Opinion of the Economic and Social Committee on the 'Communication from the Commission to the Council, the European Parliament, the Economic and Social Committee and the Committee of the Regions "Towards a new maritime strategy"` (97/C 56/04)

On 9 April 1996, the Commission decided to consult the Economic and Social Committee, under Article 198 of the Treaty, on the above-mentioned proposal.

The Section for Transport and Communications, which was responsible for preparing the Committee's work on the subject, adopted its Opinion on 9 October 1996. The Rapporteur was Mr Whitworth.

At its 339th Plenary Session (meeting of 31 October 1996), the Economic and Social Committee adopted the following Opinion by 53 votes for and one abstention.

1. Introduction and Background

1.1. The Commission's attempts to create a framework for a Community Shipping Policy date back to 1985. Its proposals at that time centred on four draft Regulations which were the subject of a detailed Opinion () (in two parts) and a Report from the Economic and Social Committee. These stressed the importance of the shipping industry to the Community and the need for a coherent maritime transport policy for the promotion of Community shipping as well as giving specific comments on the draft Regulations.

1.2. The latter were adopted in December 1986 (), specifically

Reg. 4055/86 applying the principle of freedom to provide maritime transport between Member States and between Member States and third countries;

Reg. 4056/86 laying down detailed rules for the application of Articles 85 and 86 of the Treaty to maritime transport (competition rules);

Reg. 4057/86 on unfair pricing practices in maritime transport;

Reg. 4058/86 concerning coordinated action to safeguard free access to cargoes in ocean trades.

1.3. In 1989 the Commission produced proposals under the general heading 'Positive Measures for Maritime Transport` embodying draft Regulations for the establishment of a Community ship register (the EUROS register), the definition of a Community shipowner and the freedom to provide maritime transport services within Member States (cabotage).

1.4. The Economic and Social Committee produced a further Opinion () in which it stated inter alia 'The measures as presently proposed fall well short of the Commission's own objectives... Without positive and specific measures to alleviate the burdens imposed by Member States in the areas of employment costs and company taxation, the Commission's package is insufficient to promote the EC fleets and halt the decline in the Community shipping industry`.

1.5. Subsequently a Regulation on Maritime Cabotage was adopted [Reg. 3577/92 ()] but no agreement in the Council could be reached on the other two draft Regulations and the current Communication proposes that they should be formally withdrawn.

1.6. No further proposals for Positive Measures for Maritime Transport have emerged in the interim, although there have been a series of measures on Maritime Safety (which have generally had the support of the Committee in its Opinions) and the Commission has set up the Maritime Industries Forum to develop an industrial policy approach to related maritime industries in general.

2. The Commission document

2.1. The present Commission document takes the form of a Communication outlining a substantial number of policy options designed to enhance the position of Community shipping in three main areas:

- safety and fair competition;

- maintaining open markets;

- a policy for competitiveness.

It lists a considerable number of points for possible action but does not seek to lay down concrete or detailed proposals at this stage. It is clearly the Commission's intention to formulate specific proposals based on the reactions to this document of the other Community Institutions, the Member States and other interested parties.

3. The Commission's analysis

3.1. The analysis contained in the document suggests that while the decline since 1985 in the proportion of the world fleet owned or controlled by EC interests has been relatively modest (and that this fleet has in fact grown in real terms), the proportion operated under the flags of EC Member States has continued its inexorable decline.

3.2. Continued flagging-out has been the main contributory factor in the continuing substantial loss of employment for EC seafarers. Yet at the same time a significant world-wide shortage of qualified seafarers has become apparent and the present intake into the industry is inadequate to meet anticipated future demands.

3.3. The analysis attributes these trends to competitive disadvantage and gives specific examples of the differences (sometimes substantial) in both tax and crew costs between certain EC Member States and lower-cost open registry countries as well as between individual EC Member States themselves.

3.4. The analysis emphasizes the favourable outlook for world shipping in terms of continuing growth in world trade and trading opportunities. (OECD and other forecasts indicate that world seaborne trade will double by the year 2010.)

3.5. The document stresses the need for EC shipping, in terms both of economic independence and particularly its contribution to the broader economy. It specifies a wide range of shipping-related activities ashore which export services to the rest of the world, provide substantial employment and boost the EC's economy. Indeed the jobs which these industries provide outnumber those at sea and the 'Core Group` () report identified a 70/30 value added ratio. Nevertheless seafaring qualifications and experience are indispensable for such activities as is a base of shipping operation and control if they are not also to move overseas.

