Tuesday, May 9, 2000

Washington State lawmakers seek to reclaim power
to regulate tankers

Senator Slade Gorton (R-WA) and Representative Jack Metcalf (R-WA) have introduced bills (S. 2506 and H.R. 4385 respectively) in response to the recent Supreme Court ruling in favor of Intertanko. That ruling held that federal law preempts states from regulating tank vessels with regard to design, construction, maintenance, operation, equipping, personnel qualification, and manning. The Gorton and Metcalf bills seek to remove the current preemption of state authority to adopt additional standards for tank vessels.

Gorton is making good on a pledge made immediately after the Intertanko case decision when he said he would "explore every avenue in the Senate to see that Washington's tough environmental and safety standards are permitted by federal law."

Metcalf said his bill would amend the Oil Pollution Act of 1990. It would clarify Congress' ability to permit states to adopt additional standards regarding maintenance, operation, equipping, personnel qualifications, or manning of vessels that cross into state waters.

"We need to do everything we can to preserve the national treasure that we know as the Puget Sound," Metcalf stated.  "Federal regulations alone do not provide enough protection for the unique conditions and circumstances of our region."

European Commission keeps up pressure on
Korean shipbuilders

The European Commission last week adopted the second in a series of reports to the Council of Ministers on the state of the world shipbuilding market. Noting a continuing decline in the market share of the EU shipbuilding industry. the report expresses particular concern about "commercially unsustainable prices" being offered by South Korean yards.

The report also outlines the strenuous efforts made by the Commission to convince the South Korean Government to play its part in creating fair and competitive world market conditions. In particular, after several rounds of consultations, the European Commission and the Korean Government finalized talks on April 10, 2000 and initialled "Agreed Minutes relating to the World Shipbuilding Market" . These Agreed Minutes focus on non-subsidisation, banking, financial transparency (with regard to international accounting standards), commercial pricing practices and an effective consultative mechanism. The report is due to be considered by the Council
of Industry Ministers at its meeting on 18 May 2000.

Under Council Regulation 1540/98 establishing new rules on aid to shipbuilding the Commission is required to report on the situation of the world shipbuilding market. The first report (COM (1999) 474 final) was adopted by the Commission in October 1999 and was the subject of Conclusions by the Council in November, which invited the Commission to continue its examination of the situation. This is the second such report.

According to the report, the world market for merchant ships continues to be in crisis. Supply clearly outstrips demand and there are only a few indications that this situation may improve. Consequently the comparatively stronger demand for ships in the period 1998 to 1999 has had no positive impact on prices. On the contrary, prices for nearly all ship types have continued to decline.

The on-going depression in prices is caused by extremely low offer prices from Korean yards. Cost investigations of shipbuilding orders have once more revealed the extent of the losses (11%-32% of the building costs) that Korean yards are willing to take in order to assure market share and cash flow.

At current price levels EU and Japanese market shares continue to shrink, although this effect is less pronounced for the EU. With the exception of cruise vessels, all market segments are targeted by Korean yards, leaving only small domestic orders and highly specialized tonnage to EU yards.

The Commission is continuing to monitor the market says it is pursuimg "all lines of action" to address the problem. In particular, the Commission says it has made "strenuous efforts" to secure binding commitments from the Korean Government regarding non-intervention in the financing of shipbuilding activities.

In its report the Commission states its intention to closely follow-up the consultation process set out in the "Agreed Minutes".

In parallel, the European shipbuilding industry has compiled evidence that could lead to a complaint under the EU Trade Barriers Regulation. The industry has announced its readiness to file such a complaint should the Korean Government fail to implement the Agreed Minutes satisfactorily.

The European Commission report recommends:

  • continued pressure on Korea fully to implement the "Agreed Minutes" and to assume responsibility to work towards an improvement of the market situation, in particular concerning price levels and newbuilding capacities;
  • full application of the provisions of the "Agreed Minutes" once they have entered into force, invoking the consultation mechanism whenever necessary;
  • collection of further and more detailed evidence on possible injurious pricing and other non market-oriented behavior in order to launch and support a complaint under the Trade Barrier Regulation if required;
  • informing the IMF about the findings and requesting that the promised industrial restructuring in Korea is closely monitored and assessed;
  • encouragement of the EU shipbuilding industry further to improve its competitiveness.



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