OECD STARTS TALKS ON SHIPBUILDING SUBSIDIES

OECD STARTS TALKS ON SHIPBUILDING SUBSIDIES    Government officials representing the world’s principal shipbuilding economies have started negotiations at the Organization for Economic Cooperation and Development in Paris on shipbuilding.
   Current levels of over-capacity, estimated at around 15 percent, are “largely the result of subsidies and other forms of government support measures that have allowed shipyards that would otherwise have gone bankrupt to continue to operate,” the OECD said Thursday. The result has been to push new ship prices to “artificially low levels,” below economic price levels, to keep shipbuilders’ workforces employed,it added.
   The OECD warned that, without action to counter this trend, over-capacity in the shipbuilding industry is likely to rise to more than 30 percent over the next two years.
   “Faced with this prospect, governments and industry in both OECD and non-OECD economies have agreed that there is an urgent need to establish normal competitive conditions in the world’s shipbuilding industry,” the Paris-based body said.
   A special negotiating group chaired by the Swiss ambassador to the OECD, Wilhelm B. Jaggi, is holding its first meeting at the OECD on Dec. 5-6. Participating countries include OECD members and Brazil, China, Croatia, Romania, the Russian Federation, Taiwan and Ukraine.
   Following discussions at the first meeting on the basic structure of a possible new shipbuilding agreement, future meetings will discuss mechanisms to deal with subsidies and other support measures, disciplines to address pricing and other practices that distort the market, and eventually remedies and dispute settlement procedures. The next meeting of the special negotiating group is expected to take place in early March 2003. The OECD said that the group hopes to conclude its work by the end of 2005.
   The International Chamber of Shipping, the London-based industry group that represents international shipowners, welcomed the start of the OECD inter-governmental talks in Paris on shipbuilding.
   “There remains a serious need for the major shipbuilding nations to bring normal market disciplines to this sector in order to address the problem of over-supply, and the perennial problem of too many ships chasing to few cargoes,” said Chris Horrocks, secretary general of the    International Chamber of Shipping. OECD's decision to embark on new negotiations involving the major shipbuilding nations, including those outside OECD, is very welcome, he added.
   Horrocks said that the shipping industry recognizes the “political sensitivities” involved in addressing the removal of subsidies and injurious pricing, but encouraged talks to reach a global agreement.