3.6. The Commission emphasizes the continuing globalization of shipping. It notes that the measures taken by the EC and Member States to increase the competitiveness of the EC shipping sector have thus far been unable to reverse flagging-out and loss of seagoing employment but affirms that policy responses within the EC which are out of touch with current world-wide trends and standards will lead to further exits of capital and labour from EC flags.

4. The Commission's proposals for action

4.1. The Commission document contains a number of points for discussion and possible action, grouped under the three headings, the most important of which are perceived to be as follows:

4.2. Safety and fair competition

- convergent application of internationally agreed rules and standards to all flags;

- non-binding IMO Resolutions to be made compulsory through EC legislation;

- adoption of IMO criteria for establishment and operation of flag state administrations and registers;

- defining and enforcing Flag State obligations at world level;

- common criteria for Member States' registers - including offshore;

- encouragement of higher standards, e.g. by strengthened port state control, fiscal incentives, differential port charges for high quality operators, financial sanctions against sub-standard ships and cargo owners using them, mandatory third-party liability insurance.

4.3. Maintaining open markets

- multilateral agreement on liberalization of maritime transport and removal of trade barriers;

- Commission mandate to negotiate with third countries;

- revise Regulations 4057/86 and 4058/86;

- Worldwide agreement on general competitive principles;

- application of Competition Rules in EC trades.

4.4. A policy for competitiveness

- incentives for recruitment and training of EC seafarers including financial support from the Commission and Member States;

- study of training systems of labour-supplying countries;

- IMO to ensure proper implementation of STCW () standards;

- improved monitoring of compliance with ILO requirements under all flags through Port State Control;

- develop and coordinate R & D for maritime sector;

- state aid to shipping can justify derogation per Article 92(3)(c);

- state support should reduce employment-related charges and fiscal costs;

- Community approach to be based on non-discrimination and economic link;

- state aid to be related to real cost gap of employing EC seafarers and managing ships from EC;

- tax breaks for keeping EC seafarers employed and securing necessary investment;

- inventory of current state aids and guidelines to Member States;

- economic benefit study.

5. General Comments

5.1. The Economic and Social Committee regrets the lack of progress towards enhancing the competitiveness of the EC shipping sector since it issued its 1989 Opinion; that Opinion contained the following comments:

'Early and positive action should be taken by the Community to apply specific measures to reduce the level of manning costs, without prejudice to the seafarers concerned, by:

- the abolition of income tax on the earnings of all seafarers on EC ships, and;

- the alleviation, to the greatest possible extent, of social security costs for employers and employees relating to the employment of seafarers serving on EC ships

in order to minimize the gap between net pay and gross cost.

The Commission should develop an instrument which would permit:

- a reduction of the overall fiscal burden on shipping companies established in Member States and vessels sailing under the flags of Member States;

- favourable treatment, for tax purposes, of profits from shipping activities in international markets, including profits from the sale of ships;

- flexible fiscal allowances against the costs of purchasing new and second-hand ships to facilitate re-investment in shipping.`

5.2. The Economic and Social Committee has taken every opportunity over the intervening six years to remind the Commission of its declared views but not a single measure has been adopted during that period to give effect to any aspect of these objectives.

5.3. It should be acknowledged that the Commission's work in the field of maritime safety and particularly Port State Control (supported by the Committee in its Opinions on the subjects) has been of some benefit to EC shipping by requiring its competitors whose ships visit EC ports to maintain at least minimum international standards of construction, operation and manning.

5.4. Nevertheless, the consequence of the absence of positive measures as proposed by the Committee is plain to see in the continued decline in the tonnage on EC registers and in the employment of EC seafarers.

5.5. Accordingly, the Economic and Social Committee welcomes this new, if belated, initiative and acknowledges that it makes a real attempt to address some of the specific points contained in the 1989 Opinion.

5.6. The Economic and Social Committee believes that a competitive and efficient maritime transport sector is an indispensable element for the global competitiveness of the EC economy, not only because of the latter's dependence on such transport for the carriage of its industry's goods and materials but also because of the contribution to the broader economy made by the whole range of shipping-related activities noted in paragraph 3.5 above.

5.7. Its basic objective in this field, simply stated, is that the fleets owned or controlled by Community shipping interests should, to the greatest possible extent consistent with their competitiveness, be registered under the flags of Member States and manned by Community seafarers on conditions consistent with Community social legislation and employment standards.

5.8. Equally, the shippers and consignees of cargoes, on which the trading prosperity of the EC is largely dependent, are anxious to secure reliable services provided by safe and efficient ships at reasonable cost in a competitive marketplace and it is in the interests of the overall competitiveness of the EC that they should do so.

