Council for Security Cooperation in the Asia-Pacific

MEMORANDUM

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THE WEAKEST LINK?
SEABORNE TRADE AND THE MARITIME REGIME
IN THE ASIA PACIFIC
The international system is undergoing a period of dramatic change, not only in response to the threat ofterrorism and the invasion of Iraq but also due to changes brought about by globalization andinterdependence. International and regional organizations, even those with an economic focus such as
APEC, have been addressing security issues. Secure and efficient trade is a priority for governments andbusinesses in this region which accounts for nearly fifty per cent of the world’s trade, most of which istransported over sea.
One of the weakest links in managing this period of change is the lack of an effective maritime regime thatprovides security and certainty for regional supply chains. Shipping and seaborne trade are vital to these
supply chains but are threatened by maritime terrorism and increasing incidence of hijacking, and armed
attacks against ships, as well as by other crimes at sea, such as piracy, drug trafficking and people
smuggling.
Weaknesses with the current maritime regime include: lack of maritime awareness; ineffective
arrangements for maritime jurisdiction and enforcement; differing interpretations of the Law of the Sea;
weak regional participation in legal instruments that deal with maritime terrorism; and the lack of capacityof many regional economies to implement new standards in ship security, cargo and port security, andseafarers’ documentation.
Regional cooperation is essential to overcome these weaknesses and ensure efficient implementation ofmaritime security initiatives. APEC, which is an association of economies, can play a key role in this area.
APEC’s informal structure and focus on markets could allow it to deal with issues which, if addressed in
more formal settings, are prone to second best solutions.
The Asia Pacific has an enormous stake in securing shipping and seaborne trade. Most of the world’s top
mega-ports are in APEC economies. East Asian seas, particularly the strategic straits of Southeast Asia
that are linked with vital energy routes from the Indian Ocean, are the convergence of much shipping
traffic in the Asia Pacific. Sea transport of goods and passengers is essential in the archipelagos of Japan,
the Philippines and Indonesia. The extent of shipping traffic and the unique geographical features of theregion present both opportunities and challenges for maritime security.
Moreover, features of the supply chains that characterize trade in the region exacerbate the risk toeconomic growth. Over the past twenty years complex supply chains have been created wherecomponent parts are assembled in a variety of locations. This has had great benefits for consumers andCouncil for Security Cooperation in the Asia-Pacific
Memorandum 8 – The weakest link? Seaborne trade and the maritime regime in the Asia Pacific
A Memorandum from CSCAP prepared with the support of members of the Pacific Economic Cooperation Council (PECC) network

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producers. However, a broken link in a supply chain will have severe repercussions both up and down the
production process.
To ensure that the regional supply chain is protected and to provide greater certainty in the maritime
regime, we recommend:▪
Improved arrangements for maritime jurisdiction and enforcement.
▪
Enhanced regional frameworks for maritime enforcement and cooperation.
▪
Harmonization of maritime laws.
▪
More extensive and coordinated programs of capacity to support higher standards of maritime
security.
▪
Introduction of a coordinated maritime monitoring and information exchange system.
▪
Consideration of a regional law of the sea arrangement.

Regional supply chains
Supply chains involve the provision of a variety of services, which link the original producer of a good andits final consumer. The aim is to build supply chains so that merchandise is produced and distributed at theright quantities, to the right locations and at the right time, in order to minimise system-wide costs whilesatisfying service level requirements. Maritime transport plays a key role in meeting these requirements
along with other logistic services. The logistics systems were designed on the presumption of low levels of
uncertainty in the supply processes. The systems are calibrated very finely and substantial costs are
incurred if the presumption of security, that is, the ability to control the flow of goods, is not met. Thechange in the perception of the risk of terrorist attack and its consequences has that effect.
The risk of terrorist attack can be reduced by government policy responses leading to new security
standards. But those responses themselves may also add to costs and make it more difficult for logistics
service providers to meet performance targets. New technology to support approved measures may
produce other benefits, associated with the production of information which is valuable for shippers.
However, the costs and benefits of particular government responses should still be subject to close
scrutiny.
Costs associated with logistics form a large part of the overall costs in supply chains, to varying degrees
between sectors of the economy. They may on average account for 10% of the wholesale price ofmerchandise in developed economies, and could be as high as 50 to 60% for some perishable products.
Measures taken to secure transportation which have significant effects on the costs of delivery cantherefore contribute to significant changes in product prices. Such measures need careful consideration,
especially where the competitiveness of landed products depends on the terms of access to internationaltransport.
In adopting measures to enhance the security of shipping and seaborne trade, a balance must be struck,
therefore, between tighter security and the efficient flow of trade. These measures should also accord withinternational law, in particular the international law of the sea. The objective should be a stable maritime
regime with the free and uninterrupted flow of seaborne trade, and nations able to pursue their maritime
interests and manage their marine resources in accordance with agreed principles of international law.

