MTC conclusions on compatibility of competition policies
Regulatory Reform in Maritime Transport
Safety and the Environment
Security post 11 September
Relations with Non-member Economies
Matters Related to the WTO
Consultation with Industry
SECTION III. SHIPPING RELATIONS AMONG OECD COUNTRIES
The Maritime Transport Committee (MTC) serves as a unique forum for the discussion of a broad range of economic and political maritime issues. Prime objectives to be pursued by the MTC are: to improve the convergence of shipping policies among Member and non-Member countries, to foster further liberalisation, to strengthen the competitiveness of Member country fleets, and to provide political support to the promotion of maritime safety and the protection of the marine environment.
All 30 Members of the OECD are also members of the Maritime Transport Committee, and most participate regularly in its activities.
In January 2001 the MTC elected a new Chairman, Mr. Bruce Carlton (United States) and three Vice-Chairmen (Australia, Korea and the Netherlands) and they constitute the Bureau of the Committee. This Bureau is supported by members of the extended Bureau, which comprises Canada, Denmark, Greece, Japan, and the United Kingdom.
The Russian Federation participated in the work of the Maritime Transport Committee in its capacity as observer.
The Committee's principal activities in 2001 were:
Review of MTC conclusions on compatibility of competition policies
Consideration of regulatory reform in the maritime sector
Elaboration of a Policy Statement on Substandard Shipping
Non-compliance with environmental regulations
Security issues in maritime transport post 11 September
Relations with Non-member Economies
Technical work in preparation for the resumption of the WTO negotiations
Readers should note that the Statistical Annex is discontinued.
At that time the Committee agreed to review the implementation of those principles every four years and that such reviews should preferably take place in full consultation with relevant industry parties.
The main outcomes of the review undertaken during the course of 2001 were that the principles contained in the MTC's Conclusions have been adequately implemented and that they have been reflected in recent changes to competition policy legislation in MTC Member countries. However it was noted that incompatibilities still exist among Members' competition regimes (especially as these pertain to inland shipping and liner shipping discussion agreements).
The MTC decided to revert to this issue once it had had time to review the results of a separate discussion on the issue of competition policy in liner shipping which took place at a Workshop at the end of last year (see below). Regulatory Reform in Maritime Transport
An initial Workshop in May 2000 considered a report prepared as part of the Organisation's review of the sector. Discussion focussed particularly on the section that dealt with competition policy aspects of regulatory reform that recommended the removal of immunity from the application of antitrust laws to common rate fixing by conferences, and the ability by shipping lines to enter into discussion and capacity stabilisation agreements.
Given the wide divergence of views at the Workshop regarding anti-trust exemptions given to liner operators, the Chair called on the OECD to investigate three issues relating to regulatory reform and competition policy in the sector. These were: the positive and negative impacts to both carriers and shippers of common pricing under anti-trust exemptions; the impacts of conference, discussion and stabilisation agreements; and the possible effects stemming from the removal of anti-trust exemptions for liner shipping.
During the course of 2001 the Secretariat removed the sections on competition policy from the draft report, in order to deal with these separately. The report which discusses regulations governing international liner and bulk shipping was reviewed, on the basis of comments received, and released.
The additional work on the competition policy aspects culminated in a separate draft report "Liner Shipping Competition Policy Report" that was considered in December 2001 when the MTC held a second joint Workshop with the OECD Committee for Law and Policy. This report proposes three principles that should help governments in making decisions about anti-trust exemption for price fixing, rate discussion and capacity agreements between liner ship competitors. The report also supports the widespread use of individual confidential contracts instead of the common freight rates applied by conferences.This report is being revised and will be released very shortly.
The Maritime Transport Committee has consistently supported action to combat substandard shipping , and has undertaken a number of research projects and other activities in support of this action.
This work has led the Committee to consider the formulation of a Policy Statement that would unequivocally state its concerns at the continuing problems of substandard shipping, and its commitment to work untiringly to reduce, and hopefully eliminate, substandard ships. It is expected that the Policy Statement will be finalised and released early 2002.
