Communication from the Commission to the Council, the European Parliament, the European Economic and Social Committee and the Committee of the Regions - LeaderSHIP 2015 - Defining the Future of the European Shipbuilding and Repair Industry - Competitiveness through Excellence
Date: 2003-11-21
Institutions: European Commission
Subjects: EU industrial policy, aid to industry, competition policy, international competition, shipbuilding

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 21.11.2003
COM(2003) 717 final

COMMUNICATION FROM THE COMMISSION
TO THE COUNCIL, THE EUROPEAN PARLIAMENT,
THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE
COMMITTEE OF THE REGIONS

LeaderSHIP 2015

Defining the Future of the European Shipbuilding and Repair Industry –
Competitiveness through Excellence

TABLE OF CONTENTS

1.

2.

3.

4.

5.

6.

7.

8.

9.

Introduction.................................................................................................................. 3

Establishing a Level Playing Field in World Shipbuilding.......................................... 6

Improving Research, Development and Innovation Investment.................................. 7

Developing Advanced Financing and Guarantee Schemes ......................................... 9

Promoting Safer and More Environment-Friendly Ships .......................................... 11

A European Approach to Naval Shipbuilding Needs ................................................ 13

Protection of Intellectual Property Rights (IPR)........................................................ 15

Securing the Access to a Skilled Workforce.............................................................. 16

Building a Sustainable Industry Structure.................................................................. 18

10.

Conclusions................................................................................................................ 20

2

1.

INTRODUCTION

1.1.

The policy framework of LeaderSHIP 2015

In  its  Communication  on  “Industrial  Policy  in  an  Enlarged  Europe”  1  the  Commission
provided an outline of the horizontal policy measures that are required to move faster towards
a  more  competitive  European  economy,  in  particular  in  the  light  of  the  enlargement  of  the
Community.  Knowledge,  innovation  and  entrepreneurship  were  identified  as  the  key
elements.  The  Communication  also  recognises  that  this  horizontal  approach  needs  to  be
complemented with specific sectoral approaches, based on close monitoring of the particular
situation  in  a  sector,  and  full  stakeholder  consultation,  in  order  to  arrive  at  the  most
appropriate policy mix.

Against the background of the challenges faced by industry in Europe, resulting from global
developments  and  shifting  economic  patterns  in  Europe  itself,  the  re-launching  of  the
European  economy  has received  renewed  and  additional  attention.  As  part  of  its  call  for  an
integrated strategy for European competitiveness the European Council at its meeting of 16-
17  October  2003  has  called  for  policies  to  be  pursued  in  such  a  way  as  to  contribute
consistently  to  the  goal  of  enhancing  the  competitiveness  of  enterprises  and  industry.  In
relation to industrial policies the Council and the Commission have been urged by European
leaders to address the needs of specific industrial sectors, especially the manufacturing sector,
notably in view of their essential contribution to economic growth.

LeaderSHIP 2015 represents the application of this approach to shipbuilding and follows on a
similar  exercise  already  undertaken  in  the  case  of  pharmaceuticals  (G10  Medicines)  and
aerospace (STAR21).

1.2.

The LeaderSHIP 2015 initiative by the European shipbuilding industry

1.2.1.

Background

With  the  initiative  “LeaderSHIP  2015”  the  European  shipbuilding  industry  has  started  an
ambitious  programme  to  ensure  its  long-term  prosperity  in  a  dynamic  growth  market.  The
initiative  goes  back  to  the  Council  conclusions  of  14  May  2001  where  the  Council  called
upon “the EU Shipbuilding industry to continue improving its competitiveness.” The aim is to
improve  the  already  existing  technological  leadership  in  selected  market  segments,  to  drive
and protect innovation and know-how, to strengthen customer focus, to improve the industry
structure and to move decisively to a knowledge-based production, making EU shipbuilders
and marine equipment suppliers world leaders in their field by 2015.

In  March  2002  the  industry  presented  the  idea  of  such  an  initiative  to  the  President  of  the
Commission,  Romano  Prodi,  who  responded  positively  and  requested  the  Member  of  the
Commission  in  charge  of  enterprise  to  set  up  a  working  structure,  based  on  a  detailed
workplan. A High Level Advisory Group for LeaderSHIP 20152 was accordingly established,
supported by working groups for eight key areas.

1

2

COM(2002) 714 final of 11.12.2002
The  High  Level  Advisory  Group  consists  of  leading  personalities  in  the  field  -  from  individual
companies, 
trade  unions  -,  seven  European  Commissioners  with
responsibilities that relate to shipbuilding and two Members of the European Parliament.

industry  associations  and 

3

                                                
1.2.2.

LeaderSHIP 2015 Report

In  its  report3  the  High  Level  Advisory  Group  for  LeaderSHIP  2015  made  concrete
recommendations  in  these  eight  specific  areas.  These  recommendations  must  now  be
complemented  with  targeted  actions  and  the  necessary  strong  political  support  in  order  to
ensure their aim of making the optimum contribution to the competitiveness of the industries
concerned.

Through LeaderSHIP 2015 the specific conditions resulting from the unique characteristics of
the shipbuilding sector are taken into consideration.

In this Communication the key issues addressed by the LeaderSHIP 2015 Advisory Group are
explained and assessed and policy actions are identified. These relate in particular to the key
issues  of  an  integrated  approach  to  industrial  and  transport  policies,  increased  knowledge-
intensity,  highly-qualified  human  capital,  organisational  changes,  technological  and  non-
technological innovation and intellectual property rights protection.

This  Communication  represents  the  start  of  a  longer  term  effort  to  help  ensure  the  future
competitiveness of this important sector of the European manufacturing industry, which also
plays a significant role in some of the countries joining the European Union. The Commission
will continue to develop and implement its specific policy approach to the sector, in close co-
operation  with  stakeholders  and  taking  into  account  the  responses  received  from  Member
States and the other EU institutions to the issues raised. The purpose of the Communication is
to facilitate this process.

1.3.

The future challenges for the European shipbuilding industry

1.3.1.

Analysis

The European shipbuilding industry can look back to centuries of excellence in the design and
production of  ships. Being maritime  through  history  and  geography,  European  nations  have
always taken particular pride in their ability to  produce sea-going vessels as this  ability  has
allowed them to engage in global trade and to defend their vital interests.

Shipbuilding, which consists of shipyards engaging in commercial and naval shipbuilding, the
marine equipment industry, the ship repair and conversion sector, as well as a wide range of
knowledge  providers  such  as  universities,  towing  tanks,  design  offices  and  classification
societies,  is  an  essential  part  of  Europe’s  industrial  structure.  It  develops  advanced
technologies that offer considerable spin-offs to other sectors; it provides essential means of
transport for international trade; and it supplies modern navies with technologically advanced
vessels,  a  key  requirement  for  effective  military  operations.  Shipbuilding  is  therefore  an
important part of Europe’s strategic economic needs.

Shipyards provide products of high complexity, requiring a multitude of skills, an outstanding
degree  of  scientific  knowledge  and  smart  production  technologies.  Ships  are  the  largest
moving man-made objects and their long life cycle, combined with a high level of operational
autonomy in a hostile natural environment, makes them one of the most sophisticated capital
goods.

3

“LeaderSHIP 2015”, Enterprise publications, October 2003

4

                                                
Short  production  series,  customisation  as  a  general  principle,  and  global  competition  force
shipyards to permanently search for innovative solutions with regard to design and production
technologies. Due to the complexity of the product, shipyards now depend on a large number
of  suppliers  for  components,  sub-systems  and  knowledge-based  services,  including  those
provided  by  specialists  in  the  financial  sector.  Today’s  shipyards  have  to  be  seen  as  large
scale  integrators  within  a  high  technology  industry  whose  key  players  are  often  highly
specialised SMEs; they are no longer production sites of heavy industry.

