Attention turns to Kinnock’s shipping plan

Date: 27/06/1996

By Bruce Barnard

THE imminent failure of talks in the World Trade Organisation (WTO) to liberalise international shipping, following Washington's eleventh hour refusal to put an offer on the table, frees the EU to focus on its own maritime strategy.

While the Commission was going through the motions of negotiations in Geneva this week in the run-up to the 30 June deadline, member states were penning their responses to Transport Commissioner Neil Kinnock's recently-published action plan for the Union fleet.

The EU has long discounted even a minimalist deal at the WTO because there was never any chance in an election year of the Clinton administration spurning the protectionist demands of the small, but politically-influential US maritime lobby.

The writing was on the wall when the US walked away from a financial services deal in the WTO and postponed the deadline for a global telecoms accord.

And despite the inevitable anti-US broadside Brussels will fire after the deadline has passed, the reality is that the Union can live without a deal.

EU officials were more concerned this week that the US would miss another 30 June deadline - for the ratification of an accord in the Organisation for Economic Cooperation and Development to outlaw shipbuilding subsidies covering Norway, Japan and South Korea as well as the US and the Union.

The Commission has an emergency plan ready in case the US sinks the agreement. The strategy would prolong the Union's existing system which caps subsidies at 9&percent; of the value of a contract. But EU officials concede that without a deal, the European industry, traumatised by the collapse of Denmark's Burmeister & Wain and the scandal of Germany's biggest shipbuilder Bremer Vulkan, would lose even more market share to Japan and South Korea.

The stakes were much lower in the WTO maritime talks, with only two member states - Greece, the world's biggest shipping nation, and Denmark, home of the giant oil tanker operator AP Moller Group - closely tracking the negotiations.

Greek and Danish tankers would be the only potential beneficiaries of a decision by the US to abandon the Jones Act, which reserves coastal shipping - the transport of crude oil from Alaska to refineries in California, for example - to US flagged and crewed ships.

The European Community Shipowners' Associations, headed by Greek shipowner John C Lyras, has pushed hard for a deal in Geneva. But as a back-up measure, it is also urging the Union not to overlook the maritime sector when it is negotiating bilateral deals with third countries.

Even without a WTO agreement, the EU shipping industry enjoys relatively open access to the world's markets, not least in the US: German container ships carry consumer goods from Japan to Long Beach, Greek bulk carriers haul grain from New Orleans to Hamburg and British cruise liners ply the seas between Miami and the Caribbean.

Shipping is probably the most open and competitive market in the world and one of the very few in which the Union trounces both the US and Japan.

In 1994, the EU-registered fleet totalled 7,100 vessels of 80 million gross tons, employing over 125,000 seamen and with a replacement value of more than 80 billion ecu. Union-owned vessels under foreign flags totalled an additional 83 million tons, giving the EU a 40&percent; world market share.

So why does the industry need Kinnock's maritime strategy? The answer is simple: jobs. The number of EU seafarers is declining as shipowners move to flags of convenience to hire cheap third world crews and pay less tax.

Member states have responded by setting up parallel registers - the Kerugalen Islands in the Pacific for France, the Isle of Man for the UK, landlocked Luxembourg for Belgium. The Union toyed with creating its own flag, Euros, for more than a decade, but the idea was quietly buried this spring.

Shipowners warn that unless the job losses are checked, European ships will be crewed almost totally by foreigners, from captains and engineers to deckhands, within ten to 15 years. This poses serious questions about the security and safety of the EU fleet.

The Kinnock paper has switched the Commission's emphasis from bringing Union ships 'home' from foreign registers to creating more jobs for Europeans on the high seas through a series of fiscal incentives.

His proposals have drawn a largely favourable response from shipowners and their governments, who have to file their responses by September. For the shipping industry, success in Brussels counts for more than failure in Geneva.