As part of its 2001/2002 Programme of Work the MTC has started to examine the cost advantages accruing from non-compliance with environmental protection legislation. This project involves examining elements that make up international maritime environmental regulations and analysing the potential costs savings accruing to those who partially, or totally, avoid those regulations.
International environmental regulations are contained in a number of conventions concluded at the International Maritime Organization (IMO). These conventions provide a comprehensive set of rules covering the carriage, on board safety, prevention of pollution, limits on approved discharges and reporting requirements for all vessels carrying potentially polluting substances. By avoiding compliance with some, or all of these international requirements, shipowners could obtain a competitive advantage over those shipowners that comply with these requirements.
This project will be finalised towards the end of 2002, and the results are expected to contribute to on-going support to the IMO and Flag and Port States in combating substandard shipping.
A report on ship scrapping was undertaken by a consultant for the OECD. The report establishes that there is a clear correlation between the age of vessels and losses at sea, and that a reduction in the numbers of those vessels would result in safer vessels and cleaner seas. It points out however that an accelerated scrapping programme for certain ship categories could have serious implications for trade and shipbuilding.
The report also notes that most ship scrapping is concentrated in developing countries and that the industry has a poor safety record, causes pollution and generally affords its workers with few basic rights.
The MTC's initial review in December 2001 suggested that some issues were not clear cut, and that the analysis in the report would benefit from certain additional elements which might need to be taken into consideration in order to obtain a more complete overview. The Committee will consider the follow up to give to this report once the Council Working Party on Shipbuilding has had a chance to review the issues and convey its views.
In the light of the 11 September events, initial consideration was given by the MTC to a number of issues related to security in maritime transport. Discussion touched upon, interalia, the need for:
A multilateral approach to address security issues in maritime transport given the international nature of the industry.
Increased transparency in the shipping sector to better understand ownership links and the origin and destination of cargoes.
A greater understanding of the security risks inherent in the transport network, and the repartition of increased security costs to ensure a level playing field.
The Committee agreed that an Ad hoc Working Group on Security would meet in March 2002 to consider what actions should be taken in the maritime sector to enhance security. The Committee also considered that any actions it would contemplate should be complementary to, and in support of, actions taken within the IMO. The Working Group would therefore take into account the outcome of the IMO's Special Session on Maritime Security to be held in February 2002.
The Committee's outreach programme which aims to develop and maintain contact with non-OECD economies has to date involved separate meetings with the NIS/CEECs, DNMEs and China. More recently, the OECD has invited Egypt, India, Israel and South Africa to join future discussions.
The Committee noted that separate discussions resulted in long time gaps between formal meetings with the various groups and that it would be more beneficial if it could engage broader participation on a more regular basis to share experiences and canvas views on important topical issues. On this premise the MTC will be organising a major Workshop towards the end of 2002 to which all its outreach partners and industry will be invited.
As part of the MTC's preparatory work for the negotiations on Maritime Transport Services at the WTO, the Committee has undertaken a number of research projects . The aim is to enhance the understanding of maritime negotiators of the extent and nature of restrictive practices that apply in the industry, and to guide them on where the greatest benefits could be expected from the reduction or removal of those restrictions.
The most recent of those projects has been to elaborate a list of restrictive trade practices and to evaluate their broad economic importance in order to identify practices that hinder maritime transport and related activities. Work on the elaboration of country profiles has also continued.
The Committee continued to enhance co-operation with industry through regular half-day seminars on topics specified by the maritime industry.
In December 2001, the Committee benefited from a fruitful discussion with industry representatives at a seminar on Substandard Shipping organised by the Trade Union Advisory Committee (TUAC).
The Hon. Peter Morris, former Australian Minister of Transport and current chair of the International Commission of Shipping (ICONS) presented the recent ICONS report "Ships, Slaves and Competition". The report underscores the fact that a small minority of shipowners are deriving a competitive advantage over their more scrupulous competitors by not running ships in compliance with international safety standards and by not adhering to international labour standards when dealing with seafarers. It makes a number of recommendations in order to eliminate substandard shipping and calls for concerted action by industry "champions", quality ship owners, ship inspectors and their governments, cargo owners and international maritime organisations.
