With the ROC government desiring to improve Taiwan's economic competitiveness and promote its "Offshore Transshipment Center," cross-strait relations, frozen for two years, have at last seen a new development. In mid-April, the Sheng Da, of the PRC's Fujian Province, sailed into Kaohsiung Harbor, while later in the month the ROC's Uniglory Marine Corporation's Uni-Order sailed into Xiamen Harbor. These events are a milestone, marking the first time in more than forty years that there has been direct sailing across the strait.

At 10:55 pm on April 19, the Xiamen Shipping Company's Sheng Da sailed into Kaohsiung Harbor with 30 cargo containers, beating out many competitors for the honor of being the first ship to make the trip. Thus began this new chapter in cross-strait exchanges.

In the future, cargo vessels from the two sides need not pass through a third country to transship freight, cutting shipping costs by nearly half and allowing more precise control over transportation times. With this change, Kaohsiung Harbor, which in recent years has seen slow growth in cargo tonnage, is expected to see an annual increase of 200,000 standard containers pass through it.

P.K. Chiang, head of the Council for Economic Planning and Development, states that the ROC has already taken the first step towards creating the Asia-Pacific Regional Operations Center plan's Sea Transport Transshipment Center. The next step will be allowing some transshipped cargo to enter Kaohsiung's Export Processing Zone for simple processing to add value. This will help Taiwanese businesses with operations on both sides of the strait with their division of labor and allow such businesses to maintain their base in Taiwan.

The current stage of Taiwan's opening up of mainland shipping routes is to establish an "Offshore Transshipment Center" (OTC) at Kaohsiung, Taiwan's largest port. The PRC responded by opening up Xiamen and Fuzhou. Each side has given approval to six companies for these routes. Though it is uncertain if they will be profitable, these companies are eyeing the future. Once a formula has been approved, larger ports such as Guangzhou, Shanghai, Qingdao, and Tianjin may be opened to Taiwan shipping. Also, the ports at Xiamen and Fuzhou are located right in an area of the mainland which has a great deal of Taiwanese investment and therefore have potential for development. Shippers are positioning themselves to take advantage of opportunities as they arise.

Originally, according to Taiwan's National Reunification Guidelines, direct shipping should have come in the middle stages of the process. The guidelines called for the PRC to guarantee Taiwan's sovereignty, security and dignity before such shipping could begin. However, faced with factors including booming business between the two sides and also Hong Kong's pending reversion to PRC control, the Mainland Affairs Council decided last year to move forward with the establishment of the OTCs. After a two year tug-of-war, the proposal has finally reached the implementation stage. However, the PRC feels that the use of the term "offshore" is not in keeping with the "One China" dictum; they have chosen to call the current situation "trial direct shipping."

The political side of direct shipping must also be given consideration. Currently, the policies of the two sides are obstructing direct shipping, limiting it to the transshipment of containers. People and goods are still not allowed to pass through customs. Also, shipping is limited to vessels flying "flags of convenience," which is to say, vessels registered in a third country.

These foreign-registered vessels fly the flag of the country in which they are registered and the country of their destination when entering a harbor, thus avoiding the problem of the national flag of the PRC entering Kaohsiung Harbor or that of the ROC entering a PRC port. This compromise solution, separating politics from economics, shows both sides' desire to expand exchanges, but also the differences that exist.

The mainland side has maintained a very low-key attitude, not allowing any celebratory ceremonies. The main reasons for this are that with direct shipping most freight moving between the two sides will no longer need to be transshipped through Hong Kong. Scholars estimate that with direct shipping across the strait, the volume of cargo passing through Hong Kong will shrink by 1 million standard containers. Although this is less than one tenth of Hong Kong's total volume, it will probably affect Hong Kong's status as the world's largest transshipment port. At the same time, Kaohsiung will begin to compete with Hong Kong, possibly becoming the major transshipment port for most of the mainland's imports and exports.

Another reason for the PRC's low-key attitude is that the current model for direct shipping does not have the "domestic" shipping label which PRC officials regard as ideal, meaning that the flagging issue has not been completely resolved. Further, the PRC's Taiwan policy-making bodies and its Ministry of Transportation and Communications, which is responsible for handling this issue, are at odds with one another.

It may have been pressure from mainland officials which led the Sheng Da to enter Kaohsiung under the cover of darkness as, when entering a harbor at night, a ship need not fly a flag. In this way the Sheng Da was able to avoid flying the ROC's national flag. Taiwan's minister of Transportation and Communications, Tsai Chao-yang, indicated that in the future mainland-invested vessels which do not follow regulations on flying the ROC national flag will be dealt with in accordance with commercial harbor law and not allowed to enter the harbor.

However, negotiations between shippers from Taiwan and Hong Kong will likely very soon reach a "no flags" agreement. If such an agreement actually comes into being, Taiwan will likely amend its commercial harbor law to allow commercial vessels to enter Taiwan's harbors without flying the ROC's national flag. Nevertheless, there still remain many variables in the flagging issue.

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The Sheng Da, first ship in direct cross-strait shipping, cruised into Kaohsiung, opening a new page in cross-strait transport. But the ship, arriving around midnight, did not fly an ROC flag. This minor action symbolizes the paradoxes in cross-strait relations. (photo by Yang Chia-yu)