Information sharing: maritime awareness
There is a need to increase awareness of maritime issues and activities, including potential threats to thesecurity of shipping and sea-borne trade. This has to be based on the free flow of information between
and among members that will enable better coordination, cooperation, and joint actions to collectively
address maritime security challenges.
Data on maritime activity, to the extent that it exists at present, is not shared at a regional level.
Arrangements for the exchange of maritime information are underdeveloped. In particular, there is not a
good, consolidated database of what ships are moving where in the region and with what cargo.
Significant barriers exist to the availability of this data, including commercial confidentiality.

Council for Security Cooperation in the Asia-Pacific
Memorandum 8 – The weakest link? Seaborne trade and the maritime regime in the Asia Pacific
A Memorandum from CSCAP prepared with the support of members of the Pacific Economic Cooperation Council (PECC) network

2

Good order at sea
A clear understanding of the maritime regime is vital for establishing an efficient framework for seaborne
trade. While the 1982 UN Convention on the Law of the Sea (UNCLOS) established a legal framework,
regional States have made declarations and statements on signing, ratifying or acceding to theConvention (UNCLOS) or have domestic legislation that indicate different interpretations of particular Lawof the Sea issues1. These differing positions, as well as the lack of clarity in certain provisions of
UNCLOS, may complicate the ability of the region to implement effective measures to ensure the securityof shipping and seaborne trade.

Jurisdiction and enforcement
Effective arrangements for maritime jurisdiction and enforcement, including for cooperation between
neighboring economies, are fundamental to good order at sea. They are a significant deterrent to illegal
activities at sea. To some extent the incidence of illegal activities at sea is due to deficiencies in existingarrangements, including weak maritime surveillance and enforcement capabilities. The ability of the region
to deal with maritime terrorism would be significantly enhanced by improving current arrangements.
Jurisdiction by a State might be exercised as a flag State over vessels flying its flag; as a coastal State
over waters under its jurisdiction; as a port State over vessels entering internal waters; as an archipelagicor straits State over waters within their sovereignty; as a State of nationality of natural or legal persons
engaged in illegal activities; or through the exercise of universal jurisdiction on the high seas as permitted
by international law (e.g. against piracy).
States have competence relative to matters within their jurisdiction and their jurisdictional competence
varies in different maritime zones. Most armed attacks against ships occur in the territorial sea orarchipelagic waters of a coastal State and are thus within the sole jurisdiction of that State. Similarly, actsof maritime terrorism are more likely within territorial seas and archipelagic waters, including internationalstraits. Under current international law, there is no right of visit or arrest in these waters by a warship ofanother State. Furthermore, UNCLOS places no specific obligation on a coastal or archipelagic State totake measures to strengthen maritime security or suppress acts of terrorism in waters under its
sovereignty.
The sensitivity of regional economies to matters of sovereignty and jurisdiction must be recognised in thedevelopment and implementation of measures to facilitate maritime security. Regional cooperation isessential but States are much less willing to cooperate when they perceive cooperation is compromising
their sovereignty and independence of action.

Boundary delimitation
Boundary delimitation between opposite and/or adjacent States would assist cooperation to achieve law
and order at sea. Regional States should move expeditiously to resolve existing boundary disputes toensure that jurisdiction might properly be exercised in applicable zones. If boundaries cannot be resolved,
economies should be prepared to enter into some form of provisional arrangements for the maintenanceof law and order in the disputed area without prejudice to their positions in the boundary negotiations.

Rights of visit
UNCLOS Article 110 identifies the circumstances when a warship might be entitled to board anothervessel on the high seas including exclusive economic zones (EEZs). Under existing provisions of this
Article, warships have no right to board another vessel on the high seas that is suspected of terrorist
activity. An exception is established if the flag State expressly consents to the visit either on an ad hoc
basis for a particular vessel or consents on a general basis through a bilateral agreement. A regional
protocol might be developed that admits these circumstances as an exception to UNCLOS Article 110.

1 All CSCAP members have now ratified UNCLOS with the exception of Cambodia, North Korea, Thailand and the United States. The
European Community has formally confirmed its participation in UNCLOS. The declarations, and statements made by States on signing,
ratifying or acceding to UNCLOS are available at http://www.un.org/depts/los/convention_agreements/convention_declarations.htm

Council for Security Cooperation in the Asia-Pacific
Memorandum 8 – The weakest link? Seaborne trade and the maritime regime in the Asia Pacific
A Memorandum from CSCAP prepared with the support of members of the Pacific Economic Cooperation Council (PECC) network3