The International Transport Workers Federation (ITF) presented an analysis on current trends in substandard shipping. Despite considerable discussion over recent years on how to address substandard shipping and promote quality shipping, the situation has not improved. As the OECD work has demonstrated, the costs of substandard shipping have largely been externalised to the point where there is a positive economic incentive for such owners/operators. Whilst some Flag States have undertaken to eliminate substandard ships from their Register many new more accommodating Flag States have emerged to register these displaced vessels. This has led to distortions in the ship registration market. Non-compliance with labour standards has also led to cost savings and distortions. According to the ITF, self-regulation of the industry has not been successful and has led to sub-optimal outcomes. The ITF outlined a number of areas for action where the OECD might be able to continue its contribution to the analysis of the problems of the maritime industry.
Note: This section reflects developments in the maritime sector as reported to the Committee by members of the MTC, and does not purport to be a comprehensive record of all the developments that took place in the maritime sector during 2001.
Bill C-14, containing amendments to the Shipping Conferences Exemption Act (Part 15 of the Bill), was passed by the Parliament of Canada on 1 November 2001. The new provisions pertaining to the Shipping Conferences Exemption Act came into force on 30 January 2002, i.e. 90 days after the day on which the Bill was passed.
New key provisions include: individual shipping conference members will be able to negotiate service contracts with shippers free from conference rules, and the terms and conditions of such contracts may be kept confidential; a reduction from 15 to 5 days notice before a conference member can take independent action; conference tariffs will no longer be filed with the Canadian Transportation Agency, rather conferences will have to make tariff information available to the public electronically.
Bill C-14 (Parts 1-14) also contains the new Canada Shipping Act, 2001. The Bill overhauls and replaces the existing Canada Shipping Act with modernized legislation that will promote the safety and economic performance of the commercial marine industry as well as ensure the safety of those who use pleasure craft.
The Marine Liability Act was re-introduced as Bill S-2 in January 2001. The Bill was passed on 10 May 2001, and came into force on 8 August 2001. The new legislation combined existing and new marine liability regulations into a single framework for claims related to personal injuries, fatalities, pollution and property damage. It adopted a new regime of shipowner's liability to passengers and a new regime for apportioning liability. It provided a uniform method for establishing liability balancing the interests of shipowners and passengers and applicable to all incidents governed by Canadian maritime law.
The Canada Transportation Act (CTA) was revised in 1996 and contains a clause specifying that a review of the Act and any other economic transport Act of Parliament for which the Minister of Transport is responsible be completed by 1 July 2001. The Minister appointed a Panel to conduct a wide-ranging review. Findings were reported in "Vision and Balance" in June 2001. The Report included 90 recommendations, covering all modes of transport, on how to improve the national transportation system. Examples of marine related recommendations included full recovery for marine services attributable to users, seeking further opportunities to commercialize marine services, eventual elimination of the liner shipping conference exemptions and elimination of the 25% duty on ships built or purchased outside Canada. The Minister and the Department of Transport are currently reviewing the Report.
In the spring of 2001, the Minister of Transport launched a Transportation Blueprint Initiative aimed at developing a transportation strategy for the next decade and beyond. The Blueprint will build on the recommendations of the Canada Transportation Act Review Panel Report and is strategically looking into the transportation implications of various issues including globalization and the market place, integration of modes, urbanization processes, protecting rural and remote areas, environment, safety and security, accessibility, innovation and skills. Consultations across the country are ongoing. New policy initiatives and legislative changes may result from this exercise.
The Marine Transportation Security Act (MTSA) provides the Minister of Transport with the statutory authority to introduce any required regulations, formulate confidential security measures or request security rules for all vessel operators or marine facilities in Canada. Transport Canada is working closely with other government departments and agencies, industry and its US counterparts to enhance the security of the marine transportation system in Canada and to ensure co-ordinated security preparedness.
In a concerted effort to enhance marine security in Canada, notification requirements for all vessels entering Canadian waters has been increased from 24 hours to 96 hours. This matches the US requirement for vessels entering US ports. It will permit more time to carefully screen the ship, its crew, and its passenger and cargo manifests. Also, Canadian ports are purchasing new equipment to enhance their screening of containerized cargo and adding enhanced security measures.
