Select Committee on European Scrutiny Third Report


COM(00) 783

Third Commission report to the Council on the situation in the world shipbuilding market, as required under Article 12 of the Shipbuilding Regulation (1540/98).

Legal base:
Department: Trade and Industry
Basis of consideration: Minister's letter of 14 December 2000
Previous Committee Report: HC 23-xxxi (1999-2000), paragraph 12 (29 November 2000)
Discussed in Council: 5 December 2000
Committee's assessment: Politically important
Committee's decision: Cleared, but further information requested


  11.1  The Commission is required under Article 12 of the EU Shipbuilding Regulation to present to the Council a regular report on the market situation and to appraise whether European yards are affected by anti-competitive shipbuilding practices of any kind. On 29 November 2000, we reported on the third Commission report. It showed that Korean yards were still offering ships at below-cost price and that of the seven newly-investigated orders covered by the report, four have had an impact on EU yards. In our report, we outlined the various actions the Commission proposed to tackle Korean low pricing. We noted that these proposals were to be discussed at the Industry Council in December and we asked the Minister to report the outcome.

The Minister's letter

  11.2  In his letter of 14 December 2000, the Minister for Competitiveness at the Department of Trade and Industry (Mr Alan Johnson) says that:

    "I am pleased to tell you that, at its 5 December meeting, the Industry Council took a tough approach towards Korea. The Council agreed conclusions stressing their serious concern at Korean unfair competition, urging Korea to agree an effective remedy as a matter of urgency while in the meantime calling on the Commission to complete their investigation of the Trade Barriers Regulation (TBR) against Korea as quickly as possible. The Council further instructed the Commission to report back to the Council by 1 May 2001 with a view to proposing action against Korea in the World Trade Organisation (WTO), if no bilateral remedy has been agreed by then. This will have clearly increased the political pressure on Korea, as it makes it clear that if the EU and Korea cannot achieve a negotiated solution by next May the Commission are likely to propose action in the WTO ...

    "The Council conclusions also called on the Commission to continue to monitor the shipbuilding market closely and called on the Commission and Member States to continue to work closely with the industry on competitiveness issues; to continue to encourage the IMF to ensure that the restructuring of Korean shipyards is closely monitored; and to pursue efforts to establish a level playing field for the shipbuilding industry in the OECD.

    "The Council maintained its 1998 decision to end operating aid on 31 December 2000. I should tell you, however, that on 29 November the Commission, under strong pressure from the German-led minority who had wanted operating aid to continue, put forward the idea of a defensive temporary support mechanism for vessels subject to unfair competition if no progress was made with Korea by 1 May 2001. However, at the 5 December meeting this was strongly rejected by virtually all Member States. The Council therefore only took note of the Commission proposal and added the safeguard that such a mechanism would be under the supervision of the Commission and must not distort competition in the EU.

    "This was not an easy discussion. There was determined opposition to the ending of operating aid from Germany, Italy, Spain, Greece and Portugal and this made it difficult to agree Council conclusions. That conclusions were eventually agreed is a testimony to the successful outcome to this meeting.

    "We will continue to give our fullest support to the Commission in its search for a bilateral/trade remedy to Korea. At the same time, we will also continue to work closely with the industry to improve its competitiveness, such as through the LINK shipbuilding Research project to which we are contributing £2.8m."


  11.3  We note what the Minister calls the tough approach towards Korea taken by the Council and reiterate our strong support for urgent action. In particular, we hope that the Commission's investigation of the Trade Barriers Regulation against Korea can be concluded as quickly as possible, thus opening up the possibility of action against Korea through the World Trade Organisation if no bilateral remedy has been agreed. We ask the Minister to report to us before 1 May 2001 about the Trade Barriers Regulation investigation. We note that the majority within the Council opposed any move to extend operating aid within the European Union beyond 31 December 2000.

  11.4  In the light of the Minister's letter, we now clear the document.

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