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AMONG
the top 10 countries with a significant
protected cabotage fleet, seven are Asian
countries and collectively their maritime
rules and regulations seriously hurt the
development of intra-Asian trade.
Except
for the US and Japan, the rest are all emerging
countries including China, Indonesia, Brazil,
the Philippines, Malaysia, India, Vietnam
and Russia.
China
has the largest cabotage fleet, accounting
for 45 per cent of the total. Indonesia
follows with 24 per cent, while the US comes
next with 10 per cent and Brazil the fourth
with nine per cent.
The
vessels involved all fly the flags of the
countries they serve, with exemptions under
some restrictions.
Though
cabotage policies are justified under the
banner of national security, a report from
the World Economic Forum (WEF) criticises
this argument stating that national security
is simply a pretext to disguise protectionism.
"Although
the historic justification for these restrictions
has been national security, the clear intent
of many cabotage regulations today, particularly
those affecting transportation of goods
by water, is to protect local industries
and labour interests," said the WEF
report.
The
report entitled "Enabling Trade - Valuing
Growth Opportunities" indicates that
diminishing supply chain barriers "would
increase world GDP six times more than merely
eliminating tariffs".
The
report identifies four key areas that impact
freedom of the global supply chains' market
access, border administration, transport
and communications infrastructure, and business
environment.
Additionally,
the report estimates that by reducing supply
chain barriers global GDP could increase
by US$2.6 trillion or 4.7 per cent and exports
by $1.6 trillion or 14.5 per cent.
In
contrast, removing tariffs could only raise
global GDP by $400 billion or 0.7 per cent,
and exports by $1.1 trillion or 10.1 per
cent.
The
report urges the US and China, the two biggest
economies in the world, to set an example
for other nations by abolishing some restrictions,
though it believes neither country is likely
to deregulate unilaterally.
The
WEF says the US Merchant Marine Act of 1920,
better known as the Jones Act, and China's
international relay regulations are typical
examples.
These
cabotage policies damage local economies
and add considerable costs to companies
and consumers as a result of lacking competition.
High
costs are not only caused by the absence
of competition, but also due to the remarkably
high construction cost. According to Alphaliner,
the cost of building ships in the US is
up to five times the cost of building them
in Asia.
For
China, the report says if Asia's largest
economy could abolish cabotage restrictions
and enable international relay, about 10
million TEU that are currently relayed at
international ports (including Hong Kong)
would thus be transshipped via Chinese ports.
That
volume could generate a potential income
of CNY2 billion (US$321 million) for local
ports, resulting in savings of $500 to $700
million per year from lower port charges,
optimised shipping networks, lower inventory
costs and shorter transportation time by
five to 10 days.
Although
liberalisation of cabotage regulations all
over the world can boost global trade by
reducing costs, the progress should be slow
and gradual, because it takes time to eliminate
the "legitimate national security concerns
that surround domestic transport".
Thus,
efforts should be focused on relaxing protectionist
international relay restrictions, because
the subsequent economic and environmental
benefits are so obvious that they overshadow
security concerns.
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