OECD: Maritime subsidies are inefficient and must be reformed

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OECD - maritime subsidies

According to an article in TheLoadStar, Maritime subsidies issued by some of the largest economies to the shipping industry have been inefficient, had a limited impact. According to a new investigation by the OECD (Organization for Economic Cooperation and Development), which argues a need for reform.

A new report published today, Maritime Subsidies: Do they provide value for money? of the International Transport Forum supported by the OECD and written by maritime economist Olaf Merk, investigated the impact of the three main types of government subsidies made available to shipping companies and the industry in general: taxes on tonnage, tax exemptions for national maritime transport fuels and fiscal measures to reduce the salary costs of seafarers.

He discovered that OECD countries spend about 3 billion euros a year on these three subsidies, but added that there is little evidence that the expenses justify the impact.

“Impact studies do not find much evidence of the effectiveness of maritime subsidies to achieve their stated objectives.

“Local flags and the employment of seafarers in the EU have, in fact, declined. Short sea shipping connections in the EU remain quite limited.

“However, maritime subsidies could have increased the liquidity of shipping companies, allowing some of them to renew or expand their fleets. This has contributed to the increase in overcapacity, and ships have been predominantly ordered in Asian shipyards.

“The resulting cargo peaks, the increase in ship size and the subsequent consolidation of container transport lines have had mixed impacts on ports and land use,” he said.

The report argues that many of the current subsidy programs are of a “defensive” rather than strategic nature: “They have grown in reaction to two developments: opening shipping records in developing countries (” flags of convenience “) and subsidies in others developed countries.

“Therefore, maritime subsidy schemes often include the notion of tonnage taxes as a way to level the playing field for the shipping industry in developed countries in competition with flags of convenience.”

The report argues that current subsidy failures must be addressed by improving transparency, clarifying the objectives of subsidies and making them more conditional on positive impacts, such as the UK tonnage tax regime, “which has a training requirement. “, or the Norwegian and Portuguese regions that favor cleaner ships.

However, in order to holistically measure the positive impacts of a subsidy, contributions to education, well-being, environment, and reduction of security risks must also be considered. Taxes on tonnage should be used for objectives that add value or have a positive impact even if it is not monetary.

Source LoadStar

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