International Transport Forum Calls for Review of Shipping Subsidies

On Tuesday, the OECD-administered International Transport Forum published a review of state shipping subsidies in OECD countries, and it determined that European incentive programs for domestic shipping do not always achieve their goals. It recommended that EU member states should tie their maritime subsidies - like tax credits, direct payments or loan guarantees -  to specific results, like more training slots for cadets or more investment in cleaner ships. The authors also recommended that the EU should review and harmonize its state aid guidelines (SAG) for the maritime sector. 

The report, sponsored by the International Transport Workers Federation and written by International Transport Forum staff, identified several potential areas of improvement for EU state shipping subsidies (excluding fishing and shipbuilding programs). In particular, they singled out a lack of clear policy objectives for subsidy outcomes; an unintended advantage that some subsidy schemes give to large, vertically-integrated companies with both ships and port terminals; and less-than-perfect levels of transparency about the subsidies' impact. 

The authors also suggested that "impact studies do not find much evidence of the effectiveness of maritime subsidies in achieving their stated aims." Despite subsidy programs, local flag registries and seafarer employment within the EU have declined. 

"The principal challenge for policy-making is the limited evidence that
maritime subsidies achieve their stated aims, for example with regard to defending domestic ship registers and seafarer employment, the researchers concluded. "Reorientation of maritime subsidy policies could improve outcomes and halt a race to the bottom between subsidy regimes."

The report drew criticism from the European Community Shipowners' Associations (ECSA), which responded in a statement that the EU's state aid guidelines "are a profoundly effective instrument to maintain and strengthen the European shipping sector in a highly competitive global environment." 

ECSA criticized the report's methodology, claiming that the International Transport Forum should have looked at the global industry as a whole, not only at OECD nation subsidy programs. "A thorough benchmark study, like the one Monitor Deloitte has conducted by comparing the EU with five non-EU competitors, is essential to draw well-grounded conclusions," ECSA said.