EU to outline contingency shipping plan

Date: 16/05/1996

THE European Union will extend its regime for allowing shipbuilding subsidies unless US legislators pass an international aid-cutting agreement by the middle of June.

Competition Commissioner Karel Van Miert will outline his contingency plans to prolong the aid limits of the Seventh Shipbuilding Directive at a meeting of EU industry ministers next week (20 May).

This will only happen if the US fails to ratify an accord to ban shipbuilding subsidies between the EU, the US, Japan, South Korea and Norway reached in December 1994 under the auspices of the Organisation for Economic Cooperation and Development.

The EU, together with South Korea and Norway, formally ratified the agreement on 11 December last year, but it will not enter force until all signatories have done the same. While the US has promised to ratify by 15 June, EU officials are becoming pessimistic.

“If nothing happens, why should we be the victims of the Americans with their Jones Act?” asked a Commission official.

During the OECD negotiations, the Commission was keen to limit the scope of special legislation protecting domestic US shipping. This infamous 'Jones Act' ensures that only boats built in US shipyards and flying a American flag can ply trade between one US port and another.

In general, the agreement commits signatories to eliminating direct and indirect subsidies granted specifically to the industry, including the operating aid currently allowed under the seventh directive for an amount up to 9&percent; of the value of a contract.

Some forms of aid - including selective spending on basic or applied research - can continue, but price-fixing, the rigging of bids and predatory practices will all be banned.

Apart from completing the ratification procedure, the EU has also adopted legislation on injurious pricing and a framework for state aids due to come into force hand-in-hand with the agreement.

The sector is still highly politically sensitive in several member states, meaning a prolongation of the seventh directive would not be difficult to achieve in the event that the Americans delay ratification.

Rising world market share for the Japanese, Koreans and Americans have caused the EU to fall back from 24&percent; in 1980 to well below 20&percent; today.

While European shipbuilders can still compete in the production of 'value-added' vessels such as dedicated container ships, gas and chemicals tankers, third countries have taken over the business in bulk production. At the same time, the western European workforce has collapsed from 462,000 in 1975 to only 80,000 last year.