New China-Liberia Maritime Bilateral: Savings on Port Fees Just One Element of Broader Trade Cooperation

Mainbrace | June 2016 (No. 3)

Matthew J. Thomas

In a November 2015 state visit in Beijing, the leaders of the People’s Republic of China and the Republic of Liberia signed a historic bilateral maritime agreement offering significant benefits to Liberian ship- owners. Headlines on the bilateral highlighted the immediate economic impact of the agreement: a 28 percent discount on tonnage dues in Chinese ports, putting Liberian ships on parity with Chinese vessels, and potentially saving $75,000 to $150,000 in annual port costs for capesize, VLCC, and large container vessels. Less well-understood, however, are the reasons behind this new alliance, and where the relationship appears to be headed in the future.

Background

The underpinnings of the deal date back to 2003, when Liberia transitioned diplomatic relations from Taiwan to China. Even today, Liberia is unique in this regard, as other major international flag states still continue to recognize Taiwan (although Panama reportedly sought, unsuccessfully, to shift diplomatic recognition to China in 2009.)1 In her 10 years in office, Liberian President Ellen Johnson Sirleaf has cultivated closer relations with China, which has responded with increased investment in Liberian infrastructure, public buildings, schools, hospitals, and critical in-country assistance in tackling 2014’s Ebola outbreak.

China’s investment in Liberia is part of its broader Africa strategy, driven by its “One Belt, One Road” trade initiative. In 2013, China announced plans for a “Maritime Silk Road,” linking China with Southeast Asia, the Indian Subcontinent, Africa, Mideast, and Mediterranean ports, and is proposing significant investments in infrastructure and industry to stimulate economic development and trade along that net- work. In December 2015, Chinese President Xi Jinping led a 50-nation Forum on China-Africa Cooperation, announcing plans to triple Chinese investment and financing for Africa. Commentators have noted a shift in President Xi’s priorities for African investment, with less focus on African commodities trade and far more emphasis on China’s role in advancing Africa’s industrial, manufacturing, infrastructure, and healthcare sectors.

Growing Momentum

It was against this backdrop of accelerating Chinese investment in Africa that President Sirleaf visited China in November. In addition to finalizing the new maritime accord, the countries signed a new technical cooperation and assistance agreement, and committed to expand cooperation in key Liberian industries, including mining, fishing, wood, and agricultural processing, as well as public health. President Sirleaf’s China trip came in the midst of an extraordinary three-month period in Liberian foreign relations, which also saw the approval of Liberia’s accession to the World Trade Organization, the elimination of remaining outdated UN and U.S. sanctions (targeting Liberia’s pre-2003 civil car leadership), as well as the 10th anniversary of her historic election as Liberia’s head of state.

The new China-Liberia maritime bilateral is similar in many respects to China’s longstanding shipping accords with the United States and the European Union. As noted above, Liberian registered vessels are now charged tonnage dues when visiting any port in China at the published “Preferential Rate,” which is the same rate as tonnage dues charged to Chinese vessels. Chinese authorities pledged to take measures to facilitate and expedite maritime transport to avoid unnecessary delay of Liberian vessels, and to simplify and expedite customs and other port formalities, including access to reception facilities for vessel wastes. China also committed to recognizing certificates of nationality and other ship’s documents held by vessels registered in Liberia, as well as seamen’s identification and record books. Other commitments in the agreement relate to stop-overs by crew members and their entry, stay, departure, or transit.

The bilateral also includes more open-ended commitments for the two countries to cooperate in the future on maritime and port development, as well as business, technological, and information exchange. A sign of where this cooperation might lead came last month, on April 27, when the Tianjin Dongjiang Free Trade Port Administrative  Commission and the Liberian International Ship and Corporate Registry signed a Strategic Cooperation Framework  Agreement. Under this agreement, Tianjin’s fast-growing free trade zone pledged financial and policy backing for a new Liberian Registry venture to provide Liberian corporate and vessel registration services in the trade zone. As with the maritime bilateral itself, the FTZ agreement is in part a framework for future cooperation, and additional details are expected to come into focus as Liberia and China’s maritime and trade relationship continues to move ahead.