Legal instruments
The Convention for the Suppression of Unlawful Acts Against the Safety of Maritime Navigation (“SUA”)
1988 (the Rome Convention) is the leading international instrument dealing with maritime terrorism. A
protocol to the Convention extends its application to offences committed on fixed platforms on thecontinental shelf (the Protocol for the Suppression of Unlawful Acts against the Safety of Fixed Platforms
Located on the Continental Shelf) (“SUAPROT”). Ninety-five States are now parties to the Rome
Convention but relatively few of these are in the Asia Pacific2.
The Legal Committee of the International Maritime Organization (IMO) is considering possible
amendments to the SUA Convention and its Protocol to strengthen the means of combating unlawful acts
against the safety of maritime navigation, including terrorist acts. Amendments to SUA and SUAPROT arenecessary in light of the need for a global response and enhanced cooperation to deal with the threat ofinternational terrorism.
Action is required to ensure that States in the region are prepared to ratify SUA and SUAPROT and to put
in place regional and sub regional agreements to ensure cooperation. A key provision in these
agreements should be advanced approval for boarding by another Party to the agreement. The
agreements should also provide for advanced approval by the coastal or archipelagic State of boardingsof foreign vessels within their waters by another Party to the regional agreement, if approval of the flag
State has been obtained in advance or on an ad hoc basis.

The challenge posed by security measures
Implementation of security measures will be affected by differences in technological capabilities, economic
situation, human resource skills and governance systems between regional economies. There are also
wide differences in the capacity and industry situations of developed and developing economies. New
international measures for the security of shipping are generally optimized for developed economies andchallenge the capacity of developing economies that may have other priorities of poverty alleviation anddevelopment.
Capacity comprises institutional arrangements, resources (human and financial) and legal frameworks.
Institutional arrangements include established practices of cooperation and coordination between the
public and private sectors and between government agencies, as well as habits of cooperation anddialogue with equivalent agencies in neighboring economies. These practices are underdeveloped in theregion at present. Even within economies, there may be little dialogue between agencies which are now
required to cooperate to meet the new security threats, including the implications for the costs ofinternational business discussed above.
Strategies for both ‘prevention’ and ‘cure’ are required. Different agencies are involved in theimplementation of these strategies, and they may design their systems and procedures according todifferent approaches to the management of risks. Some agencies operate in both fields or prevention orcure, but others may be more specialized. There is an interaction between the strategies of cure andprevention which also has to be taken into account in the design of policy. Structures of agencies for these
purposes also differ between economies which further complicates the development of international
cooperation.

Ship security: the ISPS code
New security arrangements for ships under the International Ship and Port Facility Security (ISPS) Codeinclude ship security plans, ship security officers, company security officers, and certain onboard
equipment, including automatic information systems (AISs) and ship security alert systems. When
activated, the ship security alert system transmits an alert to a competent authority designated by theadministration of the flag State identifying the ship, its location and indicating that the security of the ship
has been threatened.
2 As of 31 October 2003, 95 States were parties to the SUA Convention (84 to its Protocol), including in the Asia-Pacific region: Australia,
Canada, Chile, China, India, Japan, Federated States of Micronesia (convention only), Marshall Islands, Mexico, Myanmar, New Zealand,
Pakistan, Palau, Republic of Korea, Russia. Seychelles, Sri Lanka (convention only), United States, Vanuatu and Vietnam. Singapore
lodged its instrument of accession to the SUA Convention on 3 February 2004.

Council for Security Cooperation in the Asia-Pacific
Memorandum 8 – The weakest link? Seaborne trade and the maritime regime in the Asia Pacific
A Memorandum from CSCAP prepared with the support of members of the Pacific Economic Cooperation Council (PECC) network

4

Cargo and port security
Measures to ensure the security of ports and cargoes raise difficult issues. These relate to increased costs
and burden-sharing, port efficiency, discriminatory trade regimes, fears over encroachment of sovereignty,
and even questioning of the real effectiveness of such extensive and potentially expensive measures.
Security inspection of all cargoes is impossible. Developing economies in the region have already raised
their concerns about the burdens they face in meeting the new security requirements for maritime
transport by the deadline of mid 2004. They are concerned not only at the requirements established in themultilateral institutions, but also at those imposed by developed country trading partners.
A terrorist attack that disrupted one of the regions mega-ports would have a devastating effect on regional
trade, and the risk that outcome will be taken into account by shippers and shipping companies.
Enhanced cargo and port security is essential in these ports and substantial costs are incurred even if
governments take no action. The question is then the specification of the roles of the public and private
sectors in developing and cooperating in the implementation of efficient responses to the change inperception of security risks. There is also strong mutual interest, which is already evident, in cooperation
among developed and developing economies in developing the appropriate implementation capacity at all
points along the supply chain.

