A Service of Leibniz-Informationszentrum econstor Wirtschaft Leibniz Information Centre Make Your Publications Visible. zbw for Economics Kröger, Bernd Article — Digitized Version More urgent need for political initiatives Intereconomics Suggested Citation: Kröger, Bernd (1976) : More urgent need for political initiatives, Intereconomics, ISSN 0020-5346, Verlag Weltarchiv, Hamburg, Vol. 11, Iss. 4, pp. 100-104, http://dx.doi.org/10.1007/BF02928666 This Version is available at: http://hdl.handle.net/10419/139359 Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes. 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More Urgent Need for Political Initiatives by Dr Bernd KrSger, Hamburg * restern shipping circles are about "transparent anti-commu- own cargo monopoly and "in W referring more often and nist indoctrination", they denied the interest of the socialist ex- more insistently to perilous that there had been any dump- ternal economy" making prefer- competitive pressure by the ing and remarked that the USSR ential use of their own tonnages. fleets of the COMECON states and other COMECON states to- and, more especially, the USSR. gether owned no more than Intrinsic Cost Advantages In the Federal Republic, Great 7.5 p.c. of the world's merchant Britain, Holland and Norway fleet at the middle of 1975. The East bloc fleets are prof- this discussion about the policy iting from cost advantages in- of the state-owned shipping What are the relevant facts? herent in the economic system enterprises of the eastern coun- The state-owned shipping enter- of their countries. The state tries and their growing influ- prises of the socialist countries shipping enterprises of the so- ence on the liner markets is and the USSR in particular are cialist economies have a place now conducted more and more developing an increasing activ- in the wage-incentive and per- often in public. The problems ity in the cross trade between formance-control systems of the involved have even been raised western countries. They are state-directed economic group- in the Deutscher Bundestag forcing their way into the liner ings but their investments are (Lower House of the German markets by undercutting the largely financed from budget Parliament) through a question conference rates by varying allocations, amortization rates tabled by the opposition parties. margins and methods. The are low and interest charges on The East bloc media reacted OECD liberalization code en- capital mostly a formality be- immediately with fierce attacks sures free access to the mar- cause - as BOhme 'in particular on western shipping represen- kets and ports of the western recently pointed out correctly tatives. Apart from complaining countries for all fleets. The East in "Die Weltwirtschaft" (2/1975, * General Manager of the German Ship- bloc states are however at the p. 138) - sea-going shipping owners' Association. same time holding on to their has been zero-rated for the per- 100 INTERECONOMICS, No. 4, 1976 FORUM tinent interest charge. Moreover, Anybody who enjoys the cost ventional general-cargo vessels special accounting systems ap- advantages of a system which in the world. ply to sea freight earnings in refuses to accept the competi- foreign currency instead of the tive methods of the market If all sea-ships on order in the world are taken into account, it cost-earnings ratio pertaining in economy within the compass of becomes clear that the state general, with the result that its own system but at the same trading countries - foremost even low rates can yield a profit. time claims for himself a right amongst them again the USSR The shipping enterprises in the to avail himself of the liberal East bloc countries can there- - have the intention of engag- competitive methods of another fore gear their business policy ing also in future predominantly system without accepting the to factors in no way comparable in liner shipping. Inquiries last to the profitability considera- cost conditions of this other year showed the COMECON tions applying in market econ- system is capable of underbid- countries to account for 4.7 p.c. omies where firms must calcu- ding the cheapest bidder from of the orders on the books of late according to commercial the industrialized countries by the world shipbuilding industry; criteria. 20 points or more whatever the for the liner tonnage alone their rate level may be. Since the proportion was 16.9 p.c. It is hardly surprising that this conditions underlying the bid basic difference is reflected by are different, it goes without An inquiry into the reasons an aggressive rate policy of saying that he can align his for this policy of fleet expansion East bloc shipping enterprises offer of services to his own shows a number of disparate on routes where they find free supply potential and his own and mostly general economic scope. The Council of European aims and adhere to this policy criteria to play a part. There is & Japanese National Ship- for many a long day, if neces- the aim of carrying the foreign owners' Associations (CENSA) sary until he has ousted his trade merchandise and the eco- has carried out investigations nomic and military aid deliv- competitors. Decisive from his showing that the COMECON eries to socialist countries and point of view is not primarily fleets, and especially the USSR "friendly" states in Africa, Latin the ratio of costs and earnings fleet, have undercut the rates America and Asia as far as pos- in various routes by between which is crucial to his rivals in sible in own vessels. Besides, 10 and 60 p.c. the "competitive markets" but the outlays in foreign currencies the market share which he has are to be kept down and earn- Threat of Overwhelming independently determined as ings in foreign currencies to be Competition his target. increased; the latter in partic- ular are to develop into a copi- The East bloc shipping com- Largest General Cargo Tonnage ous source of revenue over the panies reject the charge of rate long term. Last not least, the dumping. Nevertheless it must Starting from this basic point merchant fleet is to be employ- be said that no matter what eco- and bearing in mind the quanti- ed as an instrument of foreign nomic theory is accepted as tative relations of the supply and security policy and to be valid for a definition of the potential of the East bloc fleets, made use of for establishing term "dumping", it makes little their growth rates and espe- and developing an economic- change for those directly affect- cially that of the Soviet mer- strategic presence on the ed. It is not to be denied that chant fleet must be a matter of oceans of the world. price differentiation and rate concern even for heedless op- undercutting are practised as timists. Many figures have been How greatly such arguments instruments of market economy quoted in the discussion, and influence the East bloc shipping competition, that they are part these can of course be arranged policy is indicated by the struc- of the free scope allowed in in various ways. The often quot- ture of merchant fleet, especially market economies. But as far ed ratio of the total COMECON in the USSR. Roll-on/roll-off and as the competition from the fleet to the world merchant fleet container ships and conven- COMECON and the USSR in (of "only" 7.5 p.c.), for instance, tional general-cargo vessels are particular is'concerned, at is- bears no relevance to the com- playing a much greater logistic sue is not the method as such petitive pressure of eastern role than bulk carriers. The fact but the extent to which it is shipping enterprises on liner that the USSR is largely self- being used - competitors may shipping, for the East bloc ratio sufficient in regard to raw ma- be ousted from the market com- on the liner routes was 12.8 p.c. terial supplies explains why in pletely - and the conditions at the middle of 1975; with 7.3 intra-Soviet sea shipping also under which the parties engage mn grt the USSR on its own has more bulk carriers are being in the competition. today the largest fleet of con- used than liner tonnage. About INTERECONOMICS, No. 4, 1976 101 FORUM 40 p.c. of the Soviet fleet are These developments have pro- eventually lead, can only be reportedly plying between USSR voked the mentioned reactions effective if several countries or COMECON ports, but this is from the affected shipping com- take them at the same time and certainly not the figure for liner panies and the political authori- move on substantially parallel shipping.