Cabotage is the name given to the transportation of goods or passengers between two places in the same country by a transport operator from another country. The term is most commonly associated with maritime and aviation activities (i.e. moving goods or people by sea or by air). In a shipping context, cabotage refers to transporting goods/passengers between two ports or places within the same country by a vessel registered in another country.
What does cabotage mean?
Cabotage comes from the French word ‘caboter’ which means ‘to sail along the coast’. It’s clear to see that the word has its roots in the maritime world, and indeed it was originally used to refer to boats navigating along the coastline of a specific country, stopping to trade at various ports. Over time, the meaning of the word cabotage has evolved to include other modes of transportation (e.g. the aviation industry). It is now an internationally-recognised term, used to refer to the transportation laws and regulations that set out the rights of foreign carriers to operate within the borders of another country.
What is cabotage law in shipping?
In shipping, cabotage law refers to regulations placed on foreign-flagged ships operating in the domestic waters of a country and providing services such as transporting cargo or passengers from one port to another within that country.
While the definition is the same around the world, specific cabotage laws and regulations can vary significantly between different countries. Nation states tend to have their own cabotage laws in place to regulate and/or restrict foreign vessels from carrying out domestic maritime transportation. For example, country X may not allow foreign ships (i.e. any vessels not from country X) to collect and move goods between two domestic ports (i.e. two ports within the borders of country X). As a result of putting these regulations in place, country X will be better able to support its domestic maritime industry by giving preference to those vessels which are locally registered and operated within country X.
Why is cabotage important?
There are a number of reasons why cabotage is important. Let’s look at some of the key reasons here:
- Economic interests
Cabotage helps protect and promote a nation’s economic interests by restricting and/or regulating foreign carriers and so ensuring that domestic operators have the best business and employment opportunities.
- Avoiding unfair competition
Cabotage enables a country to place restrictions on foreign operators, in turn preventing unfair competition as a result of differences in operating costs, safety standards and other factors.
- Protecting jobs
Introducing cabotage rules that favour local operators can help ensure domestic transportation jobs remain available for citizens of that country.
- Controlling transportation infrastructure
Cabotage regulation helps a country keep control over its transportation infrastructure, in turn enabling it to ensure the efficient movement of goods within its borders.
- Regulatory oversight
A central element of introducing cabotage rules is setting out a regulatory framework for the country’s transportation networks (e.g. safety standards and environmental regulations).
- Generating revenue
There’s an opportunity for governments to generate revenue by enforcing cabotage regulations. For example they can bring in money from charging fees or requiring foreign carriers to buy permits to be able to engage in cabotage activities.
From the above it’s clear that cabotage can be very useful for a number of reasons. Yet it is precisely because of its potential to be used strategically that cabotage can also be a controversial topic, particularly when it comes to international trade agreements and liberalisation in transportation markets. Policymakers have to strike a delicate balance between facilitating global trade and protecting domestic interests.
Has Brexit changed cabotage laws for shipping?
Following the United Kingdom (UK) officially exiting the European Union (EU) on January 31 2020, some speculated that Brexit would lead to dramatic changes to the cabotage laws the country previously had in place. While there have been some changes to UK cabotage laws after Brexit with regards to road freight, the maritime industry regulations remain largely unchanged. This is not to say, however, the future governments won’t take action and introduce measures to safeguard UK maritime interests by changing cabotage regulations (previously not allowed while the country was part of the EU).