CHOPPY SEAS FOR GREEK CABOTAGE

"I am not an Athenian nor a Greek but a citizen of the world," said Socrates, and the same may be said for latter-day Greek shipowners. They are a cosmopolitan group, incorporated all over Europe and North America, with vessels registered in dozens of countries, lifting cargo in trades across the

globe. Greek shipping is as footloose as an industry can be, responding to the dictates of both market and policy by shifting investment with abandon.

There is one group of Greeks, however, who are not so fortunate. Greece's domestic shipowners are in for stormy seas, mostly because of changes to European Union legislation that will force open long-protected "cabotage" markets - that is, the markets within a country's borders. In this case, the new EU rules pave the way for other European operators to enter the lucrative trades among Greece's islands.Roughly 120 Greek islands have regularly scheduled ferry services; about 300 vessels under Greek flag collectively are capable of carrying 100,000 passengers and 17,000 vehicles. Many are dedicated to the cabotage trades, and many are "agoni grammi," or unprofitable lines, requiring subsidies from the Ministry of Transport.

The trade-off for remaining on these money-losing routes is that Greek companies can continue to serve the more profitable routes. In the larger picture, the trade-off for such protectionism and regulatory control is maintaining the cohesion of the island communities.

At first glance the Greek policy may seem surprising, given Greece's highly liberal approach to international shipping. But it is less so when one recalls that the country has a larger proportion of its territory comprised of islands than any other nation, except Indonesia and the Philippines.

Moreover, the precarious security situation of the eastern Mediterranean increases the need to ensure a healthy Greek fleet serving the nation's outer islands.

Until a recent EU-engineered rapprochement between Greece and Turkey, the age-old dispute between those two nations threatened repeatedly to boil over into conflict. The Greek attitude toward the Bosnian conflict and its relations with other former Yugoslav republics also has set Greece at odds with its European partners.

One legacy of the protected cabotage trades is that maritime unions have enjoyed much stronger bargaining positions when negotiating for domestic seafarers than for international crews. The current shortage of seafarers does plenty to help this cause - something that international shipowners can avoid by using Asians and East Europeans. Owners of domestic lines have little choice but to pay high rates for local seamen.

The European Union, however, soon will change that equation. An EU ruling has opened these jobs to non-Greek European nationals. And a Greek presidential decree, drawn up in October 1992, duly provided that "nationals of European Community member countries have the same possibility of access as Greek seamen to jobs on Greek merchant ships."

In theory this could relieve the shortage, but not at a cost that Greek owners would welcome. A European Union agreement three years ago will open cabotage trades within member states to all EU shipping. This means that protected Greek lines will be faced with competition from highly efficient north European operators on some of the plum routes in the Aegean.

Understanding the risk, the Greek government was successful in negotiating a phase-in schedule giving the Greek island operators until 2004 to prepare for outside competition. Moreover, liner operators will be forced to apply host-state manning rules on their vessels, making it possible for Greece to exclude ships employing non-Europeans.

Not surprisingly, this anti-liberal approach engendered a great deal of opposition. Britain, Denmark and the Netherlands voted against the deal on the grounds that it did not go far enough to open the trades. Their votes in the EU's Council of Ministers, however, were not enough to block the agreement. Moreover, within Greece the more free-trade oriented cargo operators opposed the restrictive nature of the agreement.

Nonetheless, the concerns of domestic island carriers and ferry operators carried the day with the Greek government. The Ministry of Transport recognizes the risks they face. Without the ability to use low-cost crews and take advantage of operating flexibility, they face potentially disastrous competition from shipowners creaming off the more lucrative summer traffic in parts of the Aegean.

With the international fleet in mind, George Papandreou, father of the prime minister, once said that shipping is the only industry that has wings - it can fly away.

That's not true for the cabotage trades, and it explains why Greece - one of the EU's least powerful members - was able to negotiate cabotage liberalization that was so plainly riddled with exceptions.

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