The Effect of Cabotage on the Cross-Strait Sea Transport Agreement Between China and Taiwan

Abstract

The development of direct shipping links between Taiwan and China has made big progress along with the signing of the "Cross-Strait Sea Transport Agreement" on November 2008. However, one of the major issues which emerged is cabotage, which precludes non-domestic ships from operating across the Taiwan Strait and lays down another barrier to foreign and FOC ships owned by shipowners on both sides expecting to do business in the Taiwan/China trade lane. Most notably, it seems to provide a great disadvantage and disappointment to Taiwan's FOC ships. This paper focuses on investigating how China tactfully employed the role of cabotage to govern the operation of direct shipping services across the Taiwan Strait. It begins with a brief introduction to the development of cross-strait shipping. Next is a discussion of the cabotage concept. A careful examination of the cabotage rule embedded in the Cross-Strait Sea Transport Agreement is then presented. The article also briefly explores some countermeasures Taiwan authorities can possibly use in response. Some conclusions are presented in the final part.