Shipbuilding: Reorganization Programme. Communication from the Commission sent to the Council on 9 December 1977. Supplement 7/77 Bulletin of the European Communities

Bulletin of the European Communities Supplement 7/77 Reorganization of the Community Shipbuilding Industry Communication from the Commission, sent to the Council on 9 December 1977 COM (77) 542 final 6 December 1977 Cover title: Shipbuilding: Reorganization Programme Commission of the EUROPEAN COMMUNITIES This publication is also available in Danish, Dutch, French, German and Italian. A bibliographical slip can· be found at the end of this volume. Articles and texts appearing in this document may be reproduced freely in whole or in part so long as their source is mentioned. Printed in Belgium 19 78 Catalogue Number: CB-NF-77-007-EN-C contents Page Problems of Community shipbuilding 5 The crisis . . . . . . . . . . . . 5 Causes of the crisis . . . . . . 5 The consequences of the crisis for the Community 5 Current measures aimed at providing work for yards 6 The national approach 6 The international approach 8 The Community approach 8 The objectives of Community intervention 9 Adaptation of production structures 9 Redeployment of labour 9 Stimulating demand 10 Community action 11 Reorganization of the shipbuilding sector 11 Action to coordinate aids 12 Actions in the social sphere 12 Financing 12 Stimulating demand 13 International action 14 Conclusions 14 Annex 17 Characteristics of the crisis in shipbuilding . . . . . . . 1 7 Inventory of finance requirements for reorganizing the shipbuilding industry . . . . . . . . . . . . . . . . 19 Proposal for a Council decision setting up a Shipbuilding Committee . . . . . . . . . . . . . . . . . . . . . . 20 J-4 Problems of Community shipbuilding The crisis 1. The difficulties in new shipbuilding result from a world-wide structural imbalance between production capacity and demand; they are relatively worse for the Community industry on account of the competitive weakness of Community shipyards in comparison with non-European competitors.' Causes of the crisis 2. As a result of optimistic forecasts of the growth of the world economy, together with speculative demand, order books swelled unprecedentedly between 1960 and 1973. In order to meet this demand world-wide production potential increased to such an extent that overcapacity would probably have occurred even without the oiJ2 and economic crises. To meet orders received in 1972-1973, annual world production in the period 1974-76 grew to approximately 33 million grt3 (equivalent to some 20 million cgrt4 ). New orders, which determine the future level of activity, have fallen since 1975 to 13 million grt (and the same in cgrt).5 Given the extent of overcapacity in existing fleets, new orders will not even reach this level in the coming years. Japanese yards have for some time experienced a similar fall in activity, and, in their turn, are facing competition from yards in new shipbuilding countries (often established with the aid of Japanese capital). 3. Community shipbuilders have been subject to the same phenomena as others but, by depressing selling prices, the worldwide overcapacity brought Community yards down to their limit of competitiveness much earlier than their competitors. Although production facilities in some Member States have been modernized, Community shipS. 7177 building is handicapped by unsuitable structures and by uncompetitive operating costs-the large number of yards in the Community prevent large-scale production as in the Japanese yards, which are virtually new and form part of integratyd industrial groups, enabling them to withstand the hazards of the economic cycle. The need for structural adjustment is all the more urgent since Community yards have no hope of reducing social security charges which, in comparison with certain countries with a recently developed ·shipbuilding industry, are a handicap. The consequences weigh particularly heavily on the Community. 4. At the same time the prospects for several sectors of the shipping industry are gloomy, giving little hope of the serious imbalance between available tonnage and· market requirements being taken up before 1982; this is especially true for the tanker trade, but also for other trades such as bulk cargo. The statistics show6 that the Community's share of the world fleet has fallen from 25.1% in 1970 to 20.7% in 1976. It is true that the Community's shipping industry and its shipyards must remain, or be made, competitive in the world market. Community shipowners are not bound to the shipyards of the Member States; nevertheless, in practice our shipowners generally place their orders with our yards, hence the importance to these of the Community's having a competitive fleet. The consequences of the crisis for the Community 5. At the present time, the Community industry accounts for 20% of world production. Assuming that the rest of the world's share remains constant, and that the shares of the world market held by the various countries in 1975 remain the See Characteristics of the crisis in shipbuilding, page 17. The oil crisis has mainly affected new building of tankers. 1 grt is a measure of volumetric capacity. 