Seafarers’ documentation
About seventy per cent of the world’s seafarers are sourced from regional economies. Research has
revealed an extremely high level of fraudulent certificates held by seafarers. A new International Labour
Organization (ILO) Convention adopted in June 2003 provides for new seafarer identification documentswith a biometric fingerprint. The task of enhancing security by improving the quality of seafarer
documentation is challenging.
Further challenges are associated with the provision of training for seafarers to operate within the new
maritime security guidelines. Cooperation between economies, alongside private sector participation in
the provision of training services, may be required to avoid bottlenecks appearing in the training pipeline.

Regional Cooperation
Improved regional cooperation to enhance the security of shipping and seaborne trade is essential. Given
the challenges that have been outlined above and the stake that the Asia Pacific has in preventing terrorist
attacks in the most efficient manner a strong case exists for action by regional bodies such as APEC andthe ASEAN Regional Forum.

Harmonizing maritime laws
Difficult jurisdictional issues arise from overlapping and conflicting claims to offshore islands and reefs,
EEZs and continental shelves. These are aggravated by uncertainties in various legal regimes (including
piracy). It would be helpful if neighbouring economies could harmonize their maritime laws as far as
possible and agree on particular issues where uncertainty exists. However, regional economies haveradically different legal systems and harmonizing maritime laws entirely is unrealistic. The real challenge isto improve the regional framework for maritime enforcement and cooperation. Improving piracy law (andcourts systems for offenders) in some jurisdictions should be a high priority.

Capacity building and technology
Particular attention must be given to capacity building in the fields of legislation and regulation, informationexchange, surveillance and maritime law enforcement. It is important to promote awareness and links
between different agencies, institutions and forums concerned with managing maritime affairs. Training
and education are important devices for developing an environment conducive to regional cooperation.
Although they may incur significant setup costs, technologies that support security objectives may havesignificant additional benefits. For example, container tracking systems should also reduce container
crime.

Council for Security Cooperation in the Asia-Pacific
Memorandum 8 – The weakest link? Seaborne trade and the maritime regime in the Asia Pacific
A Memorandum from CSCAP prepared with the support of members of the Pacific Economic Cooperation Council (PECC) network5Security related technologies are changing rapidly and preferably regulation should be by establishingprinciples rather than processes or practices. Best practice today may not be that of tomorrow and themarket should be encouraged to develop options for meeting security objectives at lowest possible cost.

Coordinated maritime monitoring
Maritime surveillance and enforcement in the East Asian seas would be significantly enhanced by the
introduction of a coordinated regional maritime monitoring system. Its purposes would include support for
law and order at sea; enhancement of regional capabilities to deal with terrorism, piracy and armed
attacks against shipping; weather forecasting; marine safety and environmental protection.
This system would provide a capability for the long-range identification and tracking of ships using theEast Asian seas. Arrangements for coordinating responses to a ship security alert required by the ISPS
Code could be incorporated into the monitoring system.

Regional law of the sea arrangement
A regional arrangement might be considered that redresses the current limitations on the regional
capability to respond to threats to maritime security. This protocol might include the following points:▪
▪
▪
▪

The obligation of all parties to cooperate to ensure maritime security;
The obligation of coastal and archipelagic States to take measures to ensure the security of allvessels exercising legitimate passage rights in waters under their sovereignty;
The obligation of coastal and archipelagic States to cooperate with the international community tocombat terrorist threats to shipping in international sea lanes within their sovereignty;
The need for user economies to provide financial and technical assistance to enable coastal andarchipelagic States to fulfill their obligations to enhance maritime security.

Guidelines for Action
The following principles are offered as guidelines for further action to enhance the security of shipping andseaborne trade:
▪
▪
▪
▪
▪
▪

Effective maritime jurisdiction and enforcement requires close and meaningful coordination,
including arrangements for information sharing, at all levels.
New regional agreements and protocols might be required to ensure this cooperation.
Public and private partnerships are essential at both an economy and regional level.
Local arrangements for maritime security need to be streamlined with as far as possible, one pointof contact for industry.
Human capacity should be enhanced through local and regional training and educational
programs. Cooperative regional programs will be particularly beneficial.
Regulation should normally be by establishing principles rather than processes or practices.

The measures described in this memorandum would not just enhance the security of shipping andseaborne trade but would also assist regional security and economic development more generally. The
benefits are not just related to the anti-terrorism task but would improve law and order at sea in the region
generally and lead to an improved trading environment. Effective action to combat maritime terrorism
would benefit both the regional economy and regional security.
CSCAP commend the principles in this memorandum to regional Governments, APEC and the ARF.
April 2004

Council for Security Cooperation in the Asia-Pacific
Memorandum 8 – The weakest link? Seaborne trade and the maritime regime in the Asia Pacific
A Memorandum from CSCAP prepared with the support of members of the Pacific Economic Cooperation Council (PECC) network

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