5.9. The uniquely mobile nature of the shipping workplace coupled with the availability of lower-cost seafaring personnel from less developed countries and the inexorable development of open and 'second` registers has exposed EC-registered and particularly EC-manned shipping to significantly lower cost competition which it cannot hope to meet without the help of positive measures such as those which the ESC has sought in its previous Opinions and which the Commission now appears to have in mind. These are the realities of the current world-wide trends and standards to which the Commission refers, as noted in paragraph 3.6 above.

5.10. Equally, the shipping environment of at least some Member States is attractive to inward investment from outside the EC. This may bring some benefit in terms of EC manning but certainly is beneficial in respect of shore-based employment, the demand for the services of maritime-related industries and the boosting of the EC as the centre of world-wide maritime activity. Further, it is beneficial for more ships to be on registers which are administered to the highest standards.

5.11. Against this background steps should be taken to:

- neutralize the competitive advantage enjoyed by lower cost substandard ship operation and manning by imposing sanctions on such operators;

- ensure that EC shipping operates in a free market and can compete for the carriage of cargo and passengers on equal terms;

- alleviate cost burdens imposed on EC ship operators (particularly by way of taxation and social on-costs) which their competitors do not have to bear.

5.12. The Commission's current proposals fall under these three headings. If they are translated into concrete instruments which are sufficient in scope and successfully implemented they should encourage the repatriation of EC-controlled shipping, attract new capital into the industry in terms of investment and lead to the starting up of new operational activities in the EC - all in themselves highly desirable objectives.

5.13. So far the proposals are expressed only in outline; hence further clarification and detail will be required in many areas together with more precise facts and figures on which some of the assertions and arguments are based. In particular, while the beneficiaries of the Regulations for maintaining open markets were defined in the 1986 package, it will be necessary for the Commission to identify with some precision which types of EC shipowners and operators should qualify for each of the benefits which it expects to result from its various proposals for positive measures for enhancing competitiveness.

5.14. Nevertheless, the proposals will be examined in detail in the specific comments which follow.

6. Specific Comments

6.1. Safety and Fair Competition

6.1.1. The OECD Study referred to in the Commission document (p. 13) highlights the very substantial cost advantage which a sub-standard ship operator can obtain through non-observance of international rules and standards. Hence the paramount importance of securing agreement within the IMO and the ILO to increasingly higher international standards of ship construction, operation and maintenance as well as fundamental conditions of employment and ensuring that all ships calling at EC ports meet these standards through increasingly effective use of Port State Control.

6.1.2. Member States should pursue common objectives in this respect within the international bodies and, as previously affirmed in ESC Opinions, there is scope for the Commission to play a coordinating role. In particular, as stated in the Opinion on Safe Seas in November 1993, the policy of converting appropriate non-binding IMO Resolutions into binding international instruments is preferable to enforcing these Resolutions only at EC level although the latter course of action may be contemplated in particular cases if the general policy has proved unsuccessful. There is, however, a risk that this could lead to regionalization.

6.1.3. The Economic and Social Committee fully supports the Commission's proposals for the adoption of IMO instruments laying down criteria for the establishment and operation of Flag State administrations and registers. The standard of Flag State control worldwide must be improved and countries outside the EC encouraged to upgrade their flag administrations. The creation of a multinational team of experts to assist with this task could well be a positive initiative; this might best be done under the aegis (and at the expense of) the IMO.

6.1.4. Equally it supports the proposal that the EC should first set its own house in order by adopting a Community Instrument, based on IMO standards, governing Member State's registers and considers it essential that this forms part of the 'acquis` before any of the present applicants for membership are admitted. It is important that the legal status and operation of so-called second registers should also be examined in this context as these too should meet the same standards. The definition of a 'Member State Shipowner` will need to be determined, bearing in mind that, in accordance with case law established by the European Court of Justice, the Right of Establishment permits relocation from one Member State to another. Possibly some of the thinking of the now discarded instrument dealing with the definition of 'Community Shipowner` may be relevant.

6.1.5. Every effort should be made to ensure the growing effectiveness of the Port State Control and associated arrangements now in place. The Commission and the Member States should not hesitate to revise the current Regulations in the light of experience and to impose more effective sanctions if these are proved to be necessary.

6.1.6. The Economic and Social Committee would support all practicable moves to foster a spirit of quality in shipping and agrees that these could include fiscal and financial benefits for operators who strive to achieve high standards together with differential port charges based on observance of environmental and safety standards. The promotion of effective self-regulatory codes of practice should be encouraged and the vetting programmes of the oil and chemical industries are to be commended. These interests are already liable under international conventions for oil pollution damage. The mandatory insurance coverage of third party liability in the more general context should, as the Commission suggests, be fully examined.

