6. CONCLUSIONS AND RECOMMENDED ACTIONS
The Commission has continued its market monitoring and detailed investigations of selected orders placed with Korean yards. The findings broadly confirm those of the previous reports that the world shipbuilding market continues to face serious difficulties.
Supply still outstrips demand and despite increased ordering activity in the first 8 months of this year due to favourable market conditions ship prices have not fully recovered from the drop in prices since 1997. However, it appears that ship prices have shown some signs of improvement compared with the low point at the end of 1999.
The on-going depression in prices is caused by low offer prices from Korean yards.
The detailed cost investigations continue to indicate that Korean yards are still taking orders at prices which are not covering all costs.
The Republic of Korea is now the biggest shipbuilder in the world. It has continued to increase its market share at the expense of both Japanese and EU yards. Nearly all market segments are targeted by Korean yards, leaving mainly smaller domestic orders and highly specialised tonnage to EU yards. Only in the cruise ship market EU yards continue to play a dominant role.
In addition to its monitoring work, the Commission has pursued the various actions within its competence laid down in the conclusions of the 18 May Industry Council. As regards trade policy actions, the Commission has engaged Korea in negotiations under the consultation provisions of the bilateral agreement. However Korea did not fulfil all its commitments and was unable to agree to some concrete implementing measures.
In these circumstances, unless Korea is willing to accept the establishment of an effective price monitoring mechanism, the Commission considers that a trade action is necessary and desirable. The Commission will examine the merits of the TBR complaint by the European industry and, if accepted, will open an investigation.
Consequently, the Commission considers that:
- the TBR investigation should be vigorously pursued with the aim to launch a WTO action in order to seek remedy to the injury caused to the Community industry;
- an immediate agreement with Korea would avoid the risk of a bilateral conflict;
- the establishment of a level playing field remains an objective for the Union. However the rapid implementation of the OECD agreement would not solve the short-term problems faced by the European industry;
- the possibility of an early implementation of the 1994 Understanding on export credits for ships should be explored, even if it would not directly resolve the problems of the sector and Korean unfair practices.
So far as contacts with the IMF are concerned, these have not so far led to any concrete results in terms of ending unfair competition practices by Korean shipyards. However the Fund is now fully aware of the EU's concerns in this regard. Therefore, although the IMF's role in sectoral aspects is limited, further efforts are merited as a political signal of maintaining pressure on the issue.
The Commission has also considered its approach towards state aids, concluding that operating aid has not provided a solution to the Korean problem.
In the light of the foregoing, it is proposed that the following actions be pursued:
- the Commission to continue with its monitoring of the market situation;
- the Commission to examine industry's complaint under the TBR as rapidly as possible, and, if accepted, rigorously to pursue this with a view to a possible WTO action;
- in parallel, the Commission to remain open to eventual proposals from Korea that would meet the EU's concerns;
- the Commission and the Member States to pursue efforts to establish a level international playing field for the shipbuilding industry in the OECD;
- the Commission and the Member States to continue to encourage the IMF to ensure that the restructuring of Korean shipyards is closely monitored and assessed;
- the Commission to continue to work closely with the industry on competitiveness issues;
- in accordance with the provisions of article 12 of Council Regulation (EC)1540/98 and without prejudice to the actions outlined above, the Commission shall as soon as possible examine the possibilities to propose measures to address the problem.
