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THE STRATEGIC IMPORTANCE OF SEABORNE TRADE AND SHIPPING © Copyright Commonwealth of Australia 2002 This work is copyright. Apart from any use as permitted under the Copyright Act 1968, no part may be reproduced by any process without written permission from the Department of Defence. Requests and inquiries should be addressed to the Director, Sea Power Centre, RAAF Fairbairn, Canberra ACT 2600. National Library of Australia Cataloguing-in-Publication entry The strategic importance of seaborne trade and shipping: a common interest of Asia Pacific. Includes index ISBN 0 642 29570 0. 1. Merchant marine - Security measures - Asia. 2. Shipping - Security measures - Asia. 3. Strategic planning. I. Forbes, Andrew, 1962-. II. Australia. Royal Australian Navy. Sea Power Centre. (Series: Papers in Australian Maritime Affairs; no. 10). 387.5095 ii THE STRATEGIC IMPORTANCE OF SEABORNE TRADE AND SHIPPING A Common Interest of Asia Pacific Edited by Andrew Forbes RAN Sea Power Centre Royal Australian Navy Sea Power Centre Papers in Australian Maritime Affairs No. 10 The Strategic Importance of Seaborne Trade and shipping: A common Interest of Asia Pacific edited by Andrew Forbes The ‘Papers in Australian Maritime Affairs’ series is a vehicle for the distribution of substantial work by members of the Royal Australian Navy as well as members of the Australian and international community undertaking original research into regional maritime issues. Papers will be drawn generally from manuscripts not scheduled for publication elsewhere but that nonetheless merit extensive distribution. Candidates are considered by an editorial board under the auspices of the Director of the RAN Sea Power Centre. Other volumes in the series are: No. 1 From Empire Defence to the Long Haul: Post-war Defence Policy and Its Impact on Naval Force Structure Planning 1945–1955 by Hector Donohue No. 2 No Easy Answers: The Development of the Navies of India, Pakistan, Bangladesh and Sri Lanka 1945–1996 by James Goldrick No. 3 Coastal Shipping: The Vital Link by Mary Ganter No. 4 Australian Carrier Decisions: The Decisions to Procure HMA Ships Albatross, Sydney and Melbourne by Anthony Wright No. 5 Issues in Regional Maritime Strategy: Papers by Foreign Visiting Military Fellows with the Royal Australian Navy Maritime Studies Program—1998 edited by David Wilson No. 6 Australia’s Naval Inheritance: Imperial Maritime Strategy and the Australia Station 1880-1909 by Nicholas A. Lambert No. 7 Maritime Aviation: Prospects for the 21st Century edited by David Stevens No. 8 Maritime War in the 21st Century: The Medium and Small Navy Perspective edited by David Wilson No. 9 HMAS Sydney II: The Cruiser and the Controversy in the Archives of the United Kingdom edited by Captain Peter Hore iv Foreword Naval planners, and occasionally politicians, have long been concerned with the safety of the Sea Lines of Communication (SLOC), whether it has been for the protection of their nation’s seaborne trade or logistic support for military operations. Over the past century, the predominant geographical area of concern has been the Atlantic Ocean, and the trade between the United Kingdom, Europe, and the Americas. Seaborne trade was adversely affected during the two World Wars, as were military cargoes required to prosecute the war in Europe. This was also a primary concern during the Cold War when it was recognised that the resupply routes between the United States and Europe must remain open in case of war between North Atlantic Treaty Organisation (NATO) Alliance and Warsaw Pact. Of lesser priority initially (but perhaps of greater significance now) are the major sea-lanes in the Asia-Pacific region. Since 1945, this region has become the fastest growing and most dynamic sector of the global economy, with increasing intra and interregional seaborne trade. As an adverse economic situation in an individual Asia-Pacific country will impact on its regional trading partners and possibly have a global impact, SLOC security, which is the bedrock of Asian economic growth, becomes a global concern. While the countries of North Asia are the economic powerhouse of Asia, the Southeast Asian sea-lanes through which their trade passes, also become critical to any consideration of SLOC security. The region assumes greater importance as the Southeast Asian sea-lanes are natural choke points that could be blocked to hinder seaborne trade, and since much of international shipping is now Asian owned, the economic ramifications of any such actions are magnified. Less often considered is the economic strength of India, and its requirements for seaborne trade. As her seaborne trade may use the western entrance to the Malacca Strait, she has a significant interest in SLOC