Given  that  shipbuilding  is  naturally  limited  to  coastal  regions  with  access  to  deep  water,  a
modern shipbuilding industry depends on an industrial network of companies, often described
as a regional cluster. In an industrial cluster, a wide variety of  companies  and  organisations
come  together,  with  the  aim  of  exchanging  strategic  knowledge  for  the  achievement  of
projects.  Timing  and  quality  of  service  are  essential  to  make  projects  successful  and
profitable.

Shipbuilding  is  an  example  of  an  industry  that  displays  the  particular  strengths  and
weaknesses  of  Europe’s  economic  situation  in  a  distinct  sectoral  environment,  while  at  the
same  time  addressing  the  key  challenges,  through  a  pro-active  approach  in  a  wide  range  of
areas. The world shipbuilding industry has been experiencing structural and cyclical problems
since the first oil crisis (which revealed the over-investment in the sector), but European yards
have been able to “re-invent” themselves repeatedly in the face of adversity.

European shipbuilding has undergone massive changes since the mid 70’s. Two out of three
shipyards  have  disappeared  and  employment  has  fallen  from  around  460.000  shipyard
workers in 1975 to about 100.000 today in newbuilding and repair (the figures for the current
15  EU  Member  States  are  400.000  and  85.000,  respectively).  Output  in  new  vessels  has
remained  stable  in  the  last  decade  at  around  4,6  Mio.  cgt  (compensated  gross  tonnes)  thus
confirming  the  significant  productivity  increases  achieved  by  European  industry  (the
corresponding  figure  for  the  current  15  EU  Member  States  is  3,5  Mio.  cgt).  It  also
demonstrates  the  ability  of  European  shipbuilders  to  move  to  more  sophisticated  and
knowledge-based products, away from the mass market where price is the dominant factor.

Today, as the LeaderSHIP 2015 report makes clear, trade distortions are at the core of the EU
shipbuilding industry’s most pressing problems. These distortions can only be partially offset
by improved  competitiveness  and  limit  the  freedom  to  pursue  change  in  a  more  sustainable
way. Therefore,  the European Commission  is actively  pursuing  actions  at  WTO  and  OECD
level  to  remedy  these  problems.  In  the  light  of  decreasing  market  shares  for  European
shipyards, further action is required to address this situation and to safeguard manufacturing
capabilities in Europe.

Unless the situation is adequately addressed, European shipbuilding know-how will no longer
drive manufacturing activities in Europe, but would rather benefit competitors in the Far East.
Today,  this  is  already  the  case  for  very  large  container  ships,  and  to  a  lesser  extent  for
Liquefied  Gas  tankers;  there  is  a  risk  that  this  experience  could  be  repeated  with  regard  to
modern  passenger  vessels  where  European  technology  know-how  has  up  to  now  largely
succeeded in keeping the European industry in a leading position.

The  existing  market  situation  is  heavily  influenced  by  the  strategies  pursued  by  new
competitors,  attracted  by  the  fact  that  shipbuilding  can  provide  an  entry  gate  to  further
industrialisation, and thereby secure their economic base. While fresh competition is always
welcome,  distortions  of  the  market  through  unfair  trading  practices  have  to  be  fought  with
determination in the appropriate international bodies, namely WTO and OECD. Setting prices

5

at  below  cost  levels  in  order  to  enter  into  specific  market  segments  may  be  a  normal
commercial  practice,  but  if  done  on  a  systematic  basis  could  distort  competition.  Such
distortions  of  competition  can  harm  viable  industrial  structures,  lead  to  the  loss  of
employment  opportunities  with  significant  welfare  costs  ensuing,  and  affect  the  quality  of
shipping.

Similarly, treating ships not as a capital good and strategic asset but as a global commodity
with a volatile price level or  an instrument  for  gaining  tax  relief,  will only bring short  term
advantages for certain shipowners and investors, but may pose longer-term problems for the
sustainability of the maritime transport industry.

1.3.2. Commission position

The Commission will continue to address these problems in a determined way together with
current  and  future  Member  States  and  industry.  Trade  distortions  need  to  be  eliminated,
remedied and ruled out for the future. The value of ships has to be re-established to its normal
level for a sustainable and efficient transport industry. At the same time measures have to be
taken  to  ensure  the  future  of  the  European  shipbuilding  and  ship  repair  industry  through
improved competitiveness. These measures, based on the report of the LeaderSHIP 2015 High
Level Advisory Group, are outlined in the following chapters.

2.

ESTABLISHING A LEVEL PLAYING FIELD IN WORLD SHIPBUILDING

2.1.

Analysis from the report of the LeaderSHIP Advisory Group

Commercial shipbuilding and shiprepair operate in a truly global market. This comprehensive
exposure  to  world-wide  competition  and  the  fact  that  WTO  trade  disciplines  are  not  in  all
cases  suitable  for  application  to  this  sector,  make  shipbuilding  substantially  different  from
most other manufacturing industries.

State  supported  strategic  investments  in  Asia,  in  particular  through  restructuring  aids,  have
resulted in an imbalance between supply and demand. Structural over-capacity is expected to
remain a serious problem for the industry, negatively affecting the open trading environment
that characterises the highly cyclical world shipbuilding market.

Accordingly, the market does not work optimally and unfair practices, in the form of injurious
prices  and  subsidisation,  are  used  in  several  countries.  While  a  strong  state  aid  discipline
exists in the EU, no specific discipline applies at international level. Unsustainable capacity is
kept in existence, leading shipyards to accept loss-making orders to fill production facilities.

Very low and declining price levels, in particular in combination with low interest rates and
the continued existence of favourable tax schemes, are providing an incentive for shipowners
to place new orders. However, low newbuilding prices also have a negative influence on the
book value of the existing fleet that has been ordered at higher prices. While fleet renewal is
certainly  to  be  welcomed  in  the  interest  of  maritime  safety,  a  very  volatile  newbuilding
market  leads  to  speculation  and  a  disconnection  from  the  economic  fundamentals  of  the
shipping  industry,  namely  the  development  of  freight  rates.  As  the  consequences  of  over-
ordering  for  new  ships  are  only  felt  a  few  years  down  the  line,  the  impact  on  the  shipping
market  is  difficult  to  assess,  but  certain  indications  of  a  future  over-supply,  e.g.  in  the
container shipping sector, have already been recorded by market observers.

6

While  most  industries  are  effectively  covered  by  existing  multilateral  trade  rules,
shipbuilding, due to its own characteristics, is not easily amenable to the application of those
rules. In conclusion, the shipbuilding sector is practically the only industry without this type
of effective protection against unfair trading practices.

2.2.

Recommendations by the LeaderSHIP 2015 Advisory Group

The  LeaderSHIP  2015 Advisory Group  makes  the following  recommendations  for the  trade
related issues:

– 

– 

– 

Continuation of the present EU trade policy approach with determination

Full enforcement of applicable WTO rules to shipbuilding

Development  of  enforceable  OECD  disciplines  through  a  new  shipbuilding
agreement by 2005 and an unambiguous interpretation of existing rules

2.3.

Commission position

The  Commission  welcomes  these  recommendations  which  are  consistent  with  the  policy  it
has  pursued  so  far.  It  considers  that  an  international  shipbuilding  agreement,  negotiated  at
OECD  level  involving  also  major  shipbuilding  nations  that  are  not  members  of  that
organization, should address both subsidies and injurious pricing practises. More specifically,
an agreement should include provisions which make the granting of restructuring aid subject
to  very  strict  monitoring  and  a  significant  reduction  in  the  production  capacity  of  the
benefiting  shipyard.  This  approach  is  already  applied  in  the  European  Community.  An
agreement  must  also  provide  an  effective  remedy  in  case  of  non-compliance  with  the
obligations  under  the  agreement.  It  is  important  that  the  People’s  Republic  of  China
participates in such an agreement as Chinese  yards now have a significant market share and
are set for further capacity development and extension of their product range.

Also,  the  existing  OECD  Sector  Understanding  on  export  credits  for  ships,  and  related
OECD-agreements,  need  a  clear  and  unambiguous  interpretation  in  order  to  rule  out  any
potential  market  distortion  and  discrimination  against  EU  shipbuilders.  The  Commission
believes  that  the  EU  should  seek  a  unified  implementation  of  these  rules  in  all  signatory
countries and an extension of the rules to all shipbuilding regions.

