16. 3. 87 Official Journal of the European Communities No C 68/9
an efficient sub-contractor network. Looking ahead in
particular to the extension of the Directive to new sectors, the
Committee regards such action as of key importance.
3. Lastly, the Committee wishes once again to draw
attention to its proposal (') concerning the introduction of a
system for secondment of staff (e.g. senior officials of
procurement and audit departments) from national
authorities for the purpose of working in the new public
procurement unit and liaison with their counterparts in other
Member States. It is out of the question for the Commission's
staff at its present strength to cope with the duties on which
the effectiveness of the Community Directive hinges and,
since difficulties are bound to arise in simply recruiting new
staff under the Community budget, other solutions such as
the one described above will have to be found.
4. Specific comments
4 .1 . Article 4
The Committee requests that point 2 (b) of the new Article 6
stipulating that contracts by single tender may be awarded
'when the articles involved are manufactured purely for
(!) OJ No C 189, 28. 7. 1986, p. 16.
Done at Brussels, 16 December 1986.
Introduction
1. The draft Directive on shipbuilding aid is a follow-up
to the orientation paper on future aid strategy for
(>) OJNoC281, 7. 11. 1986, p. 4.
purposes of research, experiment, study or development' be
deleted; otherwise the doors would be opened wide to abuse
and circumvention of the letter and the spirit of this Article,
i.e. that awards by single tender only take place under
exceptional circumstances.
4.2. Article 5
The Committee invites the Commission to make it clear that
the order of preference to be followed by the contracting
authorities in the absence of European standards or
documents on harmonization is mandatory, not optional. It
proposes to add the following phrase to point 4 'any other
standard': 'bearing in mind the climatic conditions
involved'.
4.3. Article 12
The Committee, though supporting the Commission's efforts
to obtain significant and reliable statistical information from
the Member States, feels that the Commission should specify
in point (a) which contracting authorities are obliged to
report, and that the data required concern only the total
number and value of awarded contracts both above and
below the threshold.
The Chairman
of the Economic and Social Committee
AlfonsMARGOT
shipbuilding on which the Committee was not officially
consulted - much to its astonishment. The proposals
contained in these documents arouse deep concern about the
future of the Community's shipbuilding industry and the jobs
it provides.
Opinion on the proposal for a Council Directive on aid to shipbuilding (*)
(87/C 68/07)
On 13 October 1986 the Council decided to consult the Economic and Social Committee, under
Article 198 of the Treaty establishing the European Economic Community, on the proposal for a
Council Directive on aid to shipbuilding.
The Section for Industry, Commerce, Crafts and Services, which was responsible for preparing the
Committee's work on the subject, adopted its opinion on 3 December 1986 in the light of the report by
Mr Arena.
At its 242nd plenary session (meeting of 16 December 1986), the Economic and Social Committee
adopted the following opinion by 88 votes to 15, with 5 abstentions.
No C 68/10 Official Journal of the European Communities 16. 3. 87
1.1. It is regrettable that the Commission has not taken
the slightest notice of the Committee's opinion of 23 April
1986 on the guidelines for a Community policy in the
shipbuilding sector (OJ No C 189, 28. 7. 1986). This
opinion, on which the interested parties broadly agreed,
pinpointed the need to:
— define a minimum production capacity on economic and
strategic grounds;
— frame a clearcut policy, involving Community-wide
agreements, for safeguarding the industry's productive
capacity in order to combat the frequently distorted
competition from other countries;
— tailor the post-1986 Directive to the aims of such a policy
in order to revive an industry which has been far too long
in the grip of a recession that could have dire
consequences for the workforce and professional
skills.
1.2. In reaffirming that this opinion still holds good, the
Committee trusts that the present text will fare better. The
reasons why it cannot approve the draft Directive are
explained below.
Comments
2. Instead of proposing a system of aid for safeguarding a
shipbuilding industry restructured along the lines indicated
in the abovementioned Committee opinion of 23 April (a line
which the Association of West European Shipbuilders has
also argued), the draft Directive makes aid policy the sine qua
non and mainstay of shipbuilding policy without seemingly
giving adequate thought to the effects and consequences.
2.1. More restrictive and selective aid — in the form of a
common all-embracing ceiling fixed at a lower level — is
assumed by the Commission to be the key to eventually
creating a healthy and competitive shipbuilding industry in
the Community in which the Member States will freely
compete with each other.
2.2. The fixing of such a ceiling seems to the Committee
to be at the very least an oversimplification. Above all, it will
have adverse consequences for a large part of the
Community's shipbuilding industry unless it is fixed at a high
enough level to ensure that adequate support is provided to
enable Community yards to compete against the competition
from the Far East. The Committee believes that, at least for
an interim period while further studies take place, the ceiling
must be at least 35 %.