security in the Asia-Pacific. An additional complication to the consideration of SLOC security is the continued application of historical examples to the current situation. Certainly in the first half of the 20th Century, protection of trade had, as a major consideration, the protection of one’s own shipping that was transporting the necessary goods required. However, during the later half of the 20th Century and as we enter the 21st Century this is changing. Many of the trading nations now have a small merchant fleet and instead rely on international shipping v vi THE STRATEGIC IMPORTANCE OF SEABORNE TRADE AND SHIPPING firms, registered in one country, owned by the national of another, crewed by nations of different countries, and insured elsewhere. This raises the issue of how a country can protect its trade when it does not own the ship that is transporting the goods—as it has no legal right to convoy another country’s shipping—events in the 1980-1988 Gulf Tanker War are instructive in this regard. Importantly, notwithstanding the extensive use of attacks on seaborne trade in both times of tension and war, particularly in the 20th Century—it is difficult to identify a special threat to SLOCs in the Asia-Pacific region. The issue then is not the actual threat, of which there currently appears to be none, but the potential vulnerabilities of seaborne trade. What has now come to the fore, mainly due to the coming into effect of the United Nations Convention on the Law of the Sea (UNCLOS) 1982 is a recognition of the importance of the oceans and the development of a more holistic approach to maritime policy. To better handle the myriad of issues arising from UNCLOS, maritime and oceans policy now also encompasses SLOC security. This means that while in earlier times there may have been concerns with direct military treats to trade, this has now expanded to non-military threats, which might be just as severe. As an example, sinking ships will have an obvious impact on trade, but so will economic or environmental driven closures of international straits that extend the duration of voyages, and drive up freight costs. Pollution spills, or ship breakdowns can lead to the closure of straits that have an immediate economic impact on seaborne trade and the economics of international shipping. While convoying of merchant ships to protect against attack was primarily concerned with movement along shipping routes (with recognition that the ports at each end of the voyage also needed to be safe), ports are assuming a greater significance in economic trade. The trend toward a few hub ports which then feed off to smaller ports create a strategic vulnerability—why attack a ship if you can attack a port and achieve a more substantial impact? Moreover, with the increasing reliance on technology, a physical attack may no longer be required if a cyber-attack through the Internet will cause a equivalent or greater level of disruption. This also opens a Pandora’s box for security planners, where it usually took the capabilities of a nation state to attack shipping, albeit pirates might make an occasional foray against an individual ship, now individuals could conceivably disable ports for any reason if so inclined. The importance of UNCLOS and other international agreements concerning the use of the sea cannot be ignored. A nation’s maritime policy is also concerned with one of the fundamental drivers of seaborne trade—the status and FOREWORD vii regulation of the shipping industry, the condition of ships transporting the goods and the working conditions of their crews. As greater attention is paid to these issues, which are fundamental to seaborne trade, changes can be expected within the shipping industry as environmental regulations are strengthened. The papers that follow examine these issues and put forward possible solutions. Andrew Forbes Navy Headquarters, Canberra October 2002 Contents Foreword v Contents viii Acknowledgements x International SLOC Conference xi Notes on Contributors xiii Abbreviations xvii Opening Address 3 Vice Admiral David Shackleton, AO, RAN Keynote Address A Changing Focus for the Protection of Shipping 9 Professor Geoffrey Till Conference Dinner Address International Commission on Shipping: Inquiry into Ship Safety 25 The Hon. Peter Morris Part 1 Regional Seaborne Trade and Shipping 1 Commercial Shipping Patterns in the Asian-Pacific Region, 35 1990-2000: The Rise and Rise of China Professor Peter J Rimmer 2Trade and Shipping: A Common Interest of the Asia-Pacific 53 Mr Ken Mathews 3 East Asian Shipping Ownership 61 Professor Joon-Soo Jon 4The Sea-Lines of Communication: An Indian Ocean Perspective 85 Vice Admiral Mihir Roy, IN viii CONTENTS ix Part 2 Safeguarding Seaborne Trade 5Archipelagic Sea-Lanes and Transit Passage Through