Blog: European Union targets State subsidized Asian ocean carriers

European Union targets State subsidized Asian ocean carriers

The TOP 10 container carriers in the world account for a market share of 80.7%. Six of the TOP 10 are Asia based carriers and four are European carriers. However, the four European carriers (Maersk, MSC, CMA CGM and Hapag-Lloyd) account for a market share of 50.5% and the six Asian carriers (COSCO, ONE, Evergreen, Yang Ming, HMM and PIL) have a combined market share of 30.2%. Four of the six Asian carriers (COSCO, Yang Ming, HMM and PIL) are known to enjoy State subsidies to varying degrees. The subsidized Asian carriers global market share is 18.4%. ONE and Evergreen that collectively have a market share of 11.8% are not considered subsidized carriers.

The European Commission had received several complaints from member states about carriers in Asia receiving State subsidies. Based on the complaints, the EU’s Competition Directorate (DG IV) began analyzing this information against the background of the WTO agreement on subsidies and bilateral commitment on subsidies.

Regulation 4057/86 allows the Commission to conduct an investigation and adopt redressive measures if it finds practices that distort competition in maritime transport through non-commercial advantages granted to a third country shipowners by a non – EU State.

On 17 June, 2020 the Commission published a White Paper on leveling the playing field as regards foreign subsidies. For the purposes of the White Paper a “foreign subsidy” refers to a financial contribution by a government or any public body of a non – EU State which confers a benefit to a recipient and which is limited, in law or in fact to an individual or group of undertakings or industries.  The Commission has invited comments on the White Paper by 23 September 2020.

The Commission’s agenda maybe compromised because of actions within its own ambit. For instance, Danish shipping companies receive some State aid and the tonnage tax scheme could be termed a form of subsidy. The French Government recently guaranteed 70% of CMA CGM’s syndicated loan of $ 1.12 billion from 3 banks. The German Shipowners Association pressed for unimpeded access for State aid due to the pandemic downturn from the government run KfW Development Bank.

Subsidized Asian carriers are likely to say that – “what is good for the goose is good for the gander.”

European and Asian carriers are not exactly strange bedfellows. They work closely together as constituent partners of THE Alliance and the OCEAN Alliance. Notwithstanding, the EU White Paper has set the stage for an interesting dialogue.

Anil Jay Vitarana Ph.d

(The views expressed above are those of the writer and not that of CII).