Naval shipbuilding is a distinct part of the European shipbuilding industry in a number of aspects. Its technology contents is even higher than the one typically found in commercial shipbuilding, the supply industry plays a very significant role and the market is composed of two very different environments - the export and the domestic markets. Naval shipbuilding has so far not been exposed to systematic unfair international competition as seen in the commercial sector, although export orders are in general subject to fierce competition between European producers. As a result profit margins are higher and many commercial shipbuilders find it desirable to complement their activities with military contracts. For the future it can be expected that globally operating shipbuilding companies would benefit from being active in both areas.

　

 With regard to technologically advanced products, European naval yards are unmatched leaders in some areas such as conventional submarines and fast patrol boats. This is due in some measure to the strong cross-fertilisation between naval and highly competitive merchant shipbuilding, an advantage that must be exploited to the full.

　

 However, compared to other defence sectors, European naval shipbuilding is dominated by national companies. Without increased co-operation and consolidation, European players risk being marginalized in global terms. This in turn could reduce future EU defence options. Creating strong integrated European players will assist Europe's competitiveness also with respect to its current dominant position in international naval export markets. Three key areas merit immediate attention: industrial co-operation between yards and between yards and suppliers, access to export markets and consolidation of the industry.

　

 Wide-ranging co-operation between yards is still hampered by diverging operational requirements from national navies. Standardisation of components and sub-systems could and should be widely enhanced, leading to considerable reduction in total ownership costs. Procurement cycles differ as well, leaving yards with an uneven workload. First experience with common programmes which have been launched with the aim of reducing costs and sharing non-recurring ones achieved encouraging results, but substantial improvements are possible.

　

 Therefore, Member States and their navies need to agree to a minimum set of common operational requirements and a harmonisation of procurement cycles, in line with the Commission's Communication on "European Defence - Industrial and Market Issues" of March 2OO3⁴. These minimum requirements should be based on the Petersberg tasks and the "Helsinki Headline Goals". Initial efforts towards common requirements should focus on smaller surface vessels below frigate size, and should exceed this size later.

　

 Standardisation of components and sub-systems should be based on a voluntary and systematic approach. Standardisation should to some extent also cover a joint approach to quality assurance and life cycle support. Classification societies have an important role in standardisation, building on their experience in commercial shipbuilding. The ultimate goal of these efforts must be the interoperability of systems, vessels and fleets, leading to significant reductions in ownership costs. Co-operation should be organised around a limited number of major projects, using pooled R&D resources and a single European defence equipment market.

　

 Export markets can be quite narrow and specific. Still, these markets are key to the recovery of up-front development costs. Non-harmonised export rules in the Member States, based on different traditions and diverging geo-political objectives, lead to distortion of competition and barriers to increased industrial co-operation. The lack of full application of common market rules to intra-EU trades may have similar negative effects. Therefore, export rules (and their application and interpretation) need to be harmonised between Member States.

　

 European naval yards primarily serve a limited national market, with a high degree of customisation and stringent and specific navy requirements. In a number of Member States naval yards are state-owned or state-controlled, although this does not rule out that commercial paradigms are employed. Considerable structural differences exist between European producers, with large state-owned entities competing in the same markets with medium-sized, privately owned yards which claim that private ownership is a pre-requisite to succeed in any consolidation effort.

　

　

　

　

 The Conimission supports these recommendations which are in line with the approach developed in its Defence Communication of March 2003.

　

 Establishing a common market for defence equipment, including the setting up of a joint procurement agency, is key. In that respect, following the European Council in Thessaloniki in June 2003, the Member States and the European Institutions are actively preparing the creation of a European Defence Agency in 2004. This agency will operate in the field of defence capabilities development, research, acquisition and armaments. Open to participation by all Member States, this agency will aim, inter alia, at strengthening the European defence industrial and technological base and creating a competitive European defence equipment market throughout the promotion of European co-operative programmes. The successful achievements of that Agency in implementing numerous programmes involving enough participants to reach economies of scale, have the potential to enable and stimulate the necessary industrial consolidation, including in the naval shipbuilding sector. However, any state aid granted to naval shipyards must not be transferred to commercial shipbuilding operations.

　

　

　

 The competitiveness of the European shipbuilding and marine equipment industry can only be maintained and improved through innovative vessel concepts, optimised sub-systems and sophisticated design, production and planning methods. This "intellectual property" in the wider sense has therefore to be protected against competitors who offer very similar or even completely pirated products without the need to recover research and development costs. Unfortunately, the extent of product piracy in the sector is not known and evidence is largely anecdotal. Therefore a thorough and inventive approach is required to address the problem.

　

 Knowledge-driven technology is created at a very early stage in the relationship between yards and their suppliers. Yards have a need to disclose detailed technical requirements and solutions to their suppliers in order to safely calculate the project both under technical and commercial terms. Shipyards also have to share their knowledge with classification societies, which perform a variety of functions. The relationship between yards and shipowners is equally characterised by a direct and broad exchange of knowledge-based details of the vessel. Finally, yards are co-operating closely with universities and other experts, especially in the field of computer aided design, computer integrated manufacturing and other IT components, in order to exploit R&D results and hereby disclose relevant shipyard know how. As a result, yards are facing a permanent risk of violation of their and third parties' intellectual property rights.

