Committee Reports > List of Committees > Joint > 1978 > Committee on the Secondary Legislation of the European Communities > Report No. 07 - Shipbuilding Industry

REPORT

Introduction

1. The Joint Committee has examined the Commission Communication to the Council concerning the re-organisation of the Community ship building industry and also the draft Council Resolution and a proposal for a Council Decision setting up a Shipbuilding Committee annexed thereto [R/3216/77 (ECO 301)]

2. The Community’s interest in the problems of the shipbuilding industry in the Member States arises partly from the competition policy and partly from the Community’s involvement in assisting financially through the Regional Fund areas in which there is a high concentration of shipbuilding. There has also been a modest intervention under the Social Fund to benefit workers in the industry.

Background

3. Between 1960 and 1973, world-wide shipbuilding capacity increased to meet an over-optimistic expectation of growth in the world economy. The Commission considers that overcapacity would probably have occurred even without the oil and economic crises but, of course, these have aggravated the problem. In a depressed market the Community’s shipbuilding industry has been exposed to competition from highly efficient Japanese and other yards which are geared to large scale production, have up-to-date production facilities involving higher technology and which benefit from lower employment costs. As 90% of Community trade is seaborne, the Community has a major interest in ensuring that its shipbuilding industry survives. Already, the effect of the reduction in orders has been to reduce employment in the Community’s industry from 180,000 in 1975 to 165,000 at present. Moreover, the Commission estimates that an effective restructuring operation could affect approximately 75,000 jobs.

Remedial Measures Taken

4. The Community industry has responded to the run-down in demand by introducing short-time working, reducing working hours, encouraging employees to leave, reducing recruitment to the minimum, and diversifying to reduce its dependence on shipbuilding e.g. ship repairs and engineering work including, in the case of Ireland, work on off-shore oil installations. There has also been action on the international level. Over-capacity and possible measures to deal with it have been the subject of extended discussions between the Community and other Western European countries, on the one hand, and Japan on the other hand, in the framework of OECD. Japan has within the past year taken measures to reduce its shipbuilding capacity through reduced man-hours and has raised its export prices by 5 %. However, in recent OECD discussions it has strongly criticised the Community for continually calling for the reduction of Japanese shipbuilding capacity while doing nothing to reduce the level of Community shipbuilding capacity. The Commission’s intention is that the setting up of the proposed Shipbuilding Committee would put the Community in a better position to offer some defence against these criticisms.

Commission’s Communication

5. The Commission’s Communication seeks to lay down certain policy guidelines for the co-operation of national policies directed at making the Community shipbuilding industry commercially competitive in the world market. The Commission envisages (1) action to adjust production structures to market prospects both quantitively and qualitatively, (2) the redeployment of labour involving retraining of workers and the creation of jobs outside the industry and (3) the stimulation of demand by measures designed to counteract unfair competition and the advantages of other shipbuilding countries.

6. The Commission suggests that Community action in the re-organisation of the industry should include (a) the co-ordination of national aids in accordance with the Fourth Council Directive recently adopted, (b) special social measures and (c) financial involvement, [n the matter of stimulating demand the Commission mentions (i) environmental measures to counteract marine pollution which would create more demand in the shipyards, (ii) enforcement of minimum safety standards and minimum social rules to prevent unfair competition and (iii) other measures being discussed by the Council in relation to sea transport. The Commission also proposes more Community action at international level.

7. The Commission has asked the Council to set up a Shipbuilding Committee, This would be composed of senior officials responsible for shipbuilding policy which would advise both the Commission and the Council and which would contribute towards the co-ordination of national and Community policies by monitoring trends in the level of demand. It would also undertake studies of the economic, social and financial situation of the Community shipbuilding industry.

Irish Industry

8. In Ireland, the shipbuilding industry can be regarded as synonymous with Verolme Cork Dockyard Ltd. in which the State through Fóir Teoranta has a 47% shareholding. The Dockyard employs 1,200 (700 in shipbuilding and the remainder on other activities). Its diversification plans have already been notified to the Commission as part of a programme of re-organisation of the Dockyard. Of interest is the fact that unlike shipyards in other Member States, Verolme Cork Dockyard Ltd. has been able to obtain sufficient work to avoid the laying off even temporarily of any of its shipbuilding workers. However, the maintenance of full employment into the 1980s is necessarily problematic.

Joint Committee’s Views

9. The Joint Committee appreciates the immense problems currently facing the Community shipbuilding industry and recognises that one of the answers may well be a cutting back in production capacity. It considers however, that any re-organisation of the shipbuilding industry should be effected in such a way that individual Member States should be able to maintain a minimum critical level of shipbuilding operations. In this context, across the board pro rata reductions in the production capacity of individual Member States is not feasible.

10. Verolme Cork Dockyard Ltd. is the minimum viable size for the kind of production facilities which it possesses and because of regional and strategic considerations, it would not be possible to reduce the Yard’s capacity. The Joint Committee believes that any proposal to do so should be firmly resisted.

11. The Joint Committee understands that the shipbuilding industry is anxious to be represented directly on the Shipbuilding Committee. The Commission on the other hand envisages the Shipbuilding Committee seeking the opinion of the industry whenever necessary. In the Joint Committee’s view the important thing is that there should be machinery to enable the views of the industry to be obtained quickly.

12. The Joint Committee welcomes the Commission’s proposals to make six-monthly reports on the state and progress of the re-organisation of new merchant shipbuilding and to submit appropriate proposals for decision at the earliest possible date. It notes that the Commission will submit as soon as possible proposals for additional social measures.

Acknowledgement

13. The Joint Committee wishes to acknowledge with thanks the considerable assistance it received from Verolme Cork Dockyard Ltd. in its examination of the Communication.

(Signed) MARK CLINTON,

Chairman of the Joint Committee.

26th April, 1978.