6.1.7. It would be highly beneficial too if the aid of the generality of cargo interests could effectively be enlisted to combat the use of sub-standard ships. Responsible cargo owners already make significant efforts at no insubstantial cost to ensure that their cargoes are transported on board reputable vessels. However, in a number of trades, shippers may have no influence on the choice of vessel. The imposition of specific sanctions in this area should therefore be approached with considerable caution and would need to be targeted at the irresponsible minority who deliberately chose to charter sub-standard ships. For example, sanctions might be imposed on charterers of vessels 'black-listed` by the Port State Control authorities having been consistently found to be seriously sub-standard. Accordingly a constructive dialogue should be initiated between the interests involved to see whether practical and equitable arrangements can be devised.

6.1.8. Finally, while fully supporting the concept that the required minimum standards of ship operation should be based on those agreed internationally in the ILO and IMO, the Economic and Social Committee considers that no action contemplated in the context of the strategy programme as it emerges should undermine or dilute existing standards established within the various Member States.

6.2. Maintaining Open Markets

6.2.1. The Economic and Social Committee welcomes the Commission's commitment to securing free market access and fair competitive conditions globally through multilateral negotiation. Its support for the GATS negotiating Group on Maritime Transport Services is indicative of this approach.

6.2.2. However, while the Commission's proposal to play a coordinating role in opening up markets world-wide is considered a positive use of its powers and status, there is some reservation at its intention to engage in bilateral shipping negotiations. It should be ensured that the Commission's activity in this area does not conflict with its declared commitment to multilateralism and at the same time supports the efforts of the Member States.

6.2.3. The view has been expressed that Regulation 4057/86 has some deficiencies and appears outdated in its present concept for the larger liner trades. However, the Economic and Social Committee urges caution in any proposed revision of the 1986 package of Regulations. There is a danger that their careful balance of compromises and concessions which has contributed to the process of trade liberalization both through direct application and by acting as a deterrent could be undermined in this process. A more rigorous application of the Instruments might be a more appropriate course.

6.2.4. A balanced approach to the commercial and investment needs of shippers and ship operators both within and outside the conference system is required in the assessment of the Community's Competition Rules. The Economic and Social Committee supports the Commission's call for international compatibility of competition rules; however, it underlines the need for a distinction to be made between anti-competitive practices by enterprises and distortions resulting from government measures to restrict access to markets. Recognition should be given to the safeguarding of public services to peripheral areas which, for reason of commercial non-viability, might not otherwise be served by the private sector.

6.2.5. The Economic and Social Committee is aware of the wide divergence of views regarding the determination of freight rates and capacity management programmes in liner shipping. Regulation 4056/86 has become an increasingly contentious piece of legislation, particularly in the light of new forms of cooperation between lines. It is noted that the representation of facts in this part of the document is strongly disputed by shipowner interests who argue that it is one-sided and contains several important inaccuracies. It is, however, fully accepted by shippers. The Commission is bound to give equal consideration to all sides of the argument and should await the outcome of the current deliberations by the European Courts.

6.3. A Policy for Competitiveness

6.3.1. The Economic and Social Committee particularly welcomes the Commission's proposals in regard to training schemes and incentives to employment by Member States, especially the absorption of maritime training costs within national education and training systems. It fully endorses the Commission's view that there is an overall advantage for the EC as a whole in maintaining the maximum number of EC seafarers both for EC shipping and related industries.

6.3.2. Added urgency is given to action on this front by the growing current and forecast shortages of qualified officer and specialist rating personnel currently experienced in some Member States and revealed in the BIMCO/ISF Study to which the Commission refers. In this context the Economic and Social Committee expects that the Commission will take due note of the Report of the Human Resources Working Group of the Maritime Industries Forum and the Statement of the Joint Committee on Maritime Transport of 14 June 1996.

6.3.3. However, it will be impossible to attract suitable recruits to an enhanced training programme unless they can be convinced that a maritime career will afford them relative security and reasonable prospects with the possibility of subsequent employment ashore. This makes such a programme dependent on the successful adoption of effective positive measures in this area.

6.3.4. There is work to be done to ensure that the certification and training structure fully meets the requirements of the newly revised STCW Regulations.

6.3.5. The Economic and Social Committee would particularly welcome effective action to ensure that the maritime education and training systems of the major labour supplying countries in the third world fully meet the current and revised STCW requirements. A study such as that envisaged by the Commission would seem to be a useful first step.

6.3.6. A practical contribution by the Community's Research and Development programmes which would bring tangible benefits to the competitiveness of EC shipping would be greatly welcomed. This should be developed and monitored through the Maritime Industries Forum but an effective input from the EC's shipping industry is essential.

