Subsidies. A subsidy is a financial assistance for shipping. There are many types of subsidies.
Their main purpose is to help develop shipping activities or to assist a national fleet in the face of foreign competition. Subsidies can be long-term or permanent or used only when shipowners are faced with financial fiscal difficulties. Subsidies can be directly paid to shipowners or indirectly assist the shipping industry.
Construction, credit, insurance, operating and scrap-and-build subsidies are some of the many direct subsidies. Indirect assistance can include shipbuilding, taxation and depreciation allowances, and reductions in port and canal tolls for national flag carriers. Subsidies are one form of protectionism and can act against free competition in the market of shipping industry.
In the United States, the Constructional Differential Subsidy (CDS) and the Operating Differential Subsidy (ODS) were quite notorious after the Second World War. The U.S. flag fleet operating in foreign trades is usually subsidised. Before the Reagan Administration, U.S. flag ships had to be built in the U.S. and have U.S. crews. The shipowners were guaranteed differences between their own costs and those of typical competition by the CDS and ODS. During the Reagan Administration, additional CDS funding ceased so the shipyards could build ships only for the coastal trades where no subsidies were given. Even the ODS was cut back.
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