WORLD SHIPBUILDING INDUSTRY
(21200)
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Second Commission Report to the Council on the Situation in the World Shipbuilding Market, as required under Article 12 of the Shipbuilding Regulation.
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| Legal base:
| — |
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| Department: |
Trade and Industry |
| Basis of consideration:
| Minister's letter of 7 June
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| Previous Committee Report:
| HC 23-xviii (1999-2000), paragraph 7 (17 May 2000)
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| Discussed in Council:
| 18 May 2000 |
| Committee's assessment:
| Politically important |
| Committee's decision:
| Cleared |
Background
8.1 On 17 May we considered an EM on the
Commission's Second Report on the world shipbuilding market which
was due to be discussed in the Industry Council on 18 May. We
did not clear it but asked the Minister, the Parliamentary Under-Secretary
of State for Competitiveness (Mr Johnson), to report back after
the Council.
8.2 In its report, the Commission said that
the world market for merchant ships continued to be in crisis,
with depressed prices, exacerbated by extremely low offer prices
from Korean yards. In many cases their prices did not even cover
operational costs, let alone the servicing of debts. The Korean
financing system remained opaque and credits and guarantees to
shipyards did not follow global business practices.
8.3 All the actions it had been instructed
to take by the November 1999 Industry Council had been taken and,
the Commission said, it had made strenuous efforts to secure binding
commitments from the Korean Government. These resulted in an EU/Korea
agreement on 10 April 2000 when "Agreed Minutes relating
to the World Shipbuilding Market" were initialled. This agreement
commits Korea to finance yards on a commercial basis only, to
transparency in accounting rules for shipyards, to commercially
viable ship prices and to a consultation mechanism to take up
specific cases of unfair competition.
8.4 Evidence gathered by the Commission
had enabled the EU shipbuilding industry to prepare the basis
for a complaint under the World Trade Organisation Trade Barriers
Regulation and it recently announced that it was prepared to file
one. It noted that contacts with the IMF had not brought results.
Korea is repaying its IMF loans ahead of schedule, limiting the
IMF's ability to influence Korea's policy.
8.5 The Commission concluded its report
by recommending further action it should take.
The Minister's letter
8.6 The Minister of State for Energy and
Competitiveness in Europe (The Rt. Hon. Helen Liddell) says that
she is pleased to report that the UK achieved a good outcome at
the Council. It agreed Conclusions which established a tough approach
to Korea and re-emphasised its determination to tackle unfair
trading practices. She says:
"The Council directed
the Commission to vigorously pursue Korea to fully implement the
'Agreed Minutes', as the recently-concluded EU/Korea agreement
on shipbuilding is called, and called for bilateral consultations
with Korea on specific cases of unfair competition to begin immediately.
The UK took the lead in advocating that tough approach, which
strengthens the Commission's hand to pursue Korea.
"The Council instructed the Commission to collect
further detailed evidence of the alleged Korean anti-competitive
behaviour as a basis for taking any appropriate action in the
World Trade Organisation in the event that the process contained
in the 'Agreed Minutes' fails to deliver results. The Council
also called on the Commission, and Member States, to continue
to monitor the implementation of the International Monetary Fund-led
rescue package as it applies to shipbuilding and argued that efforts
be pursued to establish effective international trade disciplines
so as to establish a level playing field for the industry. We
fully share the Commission's belief that the only substantive
way to tackle external unfair trading practices in the longer
term is through effective international trade mechanisms, as embodied
in the Organisation for Economic Co-operation and Development
(OECD) Shipbuilding Agreement which the US has so far failed to
ratify. We have taken a leading rôle in advocating that
approach both in the EU and in the OECD and we will continue to
vigorously pursue this approach.
"Italy and Spain, with support from Germany,
tried to add to the conclusions an explicit call for the Commission
to propose 'appropriate measures' (meaning an extension of operating
aid as all appropriate measures are already part of the EU approach
to tackling Korea). However they were in a minority and this was
not agreed. It was accepted that the Commission should make progress
on tackling Korea by the end of September. I made clear our views
against continuing operating aid either as an effective means
to improve the competitiveness of the shipbuilding industry or
to tackle Korea. Commissioner Monti and my colleagues from Denmark,
Netherlands, Sweden, Finland and, significantly, from France echoed
this forthright opposition to the continuation of operating aid.
This will have clearly reinforced the bilateral/trade approach
to dealing with Korea and consequently strengthened Commissioner
Monti's hand in resisting pressure for an extension of operating
aid beyond 2000.
"We believe that the best way to help the UK
shipbuilding industry is to work with it to enhance its competitiveness
performance and we are working closely with the industry to this
end. This is entirely in accordance with the approach underpinning
the EU Shipbuilding Regulation which re-directed support away
from operating aid, which had failed to deliver a competitive
EU industry, towards areas such as innovation and R&D."
Conclusion
8.7 The Minister has provided us with
an informative account of the discussion in the Industry Council,
from which it is clear that the Government played a leading part
in prompting the Council to agree to take a tough line with Korea
and that it was firmly supported by other Member States.
8.8 We thank the Minister for this prompt
response, fully support the stand she takes and now clear the
document.
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