The black law dictionary defines cabotage as coastal trading which connotes the trade and commerce along the coast. It simply refers to the carriage of goods and persons in coastal waters between two points or ports within a country.
This definition has been expanded to include inland waters like rivers and lakes. Cabotage in its truest form can be said to be discriminatory because it enforces the right to trade or navigate in coastal and inland waters by only domestic carriers.
The essence of the cabotage regime is to enhance indigenous economic activity, public interest and safety, domestic employment, fleet expansion, eradicate competition with foreign companies and to strengthen the integrity of national security.
The essential clause which is incorporated in most cabotage laws or policy which is a derivative of the Merchant Marine Act, 1920 (USA) which is also known as the ‘Jones Act’ is the requirement that ships must be built, owned, registered, and operated by wholly the indigenes who are to carry out domestic trade and navigation in a country’s coastal and inland waters.
Ghana as it stands has no cabotage law to regulate its budding domestic maritime or shipping industry. It is instructive to note that foreign vessels on a daily basis bring in various kinds of cargoes from other countries to our ports and depart – that is essentially not the target of the cabotage regulations.
There is currently a Domestic Draft (Cabotage) Bill, 2017 which is in the process of being laid before parliament for passage. The Domestic Draft (Cabotage) Bill, 2017, is geared towards a protectionist regime that seeks to entirely restrict foreign participation in its domestic trade and navigation.
Our cabotage bill if passed in its present form will be based on the American model which places the building, owning, manning and registration of ships to solely Ghanaians.
While this may be theoretically plausible in the light of promoting and protecting local content, indigenous business and by extension our national security interest, the practicality of its implementation will be a major hindrance and a setback if not carefully looked at by both policy and industry players – we must examine the depth of the sea before we dive into it.
It is also important that we recognise the fact that laws can remain buried if they remain operationally and practically ineffective.
The protectionist cabotage regime if passed into law in Ghana will raise fundamental technical and capacity constraints. We ought to satisfy ourselves by answering certain important questions to arrive at a feasible position?
Do we have the capacity to build ships at a lower cost that can be able to meet our local demands and international safety standards and other protocols? Do we have the level of skills and the required number of seafarers? Do our nationals have the financial capacity and interest to invest in the owning of ships that can meet our local demand?
How do we deal with the issues of Foreign Direct Investments (FDI) and Globalisation? What happens to the international oil companies engaging in oil production who operate all types of ships in our territorial waters? What are the National Security implications if we operate a liberalised or relaxed Cabotage regime? And most importantly, how have countries like the United States who operate the strict or protectionist Cabotage model fared in their domestic maritime activities?
In the case of the United States, the manifest restrictions of domestic trade have had multiple consequences on their economy – the lack of competition, especially between domestic and international players, continues to shore up their domestic consumer prices – there is also a decline in their domestic shipments.
The Organisation for Economic Co-operation and Development (OECD) states that it costs four (4) to five (5) times more to build a large merchant ship in the United States than say in Asia. Furthermore, according to the United Nations Conference on Trade and Development (UNCTAD), this accounts for the reason why about 91% of large merchant ships that are built in the world emanate from countries like China, Japan, and Korea – most of these Asian countries operate a liberalised or relaxed cabotage law.
In saying so, the United States is prepared to sacrifice its economic gains with respect to its cabotage laws for its national security interests because of the constant threat of terrorism – their national security implications are of paramount interest to them and, therefore, are not prepared to loosen their guard in protecting their territorial waters against any external aggression.
Therefore, a country like Ghana must weigh its options and understand what is at stake – In as much as we want to protect the integrity and sovereignty of our territorial waters against any form of insurgencies, are we truly under threats of terrorism or aggression such that we may want to place our territorial waters in the hands of only our indigenes at the expense of our economic growth by allowing competition through a controlled foreign participation?
The Nigerian government has in place a well Coastal and Inland Shipping (Cabotage) Act, 2003, that regulates their domestic maritime industry.
They also face major operational and technical challenges with regards to the implementation of their cabotage law in view of the build, own, operate and registration of ships by wholly Nigerians in Sections 3-8 of their Coastal and Inland Shipping (Cabotage) Act, 2003.
However, the Coastal and Inland Shipping (Cabotage) Act, 2003 in Sections 9-14 sought to cure the mischief that the protectionist or strict cabotage regime will create by granting a little window for foreign participation especially in areas where Nigerians lack the capacity and technical know-how through the grant of waivers and restricted license to foreign ships.
The Coastal and Inland Shipping (Cabotage) Act, 2003 per Sections 42-45 also makes provision for financial assistants to Nigerian operators to be able to acquire ships through the Cabotage Vessel Financing Fund (CVFF).
Nonetheless, that is not to suggest that the Nigerian Coastal and Inland Shipping (Cabotage) Act, 2003 does not come with its own operational challenges. For instance, it has become more expensive for the Nigerian government to mount an effective monitoring and enforcement system of its coastal and inland waters due to logistical constraints and the cost of such tools as per the Coastal and Inland Shipping (Cabotage) Act, 2003.
Also, the lack of political will and determination to implement the Coastal and Inland Shipping (Cabotage) Act, 2003 to the latter coupled with the deeds of pirates and aggression by militias who operate within their territorial waters especially in the oil production areas.
As I indicated earlier, countries such as those in Korea, Japan, China including Brazil, Australia, New Zeal etc practice some degree of a liberalised and relaxed regime which allows for some level of foreign participation in the trade and navigation of its coastal and inland waters.
For instance, China in 2003, reformed its cabotage law to allow shipping companies that have signed bilateral agreements with them to ship empty containers between ports along its coastal lines. The Korean government also abolished trans-shipment fees and relaxed its cabotage laws to make their ports very attractive, to attract competition and to boost their economic activity as a northern hub for Asian container traffic.
In New Zealand, the cabotage law restricted coastal trade and navigation to indigenous ships except where there are no New Zealand flagged ships, the law allows for foreign ships to participate prior to securing a permit from the Minister for Transport.
Ghana must take lessons and strategic considerations in passing a Cabotage regime that is progressive, practical and with some degree of liberalisation. This can be achieved having in mind that we are limited in terms of financing, technology and skills in the owning, manning, building and repairs of merchant ships.
Allowing some level of window for foreign participation is realistic and practical in the sense that it will promote competition and economic activity which can bring about direct investment and job creation for our locals. Going on the path of a strict or protectionist cabotage regime will only stifle the growth that we all envisage for our domestic maritime and shipping industry.
It’s obvious from the foregoing that even developed economies like the United States who practise the strict and protectionist Cabotage regime are struggling to stay afloat. We must learn from some of these shortcomings including the problems associated with the Coastal and Inland Shipping (Cabotage) Act, 2003 (Nigeria) and offer practical solutions through dialogue and wider consultation with all industry players and experts alike.
Chief Obosu Mohammed
[International Maritime Consultant]
Asare Barimah & Associates
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