Shipbuilding and maritime industries in the EU
The shipbuilding industry - another problem sector - has been losing momentum in Europe since the early 1960s. In 1960 the shipyards of the European Community countries accounted for half the world production of ships. In 1975 their share of the world market in shipbuilding had fallen to 22%. As early as that year, half the world production of vessels came from Japanese yards, whilst the shipyards of certain developing countries, such as South Korea, were becoming seriously competitive. The 1973 oil crisis [see section 19.1.1.] and the ensuing economic recession led fleets to a massive amount of laying-up and of cancelled orders. Shipyards then found themselves with a large excess production capacity, especially with regard to tankers. At present, the world market for merchant vessels is still in crisis and weak prices are persisting because of the extremely low prices offered by Korean shipyards [COM/2000/263]. In the EU, in 2002, orders were down by almost 80 % compared with 2000 [see also section 20.3.4]; demand had decreased in almost all market segments (container ships, cruise ships, tankers and LNG carriers); prices for new ships had declined further and were at their lowest for more than a decade. Consequently, shipyards were going bankrupt, with large-scale lay-offs as a result [COM/2002/622].
In the absence of a legal basis provided by the EEC Treaty, the Council could not or would not take the socio-economic measures necessary for the restructuring of the European shipbuilding industry. Thus, the only means available to Community policy in the shipbuilding sector remained the coordination of national aids. Seven successive Directives covered the Community framework for aid to shipbuilding during the 1980s and 1990s. By avoiding spiralling aids and by contributing to the restructuring of undertakings, the Community framework for aid to shipbuilding made it possible for the European industry to become more competitive and direct State aid towards the building of types of vessels for which European yards were more competitive [2003/C 317/06, 2006/C 260/03 and IP/08/1097].
The multilateral negotiations launched in 1989 under the auspices of the OECD between the main producing countries (European Union, Japan, South Korea, Norway, United States), which together account for more than 70% of world shipyard output, led to an agreement in July 1994 on the elimination of all obstacles to normal conditions of competition in the sector as from 1 January 1998. Consequently, a Council Regulation on aid to shipbuilding implements the provisions of the OECD Agreement on respecting normal competitive conditions in the commercial shipbuilding and repair industry, although this agreement, pending its ratification by the USA, has still not entered into force [Regulation 3094/95, see section 23.5.]. Hence, problems continue. The Commission concentrates its efforts on defending European industry against unfair trade practices by shipbuilders in third countries and on improving its competitiveness by encouraging research and supporting closer industrial cooperation [COM/97/470 and COM/99/474]. European inquiries reveal that South Korea is distorting competition on the world market in shipbuilding through dumping practices. The Council has authorised the Commission to initiate WTO proceedings against South Korea in May 2001 and introduced a temporary defence mechanism for the European shipbuilding industry to counter unfair trade practices by the Republic of Korea in world shipbuilding markets until the conclusion of dispute settlement proceedings at the WTO [Regulation 1177/2002 last amended by Regulation 502/2004, see section 23.5].