Additional elements that should lead to a level playing field in world shipbuilding have to be
confirmed  at  WTO  level,  with  the  application  of  the  Agreement  on  Subsidies  and
Countervailing Measures to shipbuilding. The Commission is particularly active in pursuing
this path through a Dispute Settlement Procedure against the Republic of Korea.

3.

IMPROVING RESEARCH, DEVELOPMENT AND INNOVATION INVESTMENT

3.1.

Analysis from the report of the LeaderSHIP Advisory Group

There  is  wide  agreement  that  investment  in  research,  development  and  innovation  (RDI)  is
essential for improved competitiveness. This is even more so for a specialised capital  goods
industry such as shipbuilding. RDI investment has to focus on both product development and
production methods.

7

Although  European  shipbuilders  are  today  already  investing  a  significant  part  of  their
turnover in RDI, additional efforts are required to meet Community objectives in the field of
research and innovation.

In this respect it is recognised that the European Community research framework programmes
have increasingly supported RDI efforts of the European shipbuilding industry. This support
provides  particular  benefits  by  bringing  together  a  critical  mass  of  European  research  to
develop  longer-term  solutions  which  address  issues  concerning  training,  the  environment,
safety  and  competitiveness  and  take  into  account  the  wider  commercial,  environmental  and
regulatory  perspectives.  The  “InterSHIP”  project,  being  the  largest  integrated  project
supported by the Community Framework Programme under the surface transport heading, can
serve as a good example.

Based on the encouraging experiences made within the Maritime Industry Forum framework
and growing technological requirements, the continued focus on a long term strategic vision
for  shipbuilding  related  RDI  is  essential.  This  vision  must  be  commensurate  with  the  long
operational life cycle of  ships and should  encourage  the  sustained  active participation of all
maritime  stakeholders  in  order  to  address  all  issues  (industrial,  regulatory,  operational  etc.)
within  the  wider  shipbuilding  RDI  environment.  Such  a  vision  can  be  used  to  direct  policy
development, to allocate resources efficiently and to ensure the maximum  long  term  benefit
for the European shipbuilding industry.

A  fundamental  obstacle  to  improved  RDI  investment  results  from  the  application  of  the
current  Community  Regulation.  The  Community  framework  for  state  aid  for  research  and
development  has  been effective to  ensure  EU  competition  rules,  but,  due  to  certain  specific
characteristics of the sector, the shipbuilding industry has not  been  able to  receive  adequate
RDI  aid  from  Member  States.  Therefore  new  ways  and  means  are  needed  in  order  to
encourage RDI in the sector, while ensuring full compliance with the principles of the internal
market.

Possible  solutions  could  flow  from  the  fact  that  in  shipbuilding  a  significant  part  of  the
innovation activities is integrated in the design and production process itself, while in many
other  industries  RDI  activities  are  carried  out  before  series  production  starts.  Consequently,
the largest part of the product development and of the innovation activities is carried out after
the signature of the sales contract.

Current operating  conditions  are  putting  a  significant economic  and  financial  burden  on  the
EU  shipbuilding  industry.  An  increasing  number  of  European  shipbuilders  operate  in,  and
depend  on,  high-tech  market  niches,  requiring  continuously  growing  investments  in  RDI  in
order to maintain the leadership position held today.

While  maintaining  the  basic  concepts  of  the  current  regulatory  framework  and  without
prejudice to the competition in the internal market, the specifics of the shipbuilding industry
should  not  be  an  obstacle  to  the  application  of  aid  intensities  as  used  in  other  sectors  with
comparable  activities.  This  may  require  clarifying  the  eligible  expenditures  including
prototyping  costs,  and  providing  an  incentive  for  the  adoption  of  innovative  technical
solutions across the European shipbuilding and marine equipment industry.

In  the  absence  of  a  regulatory  framework  that  can  be  applied  effectively  European
shipbuilders have less means to offer highly developed technological solutions with the remit
that the development of new types of ships would no longer be cost efficient. Given the risk
connected  with  RDI  activities  in  general  and  the  increasing  unwillingness  of  financial

8

institutions to finance innovative projects in such circumstances, shipyards may not be able to
respond  to  ever-higher  demands  coming  from  their  customers.  Revenues  could  decrease
further  from  already  low  levels  and  there  is  a  serious  danger  that  EU  shipbuilding
technologies could be caught in a downward spiral in the absence of appropriate measures to
foster RDI investment.

3.2.

Recommendations by the LeaderSHIP 2015 Advisory Group

With  regard  to  RDI  the  LeaderSHIP  2015  Advisory  Group  made  the  following  specific
recommendations:

– 

– 

– 

– 

– 

The  European  dimension  of  shipbuilding  RDI  should  be  strengthened  through
integrating  and  concentrating  efforts,  with  the  aim  to  create  Technology  Platforms.
Work being undertaken within the Maritime Industries Forum should form the base
for this approach.

Shipbuilding should, in substance, enjoy the same conditions as other industries that
engage in similar RDI activities.

Aid  intensities  need  to  reflect  the  actual  technological  risks  taken  in  all  phases  of
design, development and production.

New  definitions,  notably  regarding  innovation  aid,  need  to  be  developed  where
necessary.

RDI  investment  support  needs  to  aim  at  enhancing  European  technological
leadership and should reward risk taking.

3.3.

Commission position

The Commission is aware of the problems raised and, by way of response, is in the process to
adapt  the  rules  applicable,  in  particular  with  regard  to  innovation  aid.  Furthermore,  it  will
closely  monitor  the  effects  of  the  present  conditions  for  Community-funded  research  and
development in the sector and propose further adjustments if deemed necessary.

4.

DEVELOPING ADVANCED FINANCING AND GUARANTEE SCHEMES

4.1.

Analysis from the report of the LeaderSHIP Advisory Group

Securing financing, both for the construction  phase  (pre-delivery)  and the operational phase
of the vessel (post-delivery), is crucial for shipbuilding projects to come about. Shipbuilding
financing  almost  always  includes  guarantees,  either  issued  by  private  banks  or  state
institutions.

Typically, a shipyard’s annual production value exceeds its own value as a going concern, and
a  partly  built  ship  is  not  recognised  as  a  capital  asset.  With  large  volumes  of  purchased
equipment,  the  value  added  by  the  yard’s  own  activities  amounts  to  the  smaller  part  of  the
total contract sum, while it has to assume full liability for the entire project. Most shipowners
require  bank  guarantees  for  any  down  payment  made  during  the  construction  of  the  vessel,
thus increasing the amount needed for the total project financing even further.

9

A  number  of  commercial  banks  are  reducing  their  interest  in  shipbuilding  and  hence  their
commitment  to  a  vital,  but  volatile  industry.  Reduced  interest  will  lead  to  less  expertise,
which in turn accelerates this process.

All  these  factors  lead  to  growing  difficulties  for  the  arrangement  of  the  ship  financing.
Although problems may differ depending on shiptype, they constitute a serious impediment to
the competitiveness of EU shipbuilders.

Three issues are crucial for the financing needs of  European shipyards:  guarantees  covering
the gap between the post-delivery financing schedule and the standard mortgage based loans
of  commercial  banks;  guarantees  for  the  pre-delivery  financing  of  the  project,  covering  the
working  capital  and  the  refund  guarantees  issued  by  the  builder’s  banks;  and,  a  hedging
instrument for the currency risk.

In  addressing these  issues, some key  principles  have  to  apply:  all  instruments  must  be  self-
sustained and transparent. The applicable premiums must reflect the risk that is being run. The
operation of the instruments has to be efficient, decisions should be clear and predictable. Any
action  proposed  has  to  be  in  strict  compliance  with  EU  rules.  WTO  and  OECD  regulations
should be fully respected as well.