4 cgrt (compensated gross registered ton) takes account of the amount of work per grt. 5 The volume is the same whether expressed in grt or cgrt because there has been a drastic fall in orders for simpler vessels (tankers and bulk carriers). 6 Tables I; 2 and 3. 5 Table 1 -Production in grt as a percentage of world total 1955 1960 1965 1970 EEC 70.0 51.1 31.3 25.6 AWES I 80.0 73.8 50.8 40.5 Japan 12.0 21.4 41.5 48.1 Rest of the world 8.0 4.8 7.7 11.4 1975 1976 23.3 22.6 38.5 37.5 50.6 46.7 10.9 15.8 1 AWES = Association of West European Shipbuilders (Community countries + Norway, Sweden, Finland, Spain and Portugal). Table 2 - Fleets in grt as a percentage of world total 1955 1960 1965 1970 EEC 35.4 33.5 28.6 25.1 AWES 47.5 46.9 43.0 37.9 Japan 3.7 5.3 7.4 11.8 Rest of the world 48.8 47.8 49.6 50.3 1975 1976 .22.9 20.7 35.9 32.9 12.2 11.2 51.9 55.9 Sources: Production: for 1955, 1960, 1965DAFSA study; for 1970, 1975, 1976 -Lloyd's Annual Summary. · Fleets : Lloyd's Statistical Tables. NB: Neither the Irish nor the Portuguese fleet was included in 1955, 1960, 1965 and 1970. same,1 A WES2 experts forecast that Community yards will deliver 2.4 million cgrt in 1980, compared with 4.4 million in 1975-i.e. a reduction of 46%, while world production for the same period will drop by only 40%. To the uncertainties inherent in any forecast must be added two contradictory factors, namely the low competitiveness of some shipbuilders (a factor. becoming more important as the downturn in world demand sharpens competition) and the high degree of competitiveness of Community shipyards in building certain particularly sophisticated types of vessels. But in this sector of the industry we must expect the Japanese, in particular, to launch an offensive-according to the Japanese Minister for Transport and Industry, 'the Japanese shipbuilding industry, which has depended on tankers for 0 more than 70% of its production, will have to shift more and more to special-purpose ships such as liquefied gas car6 Table 4 - 1975 production and 1980 production forecast based foreseeable demand 1975 ol980 grt cgrt gn cgn EEC 7.8 4.4 2.4 Rest of AWES 5.3 3.2 1.5 AWES 13.1 7.6 3.9 Japan 17.0 7.7 3.9 Rest of the world 4.2 4.2 4.0 Total, world 34.3 19.5 10.4 11.8 riers, etc .... having higher technology and greater value added. Consequently shipbuilding in Japan would reach 14.7 million grt in 1985, recovering to the 1975 level'.3 In this context developments in Community production must necessarily affect the workforce in the shipyards and allied industries. It is already estimated that 15 000 of the 180 000 jobs in the shipbuilding industry in 1975 have been affected by the rundown of production. 0 Current measures aimed at providing work for yards 6. Aware of the crisis in the industry, but hoping for a recovery, the authorities are resorting to every possible approach to provide work for shipyards. So far, however, these measures have merely been costly palliatives with no mediumterm prospects. The national approach 7. Many firms have cut out virtually all overtime, introduced short-time working, reduced working hours, encouraged employees to leave 1 See Annex, Table 4. 2 AWES: Association of West European Shipbuilders (Community countries + Norway, Sweden, Finland, Spain and Portugal). J Long-term vision on Japan's industrial structure, Tokyo 1976, Chapter 7. s. 7/77 _! 70% ' EEC J production Production 50% ..1. \ L ~ ~ -- f4 -- -- Fleets 1-------- "\ -- v l Third countries I - -- fleets . j ly_ I EEC II fleets 40% ·-. ~.,l \ -- c.. 1-'. '•~ ....... ..... c::-.. 30% ~~ Japanese j -~ production -. ~ ,l ~ I 20% v I Japanese J I, I\ fleet _.)j ++-+-++- ~ ~ ~~ v ""++~,. Third countries 10% 5% production 955 60 .65 70 75 76 8 0 1977 9 months Table 3 - Production and fleets in grt as a percentage of world total S. 7/77 7 and cut recruitment to the bare minimum, but ·these steps are inadequate and, what is more, they are rarely part of a long-term strategy. Left to their own devices the shipbuilding industries tend just to keep going, without attempting to adjust to the new market conditions. The Member States themselves encourage this attitude by supporting their shipyards in various ways, mainly in order to keep the level of employment as high as possible. National intervention of this type may take several forms: in some shipyards work is maintained by placing orders for naval vessels, when such are not reserved for naval dockyards, but in most cases intervention is financial. Compared with the level of employment, the sums involved are considerable: Aid now being granted, mainly to overcome the price advantage of Japan and other shipbuilding countries, is estimated at nearly 600 million u.a. annually (including aid to shipowners in the Federal. Republic of Germany and in the Netherlands, but not taking into account the hidden or unquantifiable help given in some Member States). Total aid, which in its ,various forms, is essentially aimed at maintaining employment in the yards, will necessarily increase since the level of activity will inevitably continue to drop between now and the 1980s, and competition from nonmember countries will probably grow. In most Member States financial help for the shipbuilding industry is supplemented by measures to support their own-flag fleets, and these may vary widely from one Member State to another. The international approach 8. Under the auspices of the OECD, the Member States, together with the other AWES countries and Japan, signed on 12 May 1976 the 'General guidelines for government policies in the shipbuilding industry' whose first priority is the reduction, in an appropriate manner, of production capacity in order to restore in the medium term the balance between supply and demand; the principle adopted is that of maintaining fair competition. 