Opinion of the Economic and Social Committee on the 'Proposal for a Council Regulation (EC) on aid to shipbuilding` () (97/C 30/18)

On 4 July 1996 the Council decided to consult the Economic and Social Committee, under Article 198 of the Treaty establishing the European Community, on the 'Proposal for a Council Regulation (EC) on aid to shipbuilding`.

The Economic and Social Committee decided to appoint Mr Simpson as Rapporteur-General for its Opinion.

At its 338th Plenary Session (meeting of 25 September 1996) the Economic and Social Committee adopted, by 85 votes in favour, 3 votes against and 4 abstentions, the following Opinion.

1. Introduction

1.1. The Commission proposes to further extend the Seventh Council Directive on aid to Shipbuilding. This Directive () was due to lapse on 1 January 1996 when the new international Agreement, negotiated within the framework of OECD, would have become effective if it had been ratified by all the signatories.

1.2. Under the terms of the Council Regulation of 22 December 1995, giving effect to the State Aid provisions of the OECD Agreement (), the Seventh Directive was amended to continue in force in the interim period to 1 October 1996. This acknowledged that the OECD Agreement would not be effective until a date after 1 January 1996. The Economic and Social Committee considered this proposal and, at its meeting in November 1995, approved an Opinion which supported the interim amendement ().

1.3. Whilst the European Union, Korea, Norway and, more recently, Japan have ratified the OECD Agreement, the United States has not. Despite the setting of a revised date for implementation of 15 July 1996, the US Government has not yet passed the required legislation to permit ratification.

2. Commission proposal

2.1. The Commission has, therefore, been requested by the Council to make proposals for decisions to be effective before 1 October 1996 when the interim extension of the Seventh Directive is due to terminate.

2.2. The Directive currently limits production aid to the EC shipbuilding industry for all vessels, above a minimum size, to 9 percent of the build cost for higher value ships and 4,5 percent for smaller vessels. Similarly, operating aid not linked to individual contracts is constrained to meet agreed restructuring plans, closure costs or rescue aid ceilings.

2.3. Under the OECD Agreement, production aid would be ended in the main shipbuilding countries of the world. This would be a major step in normalizing the world shipbuilding market.

2.4. In the absence of agreement on the implementation of the OECD Agreement, the Commission proposes that the provisions of the Seventh Directive should continue to apply ad interim and until 31 December 1998 at the latest.

3. Comments of the Committee

3.1. The Committee is disappointed that there has been a further delay in the ratification of the OECD Agreement. This has adverse effects on the objective of normalizing, in fair competition and open bidding for contracts, the development of the shipbuilding industry in the European Union. In particular, the provisions allowing measures to tackle injurious pricing have been postponed.

3.2. The failure of the US administration to gain legislative authority to allow ratification is especially regrettable.

3.3. The proposal to extend the Seventh Directive for a further interim period is accepted as possibly the least damaging way to assist the shipbuilding industry in the immediate future.

3.4. Whilst the Committee notes that the rules of the Directive can be maintained, consistently with the 'standstill` provisions of the OECD Agreement, the Committee proposes that, in the interim period, there should be no further action to reduce the permitted production aid unless such action would be supported by evidence from the market that the size of the cost-price gap had decreased. If the cost-price gap remains at present levels, or widens, then the principle of further degressivity should also be suspended. The 'key` 9 percent aid ceiling would then remain in place to the end of 1996, with the possibility of an amended ceiling, only if justified by market conditions, effective from 1 January 1997.

3.5. If there is no progress towards full implementation of the OECD Agreement by the end of 1996, the Committee suggests that the Commission consider what action can be taken to construct an international agreement which, faute de mieux, excludes the USA. This would, it is appreciated, raise difficult questions of how to design and implement appropriate actions which would penalise shipbuilders who received unacceptable aid and which were outside the scope of an alternative agreement. As a minimum the EU and other national authorities should introduce legislation with agreed penalties and agreed methods of implementing penalties applicable to shipbuilding yards which are identified as benifiting from injurious pricing methods.

3.6. The impasse caused by the delay in the implementation of the OECD Agreement might be used to advantage if the Commission undertook a review of the modalities of the application of the injurious pricing instruments that form part of the agreement. It is acknowledged both in the shipbuilding and shipping industries that the current provisions may be difficult to operate effectively. A review, and reconsideration, without necessarily making fundamental changes to the principles of the OECD Agreement, might be beneficial, irrespective of the outcome of the current delay.

4. Conclusions

4.1. The Committee is concerned that the implementation of the OECD Agreement has again been delayed. This perpetuates a serious crisis for European shipbuilders.

4.2. The proposal to extend the Seventh Directive on aid to shipbuilding is a necessary and minimal interim response which is supported by the Committee. The proposed amendment to Regulation 3094/95 is, therefore, supported.

4.3. The Commission should now begin to consider alternative options, in cooperation with the other willing partners to the OECD Agreement, to influence the future development of the shipbuilding industry in the European Union for negotiation and implementation, if the OECD Agreement is not ratified within the next six months.

Brussels, 25 September 1996.

The President of the Economic and Social Committee

Carlos FERRER

() OJ No C 213, 23. 7. 1996, p. 14.

() OJ No L 351, 31. 12. 1994.

() OJ No L 332, 30. 12. 1995.

() OJ No C 39, 12. 2. 1996.