2.3. In the absence of a masterplan for the industry,
which ought to be drawn up before a system of aid is worked
out, one general question which may be asked is on what
criteria the new strategy's regional and social repercussions
(including its repercussions on subcontracting industries) are
based, unless the aim is purely and simply to cut capacity and
jobs in order to scale down the financial burdens currently
borne by the Member States.
2.4. Last April's opinion explained why capacity cutting
was not the same as improving productivity or the industry's
competitiveness, since any plan for reviving the industry
would be doomed to failure unless adequate use was made of
production potential. In other words, it is necessary to arrest
the inexorable slump in capacity, and hence production,
which has already reduced the Community's shipbuilding
industry to a minor force worldwide.
2.5. The assessment of market trends underlying the draft
Directive seems to rule out any chance of demand picking up
in the next decade. This assessment is at odds with the
recently confirmed forecasts of organizations such as the
Association of West European Shipbuilders (AWES) and the
Shipbuilders Association of Japan (SAJ) which would seem to
be in the best position to judge (cf. Table 2 in the 23 April
opinion).
2.6. The importance of forecasts should not be
overestimated; however it does not seem right to disregard
the AWES/SAJ forecasts, which state that the crisis will
reach its peak in 1986/87 and that balance will be restored
on the world market by the early nineties, regardless of
whether there are any further large-scale reductions in
capacity.
2.7. In this connection, the Community authorities must
act firmly in dealing with Japan (which seems, incidentally,
to be about to take a number of important decisions about
the size of its shipbuilding industry) and South Korea (whose
share of the market has rocketed since 1975).
2.7.1. At all events it is very unwise to think that cuts in
aid and productive capacity in the Community will
strengthen the Community's hand in negotiations with Japan
and South Korea: the cuts made in the last years which have
resulted in the loss of at least 120 000 jobs (i.e. 60 % of the
16. 3. 87 Official Journal of the European Communities No C 68/11
workforce and a 55 % fall in capacity) are proof enough of
the Community's good will. It is estimated that there have
been similar cutbacks in subcontracting work, i.e. all the
suppliers of goods and services which contribute more than
50% of a vessel's value. The regional and social
repercussions of these major cuts are also evident.
2.7.2. If the Community gives Japan and South Korea the
assurance that it will pursue the aid policy being proposed at
the moment, they will merely have to maintain current prices
and not make any major cuts in capacity (i.e. basically adopt
a wait-and-see policy) to ensure that the Community prices
itself out of the shipbuilding market to all intents and
purposes. The building of advanced technology vessels — a
sector where the competitive gap is less pronounced — will in
fact provide insufficient orders even for a much smaller
Community shipbuilding industry.
2.8. If this were to happen, there would be a real danger
— in the absence of a more wider-anging policy of aid and
cooperation between Member States — that national
industries (whose shares of the world market vary from less
than 1 % for Belgium to 5—6 % for the Federal Republic of
Germany) may soon be driven to bankruptcy since they have
very little work at the moment and are unable to win new
orders.
2.8.1. The Committee believes that the objective of the
Directive should be to avoid this happening; instead, it
should stress the need to maintain within the Community a
healthy and competitive shipbuilding industry whose scale of
activity should be consistent with the size of the Community
seaborne trade and respect its economic, social and strategic
importance.
2.9. The draft Directive's other objective — and one
which the Committee endorses — is to develop the common
market in shipbuilding. It must be borne in mind, however,
that shipbuilding is a worldwide market. Therefore, if aid is
not granted, there is a danger that any order lost by a
Community shipyard is likely to go to a non-Community and
not to another Community shipyard.
3. The fixing of a common ceiling on all forms of aid to
shipyards and shipowners for the building or conversion of
vessels poses other grave problems.
3.1. A ceiling which leaves no room for flexibility would
make sense if there was a reasonable chance that a significant
number of shipyards would soon become as competitive as
the most competitive shipyard. However, because of a
number of differences (cost of money, social security charges,
progress made in restructuring, regional location, etc.)
more time may be needed to reduce costs and restore
competitiveness. Thus, the ceiling should be high enough to
win sufficient orders at the start and should be reviewed at
reasonable intervals taking account of trends on the market.
The rate at which the aid is reduced will depend above all on
conditions on the market, where the behaviour of Japan and
South Korea will be crucial.
3.2. Equally worrying is the criterion for fixing the aid
ceiling. This ceiling will be based solely on the costs in the one
area of the market selected by the Commission (advanced
technology vessels) where the most competitive Community
shipbuilders do not lag so far behind their main worldwide
competitors).
