16. 3. 87 Official Journal of the European Communities No C 68/9 
an efficient sub-contractor network. Looking ahead in 
particular to the extension of the Directive to new sectors, the 
Committee regards such action as of key importance. 
3. Lastly, the Committee wishes once again to draw 
attention to its proposal (') concerning the introduction of a 
system for secondment of staff (e.g. senior officials of 
procurement and audit departments) from national 
authorities for the purpose of working in the new public 
procurement unit and liaison with their counterparts in other 
Member States. It is out of the question for the Commission's 
staff at its present strength to cope with the duties on which 
the effectiveness of the Community Directive hinges and, 
since difficulties are bound to arise in simply recruiting new 
staff under the Community budget, other solutions such as 
the one described above will have to be found. 
4. Specific comments 
4.1. Article 4 
The Committee requests that point 2 (b) of the new Article 6 
stipulating that contracts by single tender may be awarded 
'when the articles involved are manufactured purely for 
(!) OJ No C 189, 28. 7. 1986, p. 16. 
Done at Brussels, 16 December 1986. 
Introduction 
1. The draft Directive on shipbuilding aid is a follow-up 
to the orientation paper on future aid strategy for 
(>) OJNoC281, 7. 11. 1986, p. 4. purposes of research, experiment, study or development' be 
deleted; otherwise the doors would be opened wide to abuse 
and circumvention of the letter and the spirit of this Article, 
i.e. that awards by single tender only take place under 
exceptional circumstances. 
4.2. Article 5 
The Committee invites the Commission to make it clear that 
the order of preference to be followed by the contracting 
authorities in the absence of European standards or 
documents on harmonization is mandatory, not optional. It 
proposes to add the following phrase to point 4 'any other 
standard': 'bearing in mind the climatic conditions 
involved'. 
4.3. Article 12 
The Committee, though supporting the Commission's efforts 
to obtain significant and reliable statistical information from 
the Member States, feels that the Commission should specify 
in point (a) which contracting authorities are obliged to 
report, and that the data required concern only the total 
number and value of awarded contracts both above and 
below the threshold. 
The Chairman 
of the Economic and Social Committee 
AlfonsMARGOT 
shipbuilding on which the Committee was not officially 
consulted - much to its astonishment. The proposals 
contained in these documents arouse deep concern about the 
future of the Community's shipbuilding industry and the jobs 
it provides. Opinion on the proposal for a Council Directive on aid to shipbuilding (*) 
(87/C 68/07) 
On 13 October 1986 the Council decided to consult the Economic and Social Committee, under 
Article 198 of the Treaty establishing the European Economic Community, on the proposal for a 
Council Directive on aid to shipbuilding. 
The Section for Industry, Commerce, Crafts and Services, which was responsible for preparing the 
Committee's work on the subject, adopted its opinion on 3 December 1986 in the light of the report by 
Mr Arena. 
At its 242nd plenary session (meeting of 16 December 1986), the Economic and Social Committee 
adopted the following opinion by 88 votes to 15, with 5 abstentions. 
No C 68/10 Official Journal of the European Communities 16. 3. 87 
1.1. It is regrettable that the Commission has not taken 
the slightest notice of the Committee's opinion of 23 April 
1986 on the guidelines for a Community policy in the 
shipbuilding sector (OJ No C 189, 28. 7. 1986). This 
opinion, on which the interested parties broadly agreed, 
pinpointed the need to: 
— define a minimum production capacity on economic and 
strategic grounds; 
— frame a clearcut policy, involving Community-wide 
agreements, for safeguarding the industry's productive 
capacity in order to combat the frequently distorted 
competition from other countries; 
— tailor the post-1986 Directive to the aims of such a policy 
in order to revive an industry which has been far too long 
in the grip of a recession that could have dire 
consequences for the workforce and professional 
skills. 
1.2. In reaffirming that this opinion still holds good, the 
Committee trusts that the present text will fare better. The 
reasons why it cannot approve the draft Directive are 
explained below. 
Comments 
2. Instead of proposing a system of aid for safeguarding a 
shipbuilding industry restructured along the lines indicated 
in the abovementioned Committee opinion of 23 April (a line 
which the Association of West European Shipbuilders has 
also argued), the draft Directive makes aid policy the sine qua 
non and mainstay of shipbuilding policy without seemingly 
giving adequate thought to the effects and consequences. 
2.1. More restrictive and selective aid — in the form of a 
common all-embracing ceiling fixed at a lower level — is 
assumed by the Commission to be the key to eventually 
creating a healthy and competitive shipbuilding industry in 
the Community in which the Member States will freely 
compete with each other. 
2.2. The fixing of such a ceiling seems to the Committee 
to be at the very least an oversimplification. Above all, it will 
have adverse consequences for a large part of the 
Community's shipbuilding industry unless it is fixed at a high 
enough level to ensure that adequate support is provided to enable Community yards to compete against the competition 
from the Far East. The Committee believes that, at least for 
an interim period while further studies take place, the ceiling 
must be at least 35 %. 
