Cabotage Law = “Exclusive growth” for local ship-owners

The late Philippine President Ramon Magsaysay, in his first State of the Nation Address (SONA) on January 25, 1954, raised the awareness of the plight of the poor when he said, “I believe that he who has less in life should have more in law”.  Guided by this credo, he pioneered an honest-to-goodness “land for the landless” program, to hopefully emancipate the peasants from the bondage of the soil.  Since then, we’ve called it different names but the progress has been, at best, at snail-pace and, at worst, stalled.  However, successful or not, at least, it is so direct and done with utmost well-meaning intention.  Such intention we fondly refer to today as “inclusive growth”.  

Last Monday, President Benigno Aquino III (PNoy), in his fourth SONA stressed the need to review certain laws. Despite criticisms for its length and substance, inarguably, PNoy pressed the right button when he urged congress to review and amend the Cabotage Law. Aptly, he said, “Let us amend the Cabotage Law in order to foster greater competition and to lower the cost of transportation for our agricultural sector and other industries”.

As a jargon, cabotage means “navigation or trade along the coast”.  Used legally, as in the Cabotage Law, it shall mean the domestic shipping routes shall be served solely by domestic shipping lines.  Historically, the Cabotage Law, also known as the Jones Act of 1920 was passed by the Congress of the United States of America when our country was still its colony. Today, the Cabotage Law’s principle is embodied in Sections 902 and 1009 of the Tariff and Customs Code of the Philippines, which was incorporated in Republic Act 5173.  Still, with the primordial objective of pampering or over protecting the domestic shipping industry.

Consequently, like many other industries that are controlled by a few, the industry remains inefficient. With some century-old vessels on their fleet, their maintenance and operating costs are high.  Consequently, they passed it on to the manufacturers, fishermen, farmers and traders by way of charging exorbitant fares on their cargoes.  Accordingly, businessmen as they are, they passed it on to us, the ultimate consumers to recover their costs.

Truth to tell, an international shipping line that carries one twenty-foot equivalent unit (TEU) from Hong Kong to Cebu charges only US$100.00 (or P4,300.00).  However, a domestic shipping line charges P15,000.00 from Cebu to Cagayan de Oro for one TEU.  Clearly, at face amount, that’s usuriously more than three times higher than what international shipping lines charges at a distance that is preposterously shorter.  Moreover, an international shipping line charges just below US$300.00 (or P12,900.00) for one TEU from Cebu to Kaoshiung, Taiwan while a domestic shipping line collects P25,000.00 for one TEU from Cebu to Manila.  Ironically, the international shipping line passes through Manila before reaching Taiwan. 

Moreover, exporters that are using our own locally produced raw materials are in a tight fix.  To illustrate, our dried mango processors/exporters are competing against other exporters all over the globe.  Most of our dried mango exporters are based in Cebu.  Undeniably, we don’t have ample supply of this fruit in the island.  Most of these mangoes are coming from Guimaras in Iloilo.  Due to the very high cost of inter-island transport, the landed cost in Cebu is relatively high.  Therefore, our dried mangoes had to be priced higher than necessary to recover the raw material costs (which include freight).  Consequently, our exporters have become less competitive in the international market.   As a result, demands for our own dried mangoes dwindle.  As it goes down, so is the demand for raw mangoes.  Thus, our mango growers suffer as well.  On the contrary, however, if our price is competitive in the international market, the demand rises.  Thus, the demand for raw mangoes goes up as well.  Therefore, our mango growers can probably grow in number and employ more.  Needless to say, our dried mango processors/exporters will expand and consequently will hire more workers too.  In both situations, they are contributing to our dreamed “inclusive growth”.

Indeed, it is now up to our legislature to act on this concern swiftly.  Should they decide not to amend the Cabotage provisions in the Tariff and Customs Code of the Philippines, then, it’s a no-brainer.  Absolutely, they care not about “inclusive growth” for all but the “exclusive growth” of a few domestic ship-owners.

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