THE COUNCIL OF THE EUROPEAN UNION,

　

Having regard to the Treaty establishing the European Community, and in particular Articles 92(3)(e), 94 and 113 thereof,

　

Having regard to the proposal from the Commission ⁽¹⁾,

　

Having regard to the opinion of the European Parliament ⁽²⁾,

　

Having regard to the opinion of the Economic and Social Committee ⁽³⁾,

　

Whereas the agreement respecting normal competitive conditions in the commercial shipbuilding and repair industry concluded between the European Community and certain third countries within the framework of the Organisation for Economic Cooperation and Development (OECD) (hereinafter referred to as 'the OECD Agreement') ⁽⁴⁾ has still not entered into force because the United States of America has failed to ratify it; whereas, therefore, Council Regulation (EC) No 3094/95 of 22 December 1995 on aid to shipbuilding ⁽⁵⁾ has not yet entered into force;

　

Whereas, in accordance with Article 10 of Regulation (EC) No 3094/95, the relevant rules of Council Directive 90/684/EEC on aid to shipbuilding ⁽⁶⁾ will continue to apply, in the absence of entry into force of the OECD Agreement, until 31 December 1998 at the latest;

　

Whereas a satisfactory balance between supply and demand in world shipbuilding has still not been fully established, so that prices remain depressed; whereas the competitive pressures on Community shipbuilders are expected to grow further as overall ship demand after the year 2000 is predicted to fall and available world shipbuilding capacity is expected to continue to rise;

　

Whereas, although Community yards have made progress in improving competitiveness, the rate at which they are improving productivity needs to be increased in order to close the gap with their international competitors, particularly in Japan and Korea;

　

Whereas a competitive shipbuilding industry is important to the Community and contributes to its economic and social development by providing a substantial market for a range of industries and by maintaining employment in a number of regions, many of which are already suffering a high rate of unemployment;

Whereas a complete abolition of aid to the sector is not yet possible in view of the difficult market situation and the need to encourage yards to make the necessary changes to improve competitiveness; whereas, a tight and selective aid policy should be continued in order to support these efforts and to ensure fair and uniform conditions for intra-Community competition; whereas such a policy constitutes the most appropriate approach in terms of ensuring the maintenance of a sufficient level of activity in European shipyards and, thereby, the survival of an efficient and competitive European shipbuilding industry;

　

Whereas the Community's aid policy for the shipbuilding sector has remained essentially unchanged since 1987; whereas that policy has generally achieved its objectives but requires adaptations so that it is better able to address the future challenges facing the industry;

　

Whereas, in particular, operating aid is not the most cost-effective way of encouraging the European shipbuilding industry to improve its competitiveness; whereas, accordingly, operating aid should be phased out and the focus shifted more towards other forms of support to promote the necessary improvements in competitiveness, such as investment aids for innovation;

　

Whereas operating aid will therefore end on 31 December 2000;

　

Whereas operating aid in the form of development assistance to developing countries should continue subject to stricter conditions;

　

Whereas a clearer distinction is needed between investment aid and restructuring aid; whereas restructuring aid should be granted only exceptionally and subject to strict rules, such as applying the principle of 'one time/last time', requiring genuine capacity reductions as a counterpart for the aid and tighter monitoring procedures; whereas investment aid should be allowed only to improve the productivity of existing installations in existing yards situated in areas eligible for regional investment aid, subject to certain limitations on aid intensifies in order to minimise possible distortions to competition

　

Whereas investment aid for innovation should be allowed, provided that it is for genuinely innovative projects that will improve competitiveness; whereas aid for research and development and aid for environmental protection should also be permitted so that the shipbuilding industry is not deprived of these aid possibilities that are available to all other industrial sectors; whereas closure aid should continue to be allowed to facilitate structural adjustment;

　

Whereas, although it is proposed to continue to treat ship conversion in the same way as shipbuilding to a certain extent, aid to the ship repair sector should continue not to be permitted except for restructuring, closure, investments under regional aid schemes, innovation, research and development, and environmental protection;

　

Whereas close and transparent monitoring is necessary if the aid policy is to be effective;

　

Whereas, the Commission is to present to the Council a regular report on the market situation and appraise whether European yards are affected by anti-competitive practices; whereas, if it is established that anti-competitive practices of any kind are causing injury to industry, the Commission is, where appropriate, to propose to the Council measures to address the problem;

　

Whereas the first such report is to be presented to the Council no later than 31 December 1999;

　

Whereas this Regulation is without prejudice to any amendments necessary to comply with international commitments of the Community concerning state aid to the shipbuilding industry.