2.3. In the absence of a masterplan for the industry, 
which ought to be drawn up before a system of aid is worked 
out, one general question which may be asked is on what 
criteria the new strategy's regional and social repercussions 
(including its repercussions on subcontracting industries) are 
based, unless the aim is purely and simply to cut capacity and 
jobs in order to scale down the financial burdens currently 
borne by the Member States. 
2.4. Last April's opinion explained why capacity cutting 
was not the same as improving productivity or the industry's 
competitiveness, since any plan for reviving the industry 
would be doomed to failure unless adequate use was made of 
production potential. In other words, it is necessary to arrest 
the inexorable slump in capacity, and hence production, 
which has already reduced the Community's shipbuilding 
industry to a minor force worldwide. 
2.5. The assessment of market trends underlying the draft 
Directive seems to rule out any chance of demand picking up 
in the next decade. This assessment is at odds with the 
recently confirmed forecasts of organizations such as the 
Association of West European Shipbuilders (AWES) and the 
Shipbuilders Association of Japan (SAJ) which would seem to 
be in the best position to judge (cf. Table 2 in the 23 April 
opinion). 
2.6. The importance of forecasts should not be 
overestimated; however it does not seem right to disregard 
the AWES/SAJ forecasts, which state that the crisis will 
reach its peak in 1986/87 and that balance will be restored 
on the world market by the early nineties, regardless of 
whether there are any further large-scale reductions in 
capacity. 
2.7. In this connection, the Community authorities must 
act firmly in dealing with Japan (which seems, incidentally, 
to be about to take a number of important decisions about 
the size of its shipbuilding industry) and South Korea (whose 
share of the market has rocketed since 1975). 
2.7.1. At all events it is very unwise to think that cuts in 
aid and productive capacity in the Community will 
strengthen the Community's hand in negotiations with Japan 
and South Korea: the cuts made in the last years which have 
resulted in the loss of at least 120 000 jobs (i.e. 60 % of the 
16. 3. 87 Official Journal of the European Communities No C 68/11 
workforce and a 55 % fall in capacity) are proof enough of 
the Community's good will. It is estimated that there have 
been similar cutbacks in subcontracting work, i.e. all the 
suppliers of goods and services which contribute more than 
50% of a vessel's value. The regional and social 
repercussions of these major cuts are also evident. 
2.7.2. If the Community gives Japan and South Korea the 
assurance that it will pursue the aid policy being proposed at 
the moment, they will merely have to maintain current prices 
and not make any major cuts in capacity (i.e. basically adopt 
a wait-and-see policy) to ensure that the Community prices 
itself out of the shipbuilding market to all intents and 
purposes. The building of advanced technology vessels — a 
sector where the competitive gap is less pronounced — will in 
fact provide insufficient orders even for a much smaller 
Community shipbuilding industry. 
2.8. If this were to happen, there would be a real danger 
— in the absence of a more wider-anging policy of aid and 
cooperation between Member States — that national 
industries (whose shares of the world market vary from less 
than 1 % for Belgium to 5—6 % for the Federal Republic of 
Germany) may soon be driven to bankruptcy since they have 
very little work at the moment and are unable to win new 
orders. 
2.8.1. The Committee believes that the objective of the 
Directive should be to avoid this happening; instead, it 
should stress the need to maintain within the Community a 
healthy and competitive shipbuilding industry whose scale of 
activity should be consistent with the size of the Community 
seaborne trade and respect its economic, social and strategic 
importance. 
2.9. The draft Directive's other objective — and one 
which the Committee endorses — is to develop the common 
market in shipbuilding. It must be borne in mind, however, 
that shipbuilding is a worldwide market. Therefore, if aid is 
not granted, there is a danger that any order lost by a 
Community shipyard is likely to go to a non-Community and 
not to another Community shipyard. 
3. The fixing of a common ceiling on all forms of aid to 
shipyards and shipowners for the building or conversion of 
vessels poses other grave problems. 
3.1. A ceiling which leaves no room for flexibility would 
make sense if there was a reasonable chance that a significant 
number of shipyards would soon become as competitive as 
the most competitive shipyard. However, because of a 
number of differences (cost of money, social security charges, 
progress made in restructuring, regional location, etc.) more time may be needed to reduce costs and restore 
competitiveness. Thus, the ceiling should be high enough to 
win sufficient orders at the start and should be reviewed at 
reasonable intervals taking account of trends on the market. 
The rate at which the aid is reduced will depend above all on 
conditions on the market, where the behaviour of Japan and 
South Korea will be crucial. 
3.2. Equally worrying is the criterion for fixing the aid 
ceiling. This ceiling will be based solely on the costs in the one 
area of the market selected by the Commission (advanced 
technology vessels) where the most competitive Community 
shipbuilders do not lag so far behind their main worldwide 
competitors). 