3.3. It should be noted here that the only really advanced
technology vessels being built nowadays are military vessels,
passenger ships, and certain offshore installations and (to a
rather lesser extent) gas and chemical carriers. This is too
limited a market (excluding as we must here the military part)
to rest the future of the Community's shipbuilding industry
on. Moreover, it is the parts which the shipyard purchases
from outside that are the key factor in the added value of the
product. Hence the importance of maintaining a sufficiently
large and specialized subcontracting industry. This is one of
the strengths of the Japanese, who have always seen the ship
building industry as an important export vehicle (what is
more, not subject to customs duty) for a number of products
with a higher added value (electronics, pumps, on-board
auxiliaries, engines, etc.).
3.3.1. A final point to bear in mind are the rapid
developments in vessel design. Thanks to the ease with which
technologies can be transferred, new vessel designs (e.g.
container ships) can soon become the prerogative of less
'advanced' shipbuilders.
3.3.2. Despite the move towards specialization in
products with a higher added value it would be a serious
mistake to stop building the types of vessel (bulkcarriers,
tankers, most general cargo ships) for which there is most
demand worldwide. Any of these types of vessel might
suddenly make a strong market recovery. Nor should we
underestimate the (partly strategic) role of these ships in the
supply of raw materials, and more generally their importance
for trade to and from the Community.
3.4. A final cause for serious concern is the inclusion of
aid to shipowners in the proposed ceiling (Article 3 of the
proposal). The extreme sensitivity of the shipowners' sector
— which by definition operates on an open market — to
restrictive measures could lead to practices detrimental to the
Community shipbuilding industry. The tonnage of virtually
No C 68/12 Official Journal of the European Communities 16. 3. 87
all the Member States' fleets is already falling, and average
vessel age is already high: these trends would worsen.
3.4.1. At all events a serious assessment should be made
of the repercussions which the inclusion of aid to shipowners
would have on recourse to the shipyards of the Far East
(where inter alia OECD conditions are being systematically
disregarded) and to flags of convenience, as a move to regain
more room for manoeuvre.
4. Leaving aside other albeit important comments on the
content of the Directive (such as the exclusion of ship repair
work from operating aid and investment aid), it is important
to stress the omission of any reference to additional rescue aid
to deal with an urgent problem confronting an undertaking
of particular strategic or regional significance.
4 .1 . The Committee would also stress the extreme
complexity of the proposed monitoring procedures. While
recognizing the need for appropriate monitoring by the
Commission in order to ensure that the aid regimes are
transparent, the Committee thinks that, in both number and
detail, these procedures would give the Commission powers
of control without precedent in any industrial sector covered
by the Treaty of Rome; this would undoubtedly impede
company management, particularly during the delicate stage
of commercial negotiation. Just one example: the
Commission would be empowered to pass judgement (within
30 days) on the awarding of an order, even if this order had
been negotiated to respect the ceiling, in cases where there
was competition from a shipyard in another Member State
(Article 4 (5)). The proposal further states in Article 4 (3)
that 'in its review of the common maximum aid ceiling the
Commission shall also take into account undue
concentrations of shipbuilding activities in specific market
segments to an extent contrary to Community interests'.
Done at Brussels, 16 December 1986.
5. Conclusions
5.1. After just six months, the Committee sees no reason
to amend its previous opinion, which was based on an
analysis of trends in the market, in shipbuilding, and in the
Community's fleets, and of the policy pursued by the
Community in this sector since the beginning of the crisis.
5.2. Apart from its disappointment (voiced in point 1.1
above) at the Commission's disregard of this earlier opinion,
the Committee is also perturbed at a draft Directive being
pushed through somewhat hastily which does not contain an
overall policy for the sector dealing with the problems of
concern to both shipbuilders and maritime transport and
based on an effective match of supply and demand.
5.3. This concern receives immediate confirmation in the
Commission's own predictions in COM(86) 553 final about
the regional and social effects of the new aid policy, namely
that another 40/45 000 jobs will be lost within the next three
years. This amounts to a further halving of the industry's
capacity — although by then it could hardly be termed an
industry at all.
5.4. The scale and gravity of the problem would seem to
call for consultation of the Committee, as it formally
requests.
5.5. Extension of the fifth Directive would appear to be
necessary in order to provide time to map out a realistic
policy for the sector which, whilst recognizing the need for
restructuring, would establish once and for all the basic
requirements for the safeguarding and proper operation of
this vital industrial activity. This matter ought to be
discussed at Community level by the interested parties
(shipbuilders, shipowners, workers' representatives).
The Chairman
of the Economic and Social Committee
Alfons MARGOT
Full & Egal Universal Law Academy