　

 Today, copyrights, registered designs, trademarks and patents are the main instruments to protect intellectual property rights. Additional measures are non-disclosure and specific collaboration agreements, although the "one-off' features often found in shipbuilding projects can make such agreements costly and appear less rewarding.

　

 In order to exploit these existing instruments to the full, yards and suppliers need to become more aware of the threats to their know how and the resulting competitive disadvantages. The establishment of knowledge databases could become a central activity for European yards to reach this objective. These databases should not only cover specific vessel characteristics and components, they should also indicate key people and important specific customer-supplier relations. Knowledge databases would help to form an IPR-entity that could be charged to safeguard and protect European shipbuilding knowledge. It would provide yards and suppliers with information on the internationally available knowledge (documented and non-documented) on specific vessel components, the requirements of an IPR protection of specific technical solutions, the existing patents in the relevant technical fields, the technological position of competitors, and the potential exposure of yards and suppliers to product piracy and other threats.

　

 Due to their comparatively long validity and their international recognition, patents are still an essential instrument which European shipbuilders need to exploit to the largest possible extent, including in the countries of their main competitors. In addition shipowners should be prevented from operating ships carrying devices on board built in violation of existing patents. However, the complex and truly globalized shipbuilding market contrasts with the current international framework for the protection of patents, established in 1925 and never changed substantially since then. Today, many of the rules laid down then appear anachronistic and unjustified. A re-examination of the current framework which does not allow national authorities to take measures against a ship, carrying a device built in violation of a patent, calling at a port where such patent is registered and protected, could give yards the right tool to protect their inventions and innovations, boosting the investments in research and development and stimulating yards' interest in acquiring patents.

　

　

　

　

 The Commission believes that the recommendations should be pursued. It will follow its part and calls upon industry to exploit existing IPR rules and create the appropriate data bases, the potential of which should be explored through further study and expert examination.

　

　

　

 In its Lisbon strategy the Commission has given particular attention to the question of skills and life-long learning. For any manufacturing sector, but for shipbuilding in particular, it is of high importance to retain qualified staff and attract young people. Shipbuilding, like other maritime sectors, suffers from a negative image that creates serious problems in this respect.

　

 While the decentralisation of competence in the areas of education and training limits the scope for top-down initiatives at EU level, there should be room for support to activities carried out jointly by organisations interested in promoting know-how.

　

 The EU already promotes the exchange and development of knowledge among research workers and between the research sector and industry. The principal instrument for that purpose is the Marie Curie programme, which supports training abroad and the transfer of knowledge through fellowships at post graduate to post doctoral level. The maritime industry can benefit from this support to train researchers within the industry, enable the development of commercial research knowledge, transfer research knowledge to the industry and to facilitate exchange of knowledge between industry and academia.

　

 Initiatives that could be developed at EU level may also relate to the creation of centres for post-graduates, with research and teaching activities, or to the creation of regional centres of excellence in which both companies and educational institutions would participate. This set-up could facilitate exchanges of students, transfer of knowledge, diffusion of good practices and the recognition of qualifications throughout the EU. It would also help to develop exchanges of experiences between technical staff in the maritime sector.

　

 The evolution of the industry towards a structure with a few major companies and many subcontractors increasingly requires new managerial attitudes to foster adaptability and innovation. Management needs to strengthen its ability to run firms based on project-related roles rather than on statically organised functions. This approach would be a vehicle for the social and technical innovations required to enable the industry to keep offering high quality employment in the longer term.

　

 As the first in the metal sector, shipbuilding has now formally established a committee for the sectoral social dialogue, recognised by the Commission in line with its Communication on social dialogue and in accordance with Art. 138 of the Treaty. This welcome development might lead to joint undertakings and to agreements as regards skills and social innovation in the broadest sense, in particular concerning the adaptability of workers and firms to change, and the implementation of lifelong learning strategies.

　

 Independent of the approach chosen, four concrete key aspects need addressing: Training of managers; promoting exchanges of shipbuilding specialists; supporting the development of skills; and, an appropriate communication policy to attract skilled blue and white collar staff.

　

 Management training should be offered both in a regional and international context. Interaction needs to be organised between senior and junior managers. The exchange of knowledge, including to a certain extent standardisation thereof, is important. Finally, management training should include knowledge of EU policies and regulations.

　

 Technical, management and research staff in the shipbuilding industry, including equipment manufacturers and services, should have the opportunity to work and learn elsewhere in the EU. The same applies to students and teachers on various levels.

　

 A specific EU platform where employers and employees meet, e.g. within the framework of the sectoral social dialogue, could promote the development of skills and social innovation adjusted to regional needs.

　

 A publicity campaign at EU level could help to stress the importance of preserving and further developing the shipbuilding and ship-repair industry. Regional publicity campaigns could be added to strengthen the effect of the EU-wide campaign, in order to achieve the Lisbon goals in the shipbuilding sector.

　

　

　

　

 The Commission agrees with these recommendations and calls upon the parties concerned to follow them up actively. The Commission has already established a sectoral social dialogue committee which in its view should serve as the focal point for the relevant activities.