3.3. It should be noted here that the only really advanced 
technology vessels being built nowadays are military vessels, 
passenger ships, and certain offshore installations and (to a 
rather lesser extent) gas and chemical carriers. This is too 
limited a market (excluding as we must here the military part) 
to rest the future of the Community's shipbuilding industry 
on. Moreover, it is the parts which the shipyard purchases 
from outside that are the key factor in the added value of the 
product. Hence the importance of maintaining a sufficiently 
large and specialized subcontracting industry. This is one of 
the strengths of the Japanese, who have always seen the ship 
building industry as an important export vehicle (what is 
more, not subject to customs duty) for a number of products 
with a higher added value (electronics, pumps, on-board 
auxiliaries, engines, etc.). 
3.3.1. A final point to bear in mind are the rapid 
developments in vessel design. Thanks to the ease with which 
technologies can be transferred, new vessel designs (e.g. 
container ships) can soon become the prerogative of less 
'advanced' shipbuilders. 
3.3.2. Despite the move towards specialization in 
products with a higher added value it would be a serious 
mistake to stop building the types of vessel (bulkcarriers, 
tankers, most general cargo ships) for which there is most 
demand worldwide. Any of these types of vessel might 
suddenly make a strong market recovery. Nor should we 
underestimate the (partly strategic) role of these ships in the 
supply of raw materials, and more generally their importance 
for trade to and from the Community. 
3.4. A final cause for serious concern is the inclusion of 
aid to shipowners in the proposed ceiling (Article 3 of the 
proposal). The extreme sensitivity of the shipowners' sector 
— which by definition operates on an open market — to 
restrictive measures could lead to practices detrimental to the 
Community shipbuilding industry. The tonnage of virtually 
No C 68/12 Official Journal of the European Communities 16. 3. 87 
all the Member States' fleets is already falling, and average 
vessel age is already high: these trends would worsen. 
3.4.1. At all events a serious assessment should be made 
of the repercussions which the inclusion of aid to shipowners 
would have on recourse to the shipyards of the Far East 
(where inter alia OECD conditions are being systematically 
disregarded) and to flags of convenience, as a move to regain 
more room for manoeuvre. 
4. Leaving aside other albeit important comments on the 
content of the Directive (such as the exclusion of ship repair 
work from operating aid and investment aid), it is important 
to stress the omission of any reference to additional rescue aid 
to deal with an urgent problem confronting an undertaking 
of particular strategic or regional significance. 
4.1. The Committee would also stress the extreme 
complexity of the proposed monitoring procedures. While 
recognizing the need for appropriate monitoring by the 
Commission in order to ensure that the aid regimes are 
transparent, the Committee thinks that, in both number and 
detail, these procedures would give the Commission powers 
of control without precedent in any industrial sector covered 
by the Treaty of Rome; this would undoubtedly impede 
company management, particularly during the delicate stage 
of commercial negotiation. Just one example: the 
Commission would be empowered to pass judgement (within 
30 days) on the awarding of an order, even if this order had 
been negotiated to respect the ceiling, in cases where there 
was competition from a shipyard in another Member State 
(Article 4 (5)). The proposal further states in Article 4 (3) 
that 'in its review of the common maximum aid ceiling the 
Commission shall also take into account undue 
concentrations of shipbuilding activities in specific market 
segments to an extent contrary to Community interests'. 
Done at Brussels, 16 December 1986. 5. Conclusions 
5.1. After just six months, the Committee sees no reason 
to amend its previous opinion, which was based on an 
analysis of trends in the market, in shipbuilding, and in the 
Community's fleets, and of the policy pursued by the 
Community in this sector since the beginning of the crisis. 
5.2. Apart from its disappointment (voiced in point 1.1 
above) at the Commission's disregard of this earlier opinion, 
the Committee is also perturbed at a draft Directive being 
pushed through somewhat hastily which does not contain an 
overall policy for the sector dealing with the problems of 
concern to both shipbuilders and maritime transport and 
based on an effective match of supply and demand. 
5.3. This concern receives immediate confirmation in the 
Commission's own predictions in COM(86) 553 final about 
the regional and social effects of the new aid policy, namely 
that another 40/45 000 jobs will be lost within the next three 
years. This amounts to a further halving of the industry's 
capacity — although by then it could hardly be termed an 
industry at all. 
5.4. The scale and gravity of the problem would seem to 
call for consultation of the Committee, as it formally 
requests. 
5.5. Extension of the fifth Directive would appear to be 
necessary in order to provide time to map out a realistic 
policy for the sector which, whilst recognizing the need for 
restructuring, would establish once and for all the basic 
requirements for the safeguarding and proper operation of 
this vital industrial activity. This matter ought to be 
discussed at Community level by the interested parties 
(shipbuilders, shipowners, workers' representatives). 
The Chairman 
of the Economic and Social Committee 
Alfons MARGOT