6.3.7. Paragraph 5.1 above recalls that in its 1989 Opinion the ESC sought specific measures to reduce EC manning costs by removing some of the on-cost burdens imposed by Member States which are not borne by the Industry's competitors as well as the institution by Member States of a less burdensome tax regime geared to the realities of the economics of ship operation. It is these burdens which have contributed significantly to the flagging-out of EC tonnage and a measure of their magnitude can be gauged from the tables in Annex 1 to the Commission's document; further detailed data (which is available in various publications) should be collected by the Commission as part of its study of this issue.

6.3.8. The Economic and Social Committee therefore particularly welcomes the Commission's proposal that support measures should be targeted at reducing employment-related charges and taxes and fiscal costs borne by EC ship operators so as to stimulate directly the development of EC shipping and employment within it, rather than at providing general financial assistance.

6.3.9. This assertion appears in the Commission document under the heading 'State Aid to Shipping`, but it cannot be emphasized too strongly that the shipping industry is not seeking direct subsidies or subventions from public funds, which despite the Commission's declared policy are still all too common in the aviation industry, but merely the alleviation of financial and fiscal burdens imposed in their different ways by Member States which give rise to a burden of costs which are not applicable to ship operators based outside the EC who employ low cost seafarers.

6.3.10. Any Community approach to State Aid, or more accurately in this case the alleviation of State-imposed financial and fiscal burdens, would have to meet a number of criteria. It would have to be transparent, non-discriminatory and not distortive of competition. It must preserve Member States' right of sovereignty over their taxation regimes. Hence the approach should take the form of revised guidelines, this time directed perhaps towards compensating for the specific additional costs incurred in undertaking within the EC the various elements of ship ownership, management and operation on a real cost basis so as to enable such vessels to compete on at least level terms with their world-wide competitors. However, the approach should avoid the introduction of unduly complex and bureaucratic procedures.

6.3.11. The Commission appears to have recognized the huge ramifications of ship ownership and management in today's world and the complexity of the institutional arrangements which EC shipping companies have found it necessary to adopt. It also acknowledges the benefits which can accrue from inward investment in the EC shipping. All such activities are contributing in varying degrees to the economic strength of EC shipping, providing seagoing and short-based employment and enhancing the position of the EC as the worldwide centre of this highly international industry.

6.3.12. Hence the Economic and Social Committee endorses the Commission's statement that Member States should ensure that support is focussed on entities which contribute to sustainable economic activity in the EC and that the economic link should be the paramount consideration. However, the Economic and Social Committee considers that the link with the flag cannot be rejected as it is this which establishes a clearly defined link with safety standards and employment practices. Accordingly, it suggests that in devising its revised guidelines the Commission should seek to ensure that these are directed towards the achievement of the various objectives identified in part 5 of this Opinion and particularly the basic objective set out in paragraph 5.7. Clearly there would need to be gradations of such support between various categories of EC shipping companies and the ships they operate according to their manning practices and the extent of their contribution to EC employment and inward investment.

6.3.13. Further, a clear distinction must be made between assistance to shipping companies and general schemes of State Aid directed outside the shipping industry, such as aid to ship building and ship repairing.

6.3.14. As the Commission document points out the current fiscal regimes in the Member States vary widely as they affect shipping companies. The Economic and Social Committee therefore supports the Commission's current exercise of drawing up an inventory of the present position in the various Member States. Similarly the Commission's research project to quantify the economic benefit of the maritime sector in representative Member States is likely to produce useful and informative results.

6.3.15. Finally, the Economic and Social Committee suggests that had its 1989 recommendations in respect of Positive Measures been translated into action by the Commission and the Council at that time EC shipping would now be in a much healthier state than it is today. The Economic and Social Committee re-emphasizes the absolute necessity to take effective steps towards bridging the cost gap if EC shipping companies are to remain in business, vessels are to be kept on or even attracted back to EC registers, and the future employment of EC seafarers safeguarded.

Brussels, 31 October 1996.

The President of the Economic and Social Committee

Tom JENKINS

() OJ No C 344, 31. 12. 1985, p. 31.

() OJ No L 378, 31. 12. 1986, p. 1, 4, 14 and 21.

() OJ No C 56, 7. 3. 1990, p. 70.

() Council Regulation (EEC) No 3577/92 of 7. 12. 1992 applying the principle of freedom to provide services to maritime transport within Member States (maritime cabotage) (OJ No L 364, 12. 12. 1992, p. 7).

() A group of eminent shipping experts set up to advise the Commissioner in the preparation of the strategy document.

() Standards of Training Certification and Watchkeeping.