In most Member States guarantees by the export credit agency (ECA) are available to finance
shipbuilding  projects.  However,  ECAs  are  designed  to  provide  loans  for  export  orders  to
countries  that  pose  a  political  or  economic  risk.  No  such  “country  risk”  exists  for  the  vast
majority  of  the  shipowners  ordering  at  European  yards.  In  these  cases  an  export  credit
guarantee is either not available or not the appropriate  answer to  cover  the  gap between the
owner’s  actual  financing  requirements  and  the  mortgage  based  loans  available  from
commercial banks.

It is therefore desirable to explore the possibility of establishing an EU-wide guarantee fund,
to  be  operated  by  a  European  body  in  a  manner  that  is  compatible  with  the  rules  of  the
common  market  and  the  OECD  principles.  Premiums  should  reflect  the  quality  of  the  ship
owner, the type of ownership, the employment of the ship, the type and duration of its charter
and  other  factors  that  might  influence  the  risk  level  of  the  loan.  To  this  end  a  system  of  a
limited number of rating categories could be applied. Fees, which depend on the rating, shall
ensure that the guarantee scheme complies with the OECD rules.

A common (or approximated) standard for  guarantee schemes to  be implemented by  all EU
Member  States,  following  the  key  principles  outlined  above,  could  provide  an  alternative
solution.  However,  the  harmonisation  of  such  financial  instruments  is  a  very  difficult
exercise. In any case, tools implemented should reflect practical requirements, ensuring a fast
and efficient decision making process.

Concerning pre-delivery financing a similar approach could be pursued. A guarantee covering
the  difference  between  the  actual  cost  price  and  the  down  payments  made  by  the  owner,
increased by the value of the outstanding bank guarantees for down payments, is  absolutely
essential.  In  this  case  also,  a  European-wide  guarantee  instrument  would  be  desirable,  with
common or approximated standards in EU member states as an alternative.

With  regard  to  the  management  of  currency  risks  the  situation  in  the  EU  varies  widely.  In
order  to  assure  fair  and  equal  conditions,  an  insurance  covering  the  risks  in  bidding  and
contracting in foreign currencies seems essential. Since banks do not provide such a facility at
a reasonable cost, the export credit insurance companies, covered by appropriate re-insurance,

10

are the obvious choice. Since the rates of exchange are largely dominated by the interest rate
policy of the major currency controllers, a key role in the re-insurance of currency risks could
be played by a European entity.

4.2.

Recommendations by the LeaderSHIP 2015 Advisory Group

The LeaderSHIP 2015 Advisory Group gave particular attention to the issue of financing and
arrived at the following recommendations:

– 

– 

Explore the possibility of establishing an EU-wide guarantee fund for pre- and post-
delivery financing. The alternative of harmonising standards in EU member states, in
line with common market and OECD rules, could also be considered, albeit difficult
to fully achieve. Any such tools have to be easily applicable.

Export credit insurance companies, covered by appropriate re-insurance, should offer
hedging instruments for currency risks.

4.3.

Commission position

In  the  light  of  the  above,  the  Commission  undertakes  to  explore,  together  with  industry,
whether a European entity such as the European  Investment Bank can take a leading role in
pre-  and  post-delivery  financing.  Priority  should  be  given  to  the  issue  of  pre-delivery
financing  as  this  has  shown  to  be  the  most  problematic  element.  Post-delivery  financing  is
normally easier to secure as the completed vessel can be used  as collateral and a number of
specialised  banks  are  active  in  this  particular  field.  The  Commission  is  also  prepared  to
explore, in co-operation with stakeholders, whether and how the re-insurance of currency risk
can be achieved on a European level.

5.

PROMOTING SAFER AND MORE ENVIRONMENT-FRIENDLY SHIPS

5.1.

Analysis from the report of the LeaderSHIP Advisory Group

Over  the  last  decade  the  European  Union  has  increased  its  profile  in  the  fields  of  maritime
safety and protection of the marine environment by assembling a sizeable number of laws.

The  EU  shipbuilding  and  shiprepair  industry  has  always  supported  the  adoption  of  this
legislation,  in  particular  with  regard  to  the  creation  of  a  European  Maritime  Safety  Agency
(EMSA) and the strengthening of the Port State Control regime.

Industry  holds  the  view  that  modern  ships  are  designed  and  built  to  safely  withstand  the
severest  weather  and  that  proper  maintenance,  undertaken  by  reliable  yards,  could  have
prevented recent ecological disasters. Unfortunately, the present situation in the shipping and
shipbuilding industries is characterised by very volatile freight rates and a significant decrease
of newbuilding prices over the last years. These trends risk affecting the quality of new ships
and the maintenance of the existing fleet. Recent ship losses have shown significant structural
as well as operational deficiencies. There is a clear trend in ship design to reduce construction
and/or  operating  costs.  It  needs  to  be  analysed  to  which  extent  such  changes  are
compromising the integrity of the vessel and its cargo in rough weather conditions.

Against this background, a number of lines of action are required, namely the elimination of
sub-standard  vessels  from  EU  waters,  increased  responsibilities  to  be  faced  by  operators,

11

improved technical surveys, and a quality assessment scheme for shipyards on a world-wide
level. On all of these points the EU shipbuilding industry has an essential role.

With regard to the elimination of sub-standard vessels, the shipbuilding industry can provide
crucial  expertise  to  the  European  Maritime  Safety  Agency.  To  this  end,  a  joint  expert
committee  should  be  established,  devoted  mainly  to  the  following  tasks:  To  assess  the
industrial impact of existing or pending EU legislation concerning maritime transport and, in
particular, maritime safety; to analyse possible further proposals to enhance maritime safety;
and  to  support  the  EU  within  the  IMO.  First  efforts  in  this  context  have  been  undertaken
within the LeaderSHIP 2015 frame.

Making operators more responsible should encourage “quality shipping” and thus provide an
incentive to invest in better and safer ships. European yards are prepared to offer appropriate
designs, exceeding the current minimum standards.

Promoting a more transparent, uniform, efficient and independent system of technical surveys
of  vessels  can  equally  draw  on  the  shipbuilding  expertise  available  from  the  European
shipbuilding  industry.  This  is  particularly  true  for  the  marine  equipment  industry  and  the
knowledge providers who are world leaders in their respective fields.

Encouraging  higher  safety  and  environmental  standards  and  providing  a  useful  guide  to
shipowners, operators and surveyors indicating yards whose ships risk becoming rapidly sub-
standard or suffer from high maintenance and  repair costs is a long term objective to which
EU shipyards can meaningfully contribute through the definition of good industry practice.

These  actions  should  be  developed  at  Community  level,  but  also  in  the  framework  of  the
competent international for a such as the IMO.

In addition, the EU shipbuilding industry has an important role to play in increasing overall
European transport safety and reducing the negative impact on the environment through Short
Sea  Shipping.  Short  Sea  Shipping  and  European  shipbuilding  can  provide  each  other  with
new  market  opportunities.  Short  Sea  Shipping  and  its  inter-modal  integration  generally
require  new  or  specially  adapted  vessels  and  advanced  and  flexible  ship  designs  that  are  a
domain  of  European  shipyards.  The  comparatively  smaller  size  of  these  vessels  gives  an
advantage to domestic yards.

5.2.

Recommendations by the LeaderSHIP 2015 Advisory Group

– 

– 

– 

– 

– 

Existing and future EU legislation has to be strictly implemented and “exported” to
the international level.

A more transparent, uniform, efficient and independent system of technical surveys
of vessels has to be promoted.

A quality assessment scheme for shipyards at world-wide level should be developed,
covering newbuilding and repair.

Maintaining  and  strengthening  shiprepair  capabilities  in  Europe  is  important  to
ensure a high level of transport safety and environmental protection.

An  expert  committee  is  to  be  established  to  provide  technical  support  to  the
European Commission and to EMSA.

12

– 

The great potential of Short Sea Shipping needs to be exploited through appropriate
political and economic framework conditions.

5.3.

