, Sydney, Australia: Federated Maritime Union, March 1993, p. 96.

15 Australian Financial Review, Sydney, 14 October 1989, p. 4.

16 Author interview, chairman SIRA, 22 September 1992.

17 Prices Surveillance Authority, Report No. 1, "The Monitoring of Coastal Shipping Rates," Canberra, Government Printer (February 1992), pp. 1-5.

18 ANMA News, May 1993, p. 1.

19 ANMA News, November 1993, pp. 1-2.

20 Sydney Morning Herald, 9 September 1992, p. 17; also Seamen's Journal, August 1992, p. 7.

21 M. Byrne and M. Hess, "Shipping's New Industrial Relations: A View from Below," Journal of Industrial Relations, 34(4), December 1992, pp. 580-592.

22 Sydney Morning Herald, 11 May 1992, p. 9.

23 A. van Fossen, "The International Political Economy of Pacific Islands Flags of Convenience," Centre for the Study of Australia -- Asia Relations, Griffith University, December 1992, pp. 1-17.

Mr. Morris is senior lecturer, Department of Industrial Relations, The University of Sydney, Sydney N S W 2006, Australia.