The US is playing poker on port fees. China is playing Go

ONE of recently deceased movie star Robert Redford’s best-loved roles was the part of small-time card sharp Johnny Hooker in The Sting.

The famous 1973 celluloid celebration of America’s obsession with poker deservedly cleaned up with seven Oscars and is worth watching if you haven’t seen it.

But the Chinese mostly prefer the deeply strategic board game Go, far harder to master even than western chess. The contrast offers a revealing insight into the two respective national psyches.

Poker is often played for high stakes. Raking in the chips depends as much on chance as on skill, and the winner is usually the most proficient bluffer, and not infrequently the cleverest cheat.

By contrast, victory in Go accrues to the superior strategist. While wagers on outcomes are not unknown, they remain rare.

These observations come to mind as shipping braces itself for the impending roll-out of the US Trade Representative’s scheme to impose hefty port fees on vessels it deems to be linked to China.

The proposal is detrimental both to globalisation and to free trade. Neither consideration seems to bother the incumbent in the White House unduly.

The levy is due to come into effect in less than two weeks from now, although there have been suggestions that implementation could be put on hold to enable further talks.

Given the preponderance of Chinese-built tonnage in the world fleet, many in the industry will be hoping that amicable settlement can be reached.

But America’s desire to win back market share for US shipyards has not to date materialised, and indeed, cannot do so until new capacity comes on stream.

For their part, Chinese shipyards saw their share of the global newbuilding orderbook bounce back from 51% in the second quarter, when owners were naturally jittery about the impact of port fees, back to 75% in quarter three.

Meanwhile, big names such as CMA CGM, Maersk, OOCL and Ocean Network Express are redeploying ships and adjusting routes to avoid incurring the impost.

TACO deadline

Even so, the deadline is nearing, and some owners are clearly not putting too much store by the acronym TACO, coined on Wall Street to suggest that Trump Always Chickens Out.

A case in point is Seaspan. As Lloyd’s List reported this week, the company has since August reflagged more than 60 of its 200 vessels from Hong Kong to Singapore, transferring ownership to entities registered in the city-state.

Other Hong Kong-based owners such as dry bulk specialist Pacific Basin are expected to follow Seaspan’s lead, and few would blame them.

There have also been repercussions for ship finance. The emergence of Chinese leasing in the last period means that many of the ships operated by western owners are legally speaking owned by Chinese special purpose vehicles.

Senior lawyers are earning their hefty salaries by devising workarounds, and in most instances suitable new structures have been devised and rapidly put in place.

China is not taking all of this lying down. In the past few days, it has revised its maritime regulations, with the revamp explicitly authorising retaliation against any nation that imposes discriminatory measures on Chinese operators or vessels.

The changes also spell out that where a country has commitments contained under maritime treaties with China, Beijing reserves the right to demand corrective action or take any “necessary countermeasures”.

While there has been no explicit statement that the new rules are aimed at the US, there doesn’t have to be.

It is unclear what form “necessary countermeasures” might take. But as P&I club NorthStandard puts it on its website: “Our understanding is that the options may include but are not limited to charging special fees on foreign vessels at Chinese ports, restricting access in and out of ports, and limiting access to maritime data and ancillary services.”

In poker terms, this is a call. By matching the USTR’s last raise, China stays in the hand and the betting round continues. Or, if you prefer a Go analogy, it is shaping the position on the board.

It is worth remembering that China calmly faced down Trump’s threat to impose tariffs of as much as 145% on its exports to the US, keeping its nerve as it negotiated them down to an effective rate of 57%. Port fees could well prove to be a repeat performance.

Wealthy crime boss Doyle Lonnegan may have been an easy mark for Redford and Paul Newman’s character Henry Gondorff.

But if you are going to take on Beijing at no limit Texas Hold’em, don’t expect them to be the fish.