Commission position

The  Commission  fully  supports  these  recommendations  which  are  in  line  with  its  existing
policies in the field. With regard to Short Sea Shipping it calls upon all policy makers to fully
develop and exploit this opportunity for a sustainable surface transport system across Europe
through  an  appropriate  framework,  taking  into  consideration  the  specific  conditions  of
European coastal waters and the applicable EC state aid rules.

6.

A EUROPEAN APPROACH TO NAVAL SHIPBUILDING NEEDS

6.1.

Analysis from the report of the LeaderSHIP Advisory Group

Naval  shipbuilding  is  a  distinct  part  of  the  European  shipbuilding  industry  in  a  number  of
aspects.  Its  technology  contents  is  even  higher  than  the  one  typically  found  in  commercial
shipbuilding, the supply industry plays a very significant role and the market is composed of
two very different environments –  the  export  and  the  domestic  markets.  Naval  shipbuilding
has  so  far  not  been  exposed  to  systematic  unfair  international  competition  as  seen  in  the
commercial  sector,  although  export  orders  are  in  general  subject  to  fierce  competition
between  European  producers.  As  a  result  profit  margins  are  higher  and  many  commercial
shipbuilders  find  it  desirable  to  complement  their  activities  with  military  contracts.  For  the
future it can be expected that globally operating shipbuilding companies would benefit from
being active in both areas.

With  regard  to  technologically  advanced  products,  European  naval  yards  are  unmatched
leaders in some  areas  such  as  conventional  submarines  and  fast  patrol  boats.  This  is  due  in
some measure to the strong cross-fertilisation between naval and highly competitive merchant
shipbuilding, an advantage that must be exploited to the full.

However,  compared  to  other  defence  sectors,  European  naval  shipbuilding  is  dominated  by
national companies. Without increased co-operation and consolidation, European players risk
being  marginalized  in  global  terms.  This  in  turn  could  reduce  future  EU  defence  options.
Creating  strong  integrated  European  players  will  assist  Europe’s  competitiveness,  also  with
respect to its current dominant position in international naval export markets. Three key areas
merit  immediate  attention:  industrial  co-operation  between  yards  and  between  yards  and
suppliers, access to export markets and consolidation of the industry.

Wide-ranging  co-operation  between  yards  is  still  hampered  by  diverging  operational
requirements from national navies. Standardisation of components and sub-systems could and
should  be  widely  enhanced,  leading  to  considerable  reduction  in  total  ownership  costs.
Procurement  cycles differ as well, leaving  yards  with  an  uneven  workload.  First  experience
with  common  programmes  which  have  been  launched  with  the  aim  of  reducing  costs  and
sharing  non-recurring  ones  achieved  encouraging  results,  but  substantial  improvements  are
possible.

Therefore,  Member  States  and  their  navies  need  to  agree  to  a  minimum  set  of  common
operational  requirements  and  a  harmonisation  of  procurement  cycles,  in  line  with  the
Commission’s  Communication  on  “European  Defence  –  Industrial  and  Market  Issues”  of

13

March 20034. These minimum requirements should be based on the Petersberg tasks and the
“Helsinki  Headline  Goals”.  Initial  efforts  towards  common  requirements  should  focus  on
smaller surface vessels below frigate size, and should exceed this size later.

Standardisation  of  components  and  sub-systems  should  be  based  on  a  voluntary  and
systematic  approach.  Standardisation  should  to  some  extent  also  cover  a  joint  approach  to
quality  assurance  and  life  cycle  support.  Classification  societies  have  an  important  role  in
standardisation, building on their experience in commercial shipbuilding. The ultimate goal of
these efforts must be the interoperability of systems, vessels and fleets, leading to significant
reductions in ownership costs. Co-operation should be organised around a limited number of
major  projects,  using  pooled  R&D  resources  and  a  single  European  defence  equipment
market.

Export markets can be quite narrow and specific. Still, these markets are key to the recovery
of up-front development costs. Non-harmonised export rules in the Member States, based on
different  traditions  and  diverging  geo-political  objectives,  lead  to  distortion  of  competition
and  barriers  to  increased  industrial  co-operation.  The  lack  of  full  application  of  common
market rules to intra-EU trades may have similar negative effects. Therefore, export rules (and
their application and interpretation) need to be harmonised between Member States.

European  naval  yards  primarily  serve  a  limited  national  market,  with  a  high  degree  of
customisation  and  stringent  and  specific  navy  requirements.  In  a  number  of  Member  States
naval  yards  are  state-owned  or  state-controlled,  although  this  does  not  rule  out  that
commercial  paradigms  are  employed.  Considerable  structural  differences  exist  between
European  producers,  with  large  state-owned  entities  competing  in  the  same  markets  with
medium-sized, privately owned yards which claim that private ownership is a pre-requisite to
succeed in any consolidation effort.

6.2.

Recommendations by the LeaderSHIP 2015 Advisory Group

– 

– 

– 

Joint  requirements  should  be  established  to  shape  a  number  of  major  projects,
enabling  co-operation  between  yards  and  leading  to  inter-operability  of  systems,
vessels and fleets.

Member states should address the issue of harmonisation of export rules.

Common  rules  to  create  a  European  market  for  defence  equipment  have  to  be
developed, based on the Council’s request to create an intergovernmental agency in
the field of defence capabilities development, research, acquisition and armaments.

6.3.

Commission position

The  Commission  supports  these  recommendations  which  are  in  line  with  the  approach
developed in its Defence Communication of March 2003.

Establishing  a  common  market  for  defence  equipment,  including  the  setting  up  of  a  joint
procurement agency, is key. In that respect, following the European Council in Thessaloniki
in  June  2003,  the  Member  States  and  the  European  Institutions  are  actively  preparing  the
creation  of  a  European  Defence  Agency  in  2004.  This  agency  will  operate  in  the  field  of
defence capabilities development, research, acquisition and armaments. Open to participation

4

COM(2003) 113 final of 11.3.2003

14

                                                
by all Member States, this agency will aim, inter alia, at strengthening the European defence
industrial  and  technological  base  and  creating  a  competitive  European  defence  equipment
market  throughout  the  promotion  of  European  co-operative  programmes.  The  successful
achievements  of  that  Agency  in  implementing  numerous  programmes  involving  enough
participants  to  reach  economies  of  scale,  have  the  potential  to  enable  and  stimulate  the
necessary industrial consolidation, including in  the  naval  shipbuilding  sector.  However,  any
state  aid  granted  to  naval  shipyards  must  not  be  transferred  to  commercial  shipbuilding
operations.

7.

PROTECTION OF INTELLECTUAL PROPERTY RIGHTS (IPR)

7.1.

Analysis from the report of the LeaderSHIP Advisory Group

The competitiveness of the European shipbuilding and marine equipment industry can only be
maintained  and  improved  through  innovative  vessel  concepts,  optimised  sub-systems  and
sophisticated  design,  production  and  planning  methods.  This  “intellectual  property”  in  the
wider sense has therefore to be protected against competitors who offer very similar or even
completely  pirated  products  without  the  need  to  recover  research  and  development  costs.
Unfortunately, the extent of product piracy in the sector is not known and evidence is largely
anecdotal. Therefore a thorough and inventive approach is required to address the problem.

Knowledge-driven  technology  is  created  at  a  very  early  stage  in  the  relationship  between
yards and their suppliers.  Yards have a need to disclose detailed technical requirements and
solutions  to  their  suppliers  in  order  to  safely  calculate  the  project  both  under  technical  and
commercial terms. Shipyards also have to share their knowledge with classification societies,
which  perform  a  variety  of  functions.  The  relationship  between  yards  and  shipowners  is
equally  characterised  by  a  direct  and  broad  exchange  of  knowledge-based  details  of  the
vessel. Finally, yards are co-operating closely with universities and other experts, especially
in  the  field  of  computer  aided  design,  computer  integrated  manufacturing  and  other  IT
components,  in  order  to  exploit  R&D  results  and  hereby  disclose  relevant  shipyard  know
how.  As  a  result,  yards  are  facing  a  permanent  risk  of  violation  of  their  and  third  parties’
intellectual property rights.

