Asia – China and Taiwan.
The focus of the paper by Lee, Wu and Lee (2011) is on the liberalization of trade between Taiwan and the PRC as a result of the Economic Cooperation Framework Agreement (ECFA) which was signed and came into effect in mid-2010 – and the resulting expected adjustments in trade surpluses. The removal of import/export tariffs (excepting agricultural goods) reveals an increasing trade imbalance favoring Taiwan over the PRC, but the article does include some interesting notes on the cabotage policies between the nations. Specifically, while historically trade between the PRC and Taiwan was routed through third party ports in Japan, Korea and Hong Kong, as a result of liberalization, since 2008 direct trade has been permitted – although only by PRC and Taiwanese flagged ships (Lee, 186).
As part of the PRC’s overarching “One China” policy, direct trade between the PRC and Taiwan is considered “domestic” trade and only permitted by “domestically” flagged vessels – which in this case is comprised of ships flagged by either the PRC or Taiwan. Although the authors resist speculating on this point, the resulting trade imbalance previously referenced appears to be an acceptable calculated loss on the part of the PRC leadership as it allows them opportunities to speak to the “One China” policy and include both the imports and exports under the greater Chinese economic umbrella and perhaps the establishment of further precedents through trade routes and associated dependencies (Lee, 187).
In researching barriers to effective and efficient shipping services in the inter-ASEAN region, Tongzon and Lee (2016) conducted a series of interviews with various representatives of trade organizations, shipping corporations (government and privately owned) and associated logistics service providers. To limit the scope of the study, three countries were selected as representatives to be extrapolated from – Malaysia for the more developed economies, followed by Vietnam and Myanmar to represent the least developed countries (Tongzon, 410).
Cabotage legislation is specifically identified as a contributing barrier to increased maritime trade over the course of the discussions – and as the authors note, while Malaysia and Vietnam both employ cabotage policies, they are considered market-responsive. Malaysia is specifically noted for making exceptions for container traffic to and from Port Klang, as well as permitting shippers to opt out of restrictions by paying certain taxes and fees – although these may also be exempted if there is no Malaysian vessel available meeting the requirements (Tongzon, 416).
It should be noted that while acknowledged, cabotage policies as an average are less of a concern amongst the interviewees responding on behalf of the three featured countries than port infrastructure limitations or shortages of trained personnel. Similarly, while Malaysia is a more traditionally and historically a maritime nation due to geographic concerns than Vietnam or Myanmar, neither of the archipelagic nations of Indonesia or the Philippines were reviewed in this paper. The recent contrasting legislation passed in each of those countries – increasingly strict cabotage limitations in Indonesia over the past several years following the initial passage of Maritime Law No 17 of 2008 (Yee), and the amending in 2015 of the Jones Act-esque “Republic Act of 1937” in the Philippines (Yee), which opened up domestic traffic to international carriers in the process of importing or exporting goods – would provide an interesting counterpoint for future research.
In reviewing the current literature available on the topic, there does not appear to be a large volume of academic research addressing the specifics of individual nations’ cabotage policies or legislation. As a matter of self-interest, this topic appears to be of more value to various stakeholders, special interest groups and associated government partners who tend to commission their own studies as a means of influencing policymakers (MARAD).
While there is literature advocating new policies and technologies for shippers to implement – framed in public policy theory terms, the authors are in some cases unwilling or unable to recommend policy stances that would strengthen the persuasiveness of their arguments and give more rationale for reasonable implementation – Perakis and Denisis (2008), and Medda and Trujillo (2010). In contrast, Brooks and Frost (2004) are fully cognizant of the limitations imposed by the current regulatory frameworks and openly recommend changes that would prove efficient and beneficial to multiple parties – in keeping with the pre-existing trade arrangements.
Traditionally, countries have tended to be protectionist to industries considered critical to national security, but in the 21st century as manufacturing efficiencies have been diversified and shipping specialties have been outsourced, that argument has grown increasingly stale, particularly when considering the comparatively small groups that benefit from associated protectionism at the expense of nearly the entire whole. As a function of free trade agreements in particular, the removal of cabotage restrictions between partners should be a serious consideration from this point forward.
In approaching future research considerations on this topic, it would be valuable to first collate all outstanding cabotage legislation on a country by country basis and utilize that as a framework for determining economic impacts – along a framework similar to that utilized by Lewis (2013). Although there are obvious distinctions and variations between countries, a common database would allow comparison between data points such as ship flagging requirements, crewing requirements, maintenance or operation taxes and other economic [dis]incentives. With that information available to hand, it would be a simpler matter to correct for comparative gains and losses associated with these policies and recommend more specific or targeted policy adjustments with accuracy.
Some links don’t work based on library links – article information provided in case anyone else wants to look them up later:
Lee, Tsung-Chen, Chia-Hsuan Wu and Paul T.-W Lee. “Impacts of the ECFA on Seaborne Trade Volume and Policy Development for Shipping and Port Industry in Taiwan.” Maritime Policy and Management. Vol 38: No. 2, (2011): 169-189. Web. 12 Jun. 2016.
Tongzon, Jose L. & Sang-Yoon Lee. “Achieving an ASEAN Single Shipping Market: Shipping and Logistics Firms’ Perspective.” Maritime Policy and Management. Vol 43: No. 4, (2016): 407-419. Web. 11 Jun. 2016.