Shipbuilding

1
Shipbuilding
By Christian Goebel, TJ Leja, Arne Mom Jessen
and Ben Polzin

• Todays presentation brought to you by the letter
  S and the number 9

2
Reasons for Regulation

• Cyclical industry leads to strong government
  support
• Injurious pricing (dumping)
• Long periods of recession
• Labor intensive industry
• History of Problems
• Crisis in the 1970s and 1980s
• Recession and new developing countries entering
  market

3
Past Regulations

• General Arrangement for the Progressive Removal
  of Obstacles to Normal Competitive Conditions in
  the Shipbuilding Industry (1972)
• - uneffective because it was not legally
  binding
• South Korea 2002 Injurious Pricing
• WTO Action
• Direct subsidies of 6 for tank/container ships
  were applied globally

4
Past Regulations - Part Zwei

• Agreement of 1994
• Agreement Respecting Normal Competitive
  Conditions in the Commercial Shipbuilding and
  Repair Industry
• Involved Countries
• EU, Finland, Japan, the Republic of Korea,
  Norway, Sweden and the United States
• 80 of int. shipbuilding capacities
• Entered into force on 15 July 1996 after national
  ratification processes
• USA did not sign the agreement
• Was never really accepted and implemented in
  shipbuilding industry

5
Summary of 1994 Agreement

• Direct/Indirect Support Prohibited
• Prohibited Measures
• Essential support for RD also illegal
• Some exceptions
• Support for workers losing employment
• Etc.
• Injurious Pricing
• Selling ships below normal market value
• Threatens established shipbldg company

6
Punishments of 1994 Agreement

• Punishment for any Violation
• Violations confirmed by independent panel (WTO)
• Illegal support measure would be eliminated
• Illegal benefit paid back with interest
• Sanctions

7
Expectations of 1994 Agreement

• Sustained positive impact on industry
• Punishments for dumping
• Repressed govt support
• 1994 Agreement Upgrade
• 2002 OECD countries met
• Aim include 95 of shipbldg countries
• Goal to end negotiations by 2005

8
Regulation Practice in Germany

• Support program "Innovativer Schiffbau sichert
  wettbewerbsfähige Arbeitsplätze
• Subsidies of max. 20 for expenses investments,
  development-, engineering- and testing activities
• Support of special refinancing conditions
• 2004 45 mio. EUR direct support (1/3) by
  government plus support of federal states (2/3)
• 135 mio. EUR total subsidy volume

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Questions, bitte.