Today,  copyrights,  registered  designs,  trademarks  and  patents  are  the  main  instruments  to
protect  intellectual  property  rights.  Additional  measures  are  non-disclosure  and  specific
collaboration agreements, although the “one-off” features often found in shipbuilding projects
can make such agreements costly and appear less rewarding.

In order to exploit these existing instruments to the full, yards and suppliers need to become
more aware of the threats to their know how and the resulting competitive disadvantages. The
establishment of knowledge databases could become a central activity for European yards to
reach this objective. These databases should not only cover specific vessel characteristics and
components,  they  should  also  indicate  key  people  and  important  specific  customer-supplier
relations.  Knowledge  databases  would  help  to  form  an  IPR-entity  that  could  be  charged  to
safeguard and protect European shipbuilding knowledge. It would provide yards and suppliers
with  information  on  the  internationally  available  knowledge  (documented  and  non-
documented) on specific vessel components, the requirements of an IPR protection of specific
technical  solutions,  the  existing  patents  in  the  relevant  technical  fields,  the  technological
position of competitors, and the potential  exposure of  yards  and  suppliers  to  product  piracy
and other threats.

15

Due to their comparatively long validity and their international recognition, patents are still an
essential  instrument  which  European  shipbuilders  need  to  exploit  to  the  largest  possible
extent, including in the countries of their main competitors. In addition shipowners should be
prevented  from  operating  ships  carrying  devices  on  board  built  in  violation  of  existing
patents.  However,  the  complex  and  truly  globalized  shipbuilding  market  contrasts  with  the
current international  framework  for the  protection  of  patents,  established  in  1925  and  never
changed  substantially  since  then.  Today,  many  of  the  rules  laid  down  then  appear
anachronistic  and  unjustified.  A  re-examination  of  the  current  framework  which  does  not
allow national authorities to take measures against a ship, carrying a device built in violation
of a patent, calling at a port where such patent is registered and protected, could give yards the
right tool to protect their inventions and innovations, boosting the investments in research and
development and stimulating yards’ interest in acquiring patents.

7.2.

Recommendations by the LeaderSHIP 2015 Advisory Group

– 

– 

– 

The  existing  instruments  for  IPR  protection  (copyrights,  registered  designs,
trademarks, patents, non-disclosure and specific collaboration agreements) need to be
exploited to the full.

Knowledge data bases for shipbuilding, containing information about the state of the
art,  existing  patents,  the  specific  competitive  situation  for  certain  products  and
solutions,  and  key  knowledge  holders,  should  be  built  and  run  by  dedicated  IPR
entities.

International  patent  rules  applicable  to  shipbuilding  need  to  be  examined  and
possibly strengthened.

7.3.

Commission position

The Commission believes that the recommendations should be pursued. It will follow its part
and calls upon industry to exploit existing IPR rules and create the appropriate data bases, the
potential of which should be explored through further study and expert examination.

8.

SECURING THE ACCESS TO A SKILLED WORKFORCE

8.1.

Analysis from the report of the LeaderSHIP Advisory Group

In its Lisbon strategy the Commission has given particular attention to the question of skills
and life-long learning. For any manufacturing sector, but for shipbuilding in particular, it is of
high  importance  to  retain  qualified  staff  and  attract  young  people.  Shipbuilding,  like  other
maritime sectors, suffers from a negative image that creates serious problems in this respect.

While  the  decentralisation  of  competence  in  the  areas  of  education  and  training  limits  the
scope  for  top-down  initiatives  at  EU  level,  there  should  be  room  for  support  to  activities
carried out jointly by organisations interested in promoting know-how.

The  EU  already  promotes  the  exchange  and  development  of  knowledge  among  research
workers  and  between  the  research  sector  and  industry.  The  principal  instrument  for  that
purpose  is  the  Marie  Curie  programme,  which  supports  training  abroad  and  the  transfer  of
knowledge through fellowships at post graduate to post doctoral level. The maritime industry
can benefit from this support to train researchers within the industry, enable the development

16

of  commercial  research  knowledge,  transfer  research  knowledge  to  the  industry  and  to
facilitate exchange of knowledge between industry and academia.

Initiatives that could be developed at EU level may also relate to the creation of centres for
post-graduates, with research and teaching activities, or to the creation of regional centres of
excellence in which both companies and educational institutions would participate. This set-
up could facilitate exchanges of students, transfer of knowledge, diffusion of good practices
and  the  recognition  of  qualifications  throughout  the  EU.  It  would  also  help  to  develop
exchanges of experiences between technical staff in the maritime sector.

The  evolution  of  the  industry  towards  a  structure  with  a  few  major  companies  and  many
subcontractors  increasingly  requires  new  managerial  attitudes  to  foster  adaptability  and
innovation. Management needs to strengthen its ability to run firms based on project-related
roles rather than on statically organised functions. This approach would be a vehicle for the
social and technical innovations required to enable the industry to keep offering high quality
employment in the longer term.

As the first in the metal sector, shipbuilding has now formally established a committee for the
sectoral  social  dialogue,  recognised  by  the  Commission  in  line  with  its  Communication  on
social  dialogue  and  in  accordance  with  Art.  138  of  the  Treaty.  This  welcome  development
might lead to joint undertakings and to agreements as regards skills and social innovation in
the broadest sense, in particular concerning the adaptability of workers and firms to change,
and the implementation of lifelong learning strategies.

Independent of the approach chosen, four concrete key aspects need addressing: Training of
managers;  promoting  exchanges  of  shipbuilding  specialists;  supporting  the  development  of
skills; and, an appropriate communication policy to attract skilled blue and white collar staff.

Management  training  should  be  offered  both  in  a  regional  and  international  context.
Interaction  needs  to  be  organised  between  senior  and  junior  managers.  The  exchange  of
knowledge,  including  to  a  certain  extent  standardisation  thereof,  is  important.  Finally,
management training should include knowledge of EU policies and regulations.

Technical, management and research staff in the shipbuilding industry, including equipment
manufacturers and services, should have the opportunity to work and learn  elsewhere in the
EU. The same applies to students and teachers on various levels.

A specific EU platform where employers and employees meet, e.g. within the framework of
the  sectoral  social  dialogue,  could  promote  the  development  of  skills  and  social  innovation
adjusted to regional needs.

A  publicity  campaign  at  EU  level  could  help  to  stress  the  importance  of  preserving  and
further  developing  the  shipbuilding  and  ship-repair  industry.  Regional  publicity  campaigns
could  be  added  to  strengthen  the  effect  of  the  EU-wide  campaign,  in  order  to  achieve  the
Lisbon goals in the shipbuilding sector.

8.2.

Recommendations by the LeaderSHIP 2015 Advisory Group

– 

– 

Programmes  for  shipbuilding-specific  management  training  need  to  be  developed
and established.

New skill requirements need to be analysed and addressed, ideally through a sectoral
social dialogue.

17

– 

– 

– 

Exchange of staff and know how needs to be organised on all levels, from shop floor
to academia.

A  publicity  campaign,  showing  the  vitality  and  sustainability  of  the  shipbuilding
industry, has to be implemented.

Regional centres of excellence could provide crucial input for the realisation of  the
above recommendations.

8.3.

Commission position

The Commission agrees with these recommendations and calls upon the parties concerned to
follow them up actively. The Commission has already established a sectoral social dialogue
committee which in its view should serve as the focal point for the relevant activities.

9.

BUILDING A SUSTAINABLE INDUSTRY STRUCTURE

9.1.

Analysis from the report of the LeaderSHIP Advisory Group

A viable industry structure has to be at the core of any effort to improve the competitiveness
of the EU shipbuilding and ship repair industry. In the area of newbuilding, competitors in the
Far East are much more concentrated, with only a handful of large companies dominating the
scene in Korea and Japan. In Europe, shipyards have also been reorganised into larger groups,
comprising  of  a  number  of  production  facilities,  but  there  are  more  than  30  major  yards
remaining  as  independent  companies  and  there  are  numerous  smaller  yards  engaging  in  the
production of fishing vessels and the like. In the repair sector the fragmentation is even more
pronounced.  Also  with  regard  to  naval  shipbuilding  more  concentration  seems  desirable  in
order to achieve synergies and limit problems with regard to R&D spending, market standing
or access to finance.

