Maritime sector hails revised aid proposals

Date: 13/02/1997

By Chris Johnstone

EUROPE's shipping sector is in buoyant mood amid signs that the European Commission appears at last to have taken on board its pleas in preparations for revised subsidy rules.

Shipping firms, shipowners and unions were hard pressed to hide their enthusiasm when they met officials to discuss the issue this week.

The Commission is expected to finalise its plans for a new code on maritime aid by April.

But Transport Commissioner Neil Kinnock has already issued a discussion paper which states that future policy should focus more broadly on boosting the competitiveness of the EU's shipping sector world-wide rather than concentrating almost exclusively on European issues.

The paper also suggests giving a clearer line on what government help can be offered in the form of tax and social security reductions for shipowners.

“The general philosophy of the paper is good and has been appreciated by the industry,” said a spokesman for the European Community Shipowners Association (ECSA).

Kinnock's paper suggests allowing governments to write off all taxes on operations and to exempt social security payments on seafaring staff. The zero-rate option would therefore put an end to blatant cash hand-outs to companies.

The current aid rules on national incentives are complicated and time-consuming, since they call for a Commission evaluation of every programme submitted to make sure it does not exceed set ceilings for aid.

“The existing aid rules are out of date. The new suggestions take account of the fact that maritime subsidies are not likely to be something short-term that is likely to go away,” said the ECSA spokesman.

One key issue has still to be settled - whether the state aid sanctioned by the new code should only be offered to shipowners who carry an EU flag or should be widened to include owners whose main operations are within the Union.

The distinction is far from academic. Ships registered under EU flags account for around 13&percent; of the global fleet, but European companies are estimated to own or control some four out of ten vessels world-wide. The widespread use of flags of convenience accounts for the difference.

The Commission discussion paper leaves this question open.

The argument centres on whether allowing tax breaks for vessels flying flags of convenience could tempt shipowners to return to their national registers or would have little impact on the current drift away from them. Large companies such as P&O are already registered in tax havens such as the Caribbean or Panama.

The Dutch and Greek governments and, to a lesser extent, the UK have already taken a stand by allowing shipowners with “clear economic links” to benefit from local tax breaks. Norway's large shipping sector has also been given similar advantages.

The Netherlands pursues an aggressive policy in favour of its merchant shipping sector. This helped produce a slight increase in Dutch-flagged vessels from 383 in 1994 to 385 a year later, while EU fleets showed a mixed trend.

Maritime sector unions want any tax benefits to be offered only to vessels flagged in the Union.

“We would not favour state aid being given to a Panamanian-flagged vessel simply because it purports to be under EU ownership,” said Jean Legouas, of the International Transport Workers' Federation.

The Commission's thinking has undergone a sea change since it accepted that it has a responsibility to ensure that the Union's maritime sector competes world-wide.

“This new yardstick is something new and replaces the focus on intra-European competitiveness. It is something we have been asking for for years,” said the ECSA spokesman.

Legouas says one of the advantages of the new strategy is its apparent willingness to allow subsidies to ferry companies for operating public services at the same time as imposing conditions on any government cash paid.

The discussion document makes no move to set out subsidy rules for European ports, an area where no clear policy now exists, with aid currently cleared by officials for infrastructure development which could have wider economic benefits.

Instead, Kinnock's officials have launched a separate fact-finding study of Europe's port sector which could suggest action further down the line.

The issue is becoming pressing, with complaints by German ports about government support for Dutch counterparts already lodged with the Commission and less advanced grumblings by private UK ports about continental rivals.