Cargo reservation is a commonly-adopted policy to protect shippingindustry. We estabilish a general equilibrium model to analyzeeconomic impacts of both cargo reservation and guest crew policies,especially for a small open economy in which the shipping sectoris suffering from crew shortage because of higher wage rate in theother sectors. We find that (i) allowing more quest crew will causelabor to move out of the lower productivity shipping sector to tradesectors. This labor reallocation is welfare improving and, throughincome effect, will raise demand for imports, and hence the shippingsector will expand. However, the labor increase in trade sectors willcause additional change in import demand which by Rybczynskitheorem is ambiguous, depending on the relative factor intensitiesbetween the export sector and import sector. Thus the overallimpacts become ambigous. (ii) Raising the cargo reservation ratiowill expand the shipping sector, however, the economy will be worseoff.