Considerations on the future structure of the European shipbuilding industry therefore need to
cover all areas of activities, from the construction of all types of merchant and naval vessels,
to repair and conversion projects, to the manufacturing of key components and systems, as all
these  activities  are  closely  linked.  Security  considerations  establish  clear  needs  for  certain
shipbuilding capabilities, with regard to both commercial shipping and defence related tasks.
Maintenance and repair capabilities are certainly to be regarded as indispensable due to safety
requirements and the topographic nature of Europe.

The  cornerstones  for  a  healthy  and  sustainable  development  of  the  industry  world-wide  are
reasonable  investments  meeting  the  actual  market  demands.  Economically  less  efficient
facilities should exit from the market and investments should concentrate on segments where
sufficient returns can be achieved.

Great  market  volatility  and  the  cyclical  nature  of  the  industry  force  shipyards  to  meet
contradicting objectives: In order to optimise productivity, yards have to specialise; in order
to  be  able  to  weather  market  volatility  and  business  cycles,  yards  should  diversify.  The
comparatively  smaller  size  of  European  yards  can  be  a  competitive  advantage  when
specialising in certain products. At the same time, market volatility constitutes a serious threat
to  highly  specialised  yards:  Declining  demand  in  specific  market  segments  may  force  a
specialised yard to engage in alternative products for which it is less well suited, and to team
up with other yards.

18

On company level, structural changes are on-going. They relate particularly to the relationship
between yard and suppliers, but consolidation through mergers and acquisitions is also on the
horizon.  In  the  future,  the  relationship  between  yards  and  suppliers  will  evolve  towards
project  partnerships,  moving  away  from  the  traditional  customer-supplier  relation.  Recent
developments in the market indicate that this evolution may dramatically accelerate if efforts
to  merge  a  number  of  naval  yards,  eventually  under  the  lead  of  a  key  marine  equipment
producer,  are  successful.  As  some  of  the  yards  involved  are  also  engaged  in  commercial
shipbuilding, a powerful entity, comprising all major shipbuilding activities, could emerge.

Great diversity of yards and products exists in Europe, particularly when the situation in the
future  EU  member  states  is  taken  into  account  as  well.  The  total  employment  in  merchant
shipbuilding  in  the  accession  countries  is  about  20%  higher  than  in  the  combined  EU  15,
while production output is only slightly above a quarter of the EU 15 reference figure. With
still  much  lower  labour  costs,  shipyards  in  accession  countries  focus  on  a  different  product
portfolio. The different  sets  of  competitive  advantages  already  foster  extensive co-operation
between yards in current and future EU member states. However, this cannot conceal the fact
that  the  EU  enlargement  process  will  increase  the  necessity  for  an  overall  industrial
consolidation  in  Europe.  Past  experience  of  fundamental  restructuring  processes,  such  as  in
East  Germany,  indicates  that  policies  are  not  yet  optimised  in  this  respect.  Industrial
restructuring needs to put stronger emphasis on commercial investors who provide additional
know  how  and  better  market  access.  Where  yard  closures  have  become  unavoidable,  these
should be undertaken and supported with the view to create new investments.

The  future  policy  for  the  sector  should  be  reviewed  without  bias  and  with  a  clear
understanding  of consequences.  Two extreme paths, both undesirable, illustrate  the possible
pitfalls.  The  absence  of  specific  measures  and  policies  for  shipbuilding  could  result  in  the
disappearance  of  merchant  shipbuilding  in  Europe  within  less  than  a  decade  and  a  serious
impediment  to  the  construction  of  a  European  defence  identity.  On  the  other  hand,
protectionism, as experience shows elsewhere, for example in the USA, will inevitably result
in  an  irreversible  loss  of  competitiveness  in  commercial  shipbuilding  and  extremely  high
procurement costs for naval ships.

9.2.

Recommendations by the LeaderSHIP 2015 Advisory Group

– 

– 

– 

Non-action is not an option, neither is protectionism: The EU of the 25 must further
develop  its  policy  approach  to  the  sector,  in  line  with  its  principles  on  industrial
policies.

A consolidation process among European producers should be facilitated, providing
incentives to remove less efficient production capacity and thereby freeing resources
for new investments.

The  current  closure  aid  rules  in  the  EU  should  be  scrutinised  with  the  view  to
facilitate a more pro-active approach, based on the idea of “aid to consolidation”.

9.3.

Commission position

The  Commission  believes  that  further  consolidation,  respecting  competition  rules,  can
generate benefits at all levels of activity, commercial and naval shipbuilding, and ship repair.
However,  this  is  primarily  the  responsibility  of  industry  and  in  matters  of  defence  Member
States have a key role also. The Commission is ready to offer its knowledge and experience to
facilitate the process.

19

10.

CONCLUSIONS

The  Commission  acknowledges  the  substantial  work  undertaken  in  the  framework  of  the
LeaderSHIP  2015  initiative  and  endorses  the  approach  to  improve  sectoral  competitiveness
through an intensive dialogue between stakeholders. It invites the other European institutions
to  closely  examine  the  issues  raised  and,  in  line  with  their  commitment  to  support  the
manufacturing industries in Europe, to co-operate with the Commission in developing specific
sectoral  responses  that  are  suited  to  boost  industrial  competitiveness  and  to  take  action  on
aspects that fall within their competences. More specifically, the Commission wishes to stress
the following aspects:

– 

– 

– 

– 

– 

– 

– 

The important strategic dimension of shipbuilding and shiprepair for Europe should
be  recognised  by  Member  States,  with  regard  to  defence  needs,  the  trade  in  raw
materials and manufactured goods for import and export, employment opportunities
and the retaining of know-how. The important role of the marine equipment industry
in the production of merchant and naval vessels should receive particular attention.

WTO  rules,  in  particular  those  relating  to  subsidies  and  countervailing  measures,
need to be used to help establish a level playing field.

Enforceable disciplines need to be brought about as soon as possible and by 2005 at
the  latest,  through  a  new  international  shipbuilding  agreement,  as  well  as  the  clear
interpretation of existing OECD rules on export credits. Any such agreement should
also  include  the  People’s  Republic  of  China.  Member  States  are  called  upon  to
continue  their  steadfast  support  for  the  goals  pursued  by  the  Community  in  the
current OECD negotiations.

Regarding  investment  in  innovation,  state  aid  rules  will  be  further  adapted  to  the
specific conditions of the European shipbuilding industry. Member States are called
upon to adjust their support measures to the new rules.

The  need  to  explore  whether  a  European  entity  such  as  the  European  Investment
Bank  can  take  a  leading  role  in  pre-  and  post-delivery  financing  for  shipbuilding
projects.  Priority  should  be  given  to  the  issue  of  pre-delivery  financing  as  this  has
shown to be the most problematic element. The Commission is open to exploring in
co-operation  with  stakeholders  whether  and  how  the  re-insurance  of  currency  risk
can be achieved on a European level.

institutions  and  Member  States, 

the  European
Together  with  Community 
shipbuilding industry should play an important role in the improvement of maritime
safety  and  environmental  protection  through  providing  technical  expertise  to  the
relevant  bodies,  through  the  development  of  high  quality  products  that  exceed  the
current minimum standards and through the establishment of good industry practice,
in particular concerning ship repair works. The latter could take the form of a quality
assessment scheme for shipyards on a world-wide level.

Additional  market  opportunities  for  EU  shipyards  could  result  from  Short  Sea
Shipping and intermodal integration which require new or specially adapted vessels
and  transport  concepts.  EU  policy  makers  in  the  Council  and  the  Parliament  are
called upon to support the Commission in its efforts to facilitate this modal shift.

