With LeaderSHIP 2015 the European shipbuilding industry has initiated an ambitious programme to ensure its long-term prosperity in a dynamic growth market. The European shipbuilding industry consists of a great number of companies and bodies - shipyards, equipment manufacturers, engineering services and other knowledge providers - which engage in a wide range of maritime activities, from ship newbuilding to repair and conversion to mechanical engineering and a large variety of specialised services, including offshore technologies. Many of these companies are SMEs.

　

 In high-tech industry sectors such as shipbuilding, success is first of all based on knowledge. Only in Europe exists such a dense network of shipyards, equipment suppliers, research centres and other providers of advanced technologies and engineering services. This particular advantage gives the European shipbuilding industry good reason to be confident about its future. With regard to knowledge-based economic activities, LeaderSHIP 2015 provides a sector-specific response to the EU's longer term strategy for economic, social and environmental renewal as brought forward by the Lisbon Council of March 2000. The Lisbon strategy lays the foundations for improved competitiveness, new business opportunities and a balanced economic development, through more and better targeted investment in knowledge and innovation and closer interaction between industry and research institutions. Key elements of this strategy - confirmed again in the conclusions of the Thessaloniki Council of June 2003 and in the Commission's very recent Growth and Investment Initiative - are, among others, increased R&D investment with a target of 3% of GDP, improved access to finance for business, lower regulatory burdens and the attraction of young people to industrial jobs in an enlarged Europe. On all of these points LeaderSHIP 2015 makes concrete recommendations.

　

 In the LeaderSHIP 2015 road map, presented to the European Commission in October 2002, industry outlined its longer term vision, presenting a robust strategy aimed at providing answers to the key challenges and assuring a leading role in world shipbuilding by 2015. President Prodi welcomed this initiative and offered his full support. LeaderSHIP 2015 is now recognised by Commissioner Liikanen as one of the priority issues for the sectoral transposition of the Commission's revised industrial policy which aims at improving framework conditions for enterprise and facilitating necessary adjustment processes.

　

 Shipbuilding is of strategic importance in many respects. It develops advanced technologies that offer considerable spin-offs to other sectors; it provides essential means of transport for international trade; and it supplies modem navies with advanced vessels, a key element for effective military operations. That is why countries around the globe regard shipbuilding as a particularly sensitive industry sector, which continues to receive political support.

　

 Unfortunately, not all players respect the principles of fair competition. The European Union is employing all available trade policy measures to ensure fair competition in the global market. However, this must be complemented with concrete actions and decisive political support in order to ensure full-scale competitiveness. The European Commission has welcomed that all stakeholders participate in the LeaderSHIP 2015 Advisory Group with the aim of elaborating concrete actions and appropriate policy proposals in a close dialogue.

　

 The present report summarises the results of this constructive process, based on eight key areas, identified by the Advisory Group, in which further targeted action is needed. It directly responds to the issues and objectives put forward in the LeaderSHIP 2015 roadmap, namely to

　

　

 LeaderSHIP 2015 has proven to be an efficient approach for identifying lines of action, aiming to enhance the industry's vibrancy, dynamism, and world-wide competitiveness, and with it securing sustainable growth. Through LeaderSHIP 2015 the specific conditions resulting from the unique characteristics of the shipbuilding sector are taken into consideration. Launched at a crucial time, Leadership 2015 offers first recommendations to address the current challenges, which should be implemented swiftly. Thus LeaderSHIP 2015 serves as a good example for an effective European industrial policy on sectoral level.

　

　

 Commercial shipbuilding and shiprepair have always operated in a truly global market, with yards competing for contracts within and outside their own countries. This early and comprehensive exposure to the forces of globalisation and the absence of an anti-dumping discipline make shipbuilding substantially different from most other manufacturing industries.

　

 State supported strategic investments in Asia have resulted in an imbalance between supply and demand. If not removed in time, over-capacity is expected to remain a serious problem for the industry, negatively affecting the open trading environment that characterises the highly cyclical world shipbuilding market. Particularly true is its impact on market prices. Excess production capacity, created for strategic reasons, is therefore the key problem in world shipbuilding.

　

 The market is not working optimally due to unfair practices, including injurious prices and subsidisation in several countries. While a strong state aid discipline exists in the EU, no specific discipline applies at international level. Unsustainable capacity is kept in existence and shipyards accept loss-making orders to fill production facilities. The resulting losses lead to new government interventions to save shipyards from bankruptcy. A vicious cycle is created.

　

 Very low and declining price levels are providing an incentive for shipowners to place new orders. However, low newbuilding prices also have a negative influence on the book value of the existing fleet that has been ordered at higher prices.

　

 While most industries are effectively covered by existing multilateral trade rules, shipbuilding, due to its own characteristics, is not easily amenable to the application of those rules. Today, shipbuilding is not subject to an anti-dumping discipline or to custom duties. In conclusion, the shipbuilding sector is practically the only industry without this type of effective protection against unfair trading practices.

　

 Many forms of trade distortions are faced by the EU shipbuilding industry: Different forms of direct and indirect subsidies and other support measures, especially practised by one major shipbuilding nation, such as debt forgiveness, debt-for-equity-swaps and interest relief by government-owned and government-controlled banks; unfair pricing practices in form of dumping; grey areas regarding shipbuilding financing; reservation of the domestic market for local shipyards; restrictions to market access like general import restrictions, import taxes and "home built" preferences linked to national shipping services; loans and loan guarantees to shipowners below normal market conditions. Generally, any aid to shipowners may also constitute aid to shipyards if it is conditioned, legally or factually, to purchase new ships domestically. In cases where such a link does not exist in any form, such state aids normally benefit only the domestic shipowner.

　

 The EU shipbuilding industry supports the view that an international shipbuilding agreement, to be concluded on OECD level, should regulate subsidies and injurious pricing practises. It should include provisions that restructuring aid can only be allowed in return for a significant reduction in the activity of the benefiting shipyard, similar to current practice in the EU. Any agreement must also provide an effective remedy in case of non-compliance with the obligations under the agreement.

　

 Also, the existing OECO Sector Understanding on export credits for ships, and related OECD-agreements, need a clear and unambiguous interpretation in order to rule out any potential market distortion and discrimination of EU shipbuilders. It is recommended that the EU seeks a unified implementation of these rules in all signatory countries and a spreading of the rules to all shipbuilding regions.

　

 Additional elements that should lead to a level playing field in world shipbuilding have to be developed on WTO level, with the full application of the Agreement on Subsidies and Countervailing Measures to shipbuilding.