The Canadian marine industry has been extremely proactive following the terrorist attacks and is working in close co-operation with the government.
On 5 January 2001, the Transport Minister announced an agreement with the classification society, Lloyd's Register of Shipping. The agreement, reached in early December 2000, allows Lloyd's to carry out marine safety inspections and issue statutory certificates - indicating compliance with Canadian regulations and, where appropriate, international agreements - on behalf of the Government of Canada under the Canada Shipping Act.
The Government has drawn up a programme which seeks to maintain its national maritime transport sector and improve the competitiveness of the Finnish merchant fleet.
In compliance with this programme, the EU Commissions guidelines for state aids to maritime transport have been applied since 1 July 2000, to cargo vessels in international traffic. Seafarers' taxes and social contributions are refunded to the shipping company.
Concerning passenger vessels in international traffic, the Finnish parliament has passed legislation allowing reimbursement of up to 97 % of seafarers taxes to shipping companies. The subsidy is measured to correspond to the amount of seafarers and company taxes that would be lost anyway if passenger vessels in international traffic were flagged out.
A Cabinet programme on maritime transport also involves a proposal for tonnage taxation. This proposal was submitted to Parliament at the end of 2001. This new scheme, which will be an alternative to the normal company taxation, should come into force in 2002.
Measures in favour of the development of the French fleet during 2001 centred on the reduction of shipowners' social and fiscal charges.
A scheme of refunding the employers' seafarer social contributions was established on 1 April 1998. This scheme, however, only included contributions to the sickness and work-related accident insurance fund, as well as contributions to the pension scheme. These payments amounted to approximately one third of the employers' total contribution. On 27 June 2000, the scheme was expanded to include the employers' contributions to family benefits, unemployment benefits and the wage guarantee fund.
Reimbursement is made on the condition that the shipowner has an agreement with the seafarers union under which the shipowner guarantees to maintain or expand the employment of French seafarers and the use of the French flag, as well as to increase the skill level of in-house seafarers.
Consideration is also being given on how to improve the shipowners tax system taking into account current practices carried out by our European partners and competitors.
Consultations are taking place with seafarer trade unions aimed at easing nationality requirements for sailors aboard vessels of the French Antarctic and Austral Territories Register (known as the Kerguelen register). The current requirement is that 35 % of the crew must be composed of European Community nationals.
In a further move towards attracting maritime activities, the Federal Government of Germany has taken an initiative to establish a "Maritime Alliance", comprising the Federation, the German coastal states ("Laender") and the respective partners for social issues. This comes in the wake of earlier moves in that direction, such as the introduction in 1999 of the concept of a "tonnage tax" and of a 40 % income tax retention privilege of shipowners, which resulted in a reduction of the wage-related ancillary costs of seafarers employed aboard German merchant ships.
In creating a Maritime Alliance, which was concluded at a National Maritime Conference held at Rostock in November 2001, the participants in the Alliance have pledged their joint efforts to secure the international competitiveness of the German merchant fleet as well as training and employment opportunities in German ocean shipping. The main efforts of the Alliance are directed against the tendency to flag out German merchant ships. This tendency has recently been increasing again as a result of a slump in the market since 2001, bringing with it a negative effect upon the training and employment situation of seafarers as well as upon the maritime know-how in maritime related industries.
To promote the aims of the Alliance, the Federation, applying the EU Subsidy Guidelines of 1997, has appropriated some EUR 40 million in subsidies. These subsidies will be used for wage-related ancillary costs of seamen from Germany, as well as from the rest of the EU, employed on board German merchant ships in a first 15-month programme running until the end of 2002. In another move to promote seafarer training, the financial contribution has been increased to EUR 30 000 Euro per trainee - this incorporates a financial commitment on the part of the Association of German Shipowners.
In July 2001, the "Short Sea Shipping Promotion Center Germany" began its activities. This office, whose main task is information brokerage, is being financed by Germany and by the maritime industry. It is designed to create more transparency and, thus, to promote the readiness of shippers and forwarders to make use of European coastal shipping services for the transport of goods to a greater extent.