20

– 

– 

– 

– 

– 

– 

The need for Member States and their navies to agree to a minimum set of common
operational requirements and a harmonisation of procurement cycles, in line with the
Commission’s  Communication  on  “European  Defence  –  Industrial  and  Market
Issues”  of  March  2003.  These  minimum  requirements  should  be  based  on  the
Petersberg  tasks  and  the  “Helsinki  Headline  Goals”.  Co-operation  between  yards
should be organised around a limited number of major projects, using pooled R&D
resources  and  a  single  European  defence  equipment  market,  while  respecting  EC
competition rules.

Export  rules  (and  their  application  and  interpretation)  for  naval  vessels  and  their
components need to be harmonised between Member States.

Establishing a common market for defence equipment, including the setting up of a
joint  procurement  agency,  would  foster  industrial  consolidation  in  the  longer  term,
and consistent with its approach set out in its Communication, the Commission will
give its full support to relevant actions towards the achievement of this goal.

The extent of the problems regarding intellectual property right infringements in the
shipbuilding sector will be further explored. Based on the outcome, new approaches
to  the  protection  of  intellectual  property  rights  have  to  be  considered.  First  ideas
relate  to  the  creation  of  a  comprehensive  knowledge  database,  whose  feasibility
should  be  studied,  and  a  re-examination  of  applicable  patent  law  which  appears
outdated and inappropriate.

With regard to skills and training four issues require immediate attention: training of
managers with the aim to strengthen the ability to run firms based on project-related
roles; promoting exchanges of specialists with the objective to facilitate the transfer
of  knowledge,  the  diffusion  of  good  practices  and  the  recognition  of  qualifications
throughout the EU; supporting the development of skills, in particular concerning the
adaptability  of  workers  and  firms  to  change,  and  the  implementation  of  lifelong
learning  strategies;  and,  a  communication  policy  to  attract  skilled  blue  and  white
collar  staff.  It  is  proposed  to  develop  targeted  activities  in  all  these  areas,  ideally
through the social dialogue  that  has  been established  for the sector.  Actions should
take place on regional and EU-wide level.

respecting  EC 

The need to maintain a supportive policy approach to the sector, in line with its goals
to  ensure  industrial  competitiveness.  A  consolidation  process  among  European
producers, 
industrial
competitiveness by providing incentives to remove less efficient production capacity
and  thereby  freeing  resources  for  new  investments.  Greater  co-operation  between
naval  defence  and  shipbuilding  resources  in  Europe,  built  on  a  number  of  leading
companies in the areas of commercial and naval shipbuilding and marine equipment,
can also contribute to the improvement of competitiveness.

rules,  would 

competition 

improve 

21

ANNEX

The European Shipbuilding and Ship Repair Industry – Key Data

The information provided here is based on data presented in the AWES annual report for 2002. AWES
is  the  association  of  European  Shipbuilders  and  Shiprepairers,  with  members  in  Norway,  Finland,
Poland,  Germany,  the  Netherlands,  Denmark,  Great  Britain,  France,  Spain,  Portugal,  Italy,  Croatia,
Greece and Romania. All data refer to AWES and cover shipbuilding and ship repair activities only.
Figures for the marine equipment industry are not included.

1.

Market shares

Market shares in completions
(based on compensated gross tonnes)

40

35

30

25

%

20

15

10

5

0

40

35

30

25

%

20

15

10

5

1998

1999

2000

2001

2002

Market shares in new orders
(based on compensated gross tonnes)

AWES
JAPAN
S. KOREA 

AWES
JAPAN

S. KOREA 

0
1998

1999

2000

2001

2002

In  terms  of  completions,  i.e.  tonnage  delivered  during  the  periods  in  question,  European  producers
were  able  to  maintain  their  share  until  2002.  Korea  increased  output,  but  rather  to  the  detriment  of
Japan. The  completions  in  2002 reflect orders that  were taken  in 2-3  years  earlier,  and  it  should  be
noted that towards the end of 2000 order intake for European yards increased due to the abolition of
operating aid. In terms of new orders, the situation changed after the end of 2000: European order in-
take decreased while Japan recovered due to strong domestic demand. The combination of the graphs
shows that European producers did not participate in the increased ordering activity since 2000 to the
same extent as their main competitors, but are still busy in the completion of past orders. The failure to
maintain  an  important  share  in  new  orders  has  many  reasons:  The  decline  in  cruise  ship  orders  (a
mainstay  of  European  production)  after  the  events  of  11  September  2001,  the  aggressive  pricing
policies  of  Korean  yards,  in  particular  with  regard  to  Liquefied  Natural  Gas  tankers  (another
stronghold  of  European  yards),  the  emergence  of  China  as  a  major  shipbuilding  nation,  the  strong
domestic demand in Japan that is traditionally inaccessible for non-Japanese producers and the surge
in orders for oil tankers (a very simple shiptype whose production is no longer relevant for European
yards), following the latest European maritime safety legislation.

22

2.

Employment and production

WORKFORCE IN EUROPEAN SHIPBUILDING AND SHIP REPAIR

Country

Total

Newbuilding Total

Newbuilding

Total

1975

2002

Drop in percent
Newbuilding

BELGIUM
CROATIA 
DENMARK
FINLAND 
FRANCE
GERMANY 
GREECE
IRELAND 
ITALY 
NETHERLANDS
NORWAY
POLAND 
PORTUGAL 
ROMANIA 
SPAIN 
SWEDEN
UNITED KINGDOM 

TOTAL 

10245

18900
18000
40354
105988
10159
1633
36260
39850
29000

17100
47000

31500
55999

6586

15300
17000
24938
71598
2316
1427
21460
20850
16500

7000
27800

25000
48272

0
10957
3360
6150
6800
23300
3000
0
13438
9000
5266
20132
2350
20400
7876

7000

0
8464
2820
6000
5200
16800
750
0
9606
3800
3707
15073
1284
19100
6234

2500

100%

82%
66%
83%
78%
70%
100%
63%
77%
82%

86%
57%

100%
87%

461988

306047

139029

101338

70%

100%

82%
65%
79%
77%
68%
100%
55%
82%
78%

82%
31%

100%
95%

67%

Production of European yards in compensated 
gross tonnes

6000000

5000000

4000000

3000000

2000000

1000000

0

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

Year

The available information shows that employment in European shipbuilding has decreased by nearly
70% since 1975, with a number of countries ending all shipbuilding activities for good. At the same
time output remained at a very high level, with a further increase since 2001 when cruise ship orders
placed  before  11  September  2001  came  up  for  delivery.  The  reasons  for  this  dramatic  productivity
increase  are  new  improved  production  methods,  the  closure  of  many  less  efficient  yards  and  a
significant shift in the production portfolio, from standard shiptypes such as tankers and bulk carriers
to  sophisticated  vessels  such  as  cruise  ships.  It  should,  however,  be  noted  that  deductions  on
competitiveness  of  the  industry  are  notoriously  difficult  to  make  due  to  the  cyclical  nature  of  the
business,  the  interaction  with  the  highly  volatile  shipping  industry,  technological  developments
regarding  new  shiptypes  and  massively  increased  ship  sizes,  wide-spread  trade  distortions  and  the
nature of shipbuilding with long delays between ordering and delivery and an extremely diverse range
of products that makes direct comparisons between competitors problematic.

23

3.

Production value and export share

Production value 
of European yards in Mio Euro

13500

13000

12500

12000

11500

11000

10500

95,0%

85,0%

75,0%

65,0%

55,0%

45,0%

35,0%

25,0%

1998

1999

2000

2001

2002

Share of export in European yard production 
value

1998

1999

2000

2001

2002

In  line  with  the  information  provided  under  2.  the  above  graph  (top)  shows  the  development  in
production value for European shipyards since 1998. In particular the completion of a large number of
cruise ships has contributed to the increase in production value since 2000, a fact that is also reflected
in  the  share  of  exports  (i.e.  orders  for  foreign  accounts)  which  reach  nearly  75%  of  the  entire
production value.

24