8 This action under the OECD is coupled with approaches to Japan. The Member States warned their partners against the possibility of Japan's failing to bear a sufficient share of the consequences of the crisis, and threatened to adopt unilateral protective measures. These pressures have led Japan to raise its export prices by 5% and introduce some measures of voluntary restraint vis-a-vis some European countries. But these measures seem insufficient to bring back balance into the market. The Community approach 9. The Community's interest in the problem of shipbuilding has two aspects: -competition: so far Community action on the industry has been almost entirely limited to successive directives coordinating aids to shipbuilding. Their main objective was to harmonize public intervention in the sector and reduce the level of those aids most damaging to intra-Community competition; -financial: since its inception, the European Regional Development Fund (ERDF) has paid out an estimated 78.65 million u.a. in regions where there is a high concentration of shipbuilding. The sum covers 225 projects involving a total investment of 1 470 million u.a. and the creation or preservation of 34 112 jobs in France, Germany, Italy, and in the United Kingdom where, in addition, 111 industrial-infrastructure projects have been aided in the said regions. Intervention by the Social Fund to benefit workers in the industry has been modest and the Council did not take up the Commission's proposal for applying Article 4 of the decision on the use of the .Social Fund, 1 submitted in January 1974.2 1 OJ L 28 of 4.2.1971. 2 OJ c 13 of 12.2.1974. S. 7177 The objectives of Community intervention 10. The Community, as the world's leading trading power, 90% of whose trade is seaborne, has a major interest in conducting a maritime policy which makes it commercially competitive. Commercial competitiveness depends partly on a competitive Community fleet. Such a fleet is potentially a market for Community yards if they can supply it on terms competitive with those offered by others. The first objective of Community policy on shipbuilding must therefore be to make our yards competitive in the world market. The Community's attention should be directed chiefly to the new building of seagoing non-naval ships,1 since this is the segment of the industry in which the structural problem of overcapacity and competitiveness is acute. The other sub-sectors, while less affected by the structural problem, are more sensitive to the short-term economic situation. Community strategy should concern itself with coordinating the means at present available to the Community and concentrating them on achieving a predefined objective. The aim should be to reorganize Community shipyards, so that they are competitive in the world market and consequently able to provide a significant proportion of the Community fleet. Independence of Community shipowners from yards in third countries is essential for the security of the Community's supply in view of the importance of sea transport to its external trade-and for the maintenance of the Community's share of world trade. ' As the cost of transport is a very important factor in the Community's economy, the Commission does not consider that the interests of the shipping industry should in any way be subordinated to those of shipbuilders. The Commission considers that action by the authorities in areas of interest common to both industries is an essential element in implementing an overall strategy for ' shipbuilding. Reorganization of the industry should be based on the realities of the market, and the expected s. 7/77 level of demand should be the datum point for any action at Community or national level. On the basis of the information quoted in Part One above, the level of demand should be approximately 2.4 million cgrt in the early 1980s; · this estimate must be checked with the Member States and regularly adjusted to market developments. In view of the present imbalance between supply and demand for certain types of ships, the attainment of a general production aim geared to foreseeable demand is contingent on the adaptation of production structures, the redeployment of labour and the stimulation of demand. Adaptation of production structures 11. There should be a quantitative and qualitative adjustment of structures to foreseeable demand; this should also extend to directly related industries. -Quantitatively, it will be necessary, in the industry's own interests as well as in the interests of the workers whose jobs in the shipyards will otherwise disappear entirely, to adjust production capacities to market prospects in an orderly fashion. -Qualitatively, moves to adapt production capacities quantitatively must be accompanied by efforts to improve production facilities so that they may survive without aid and become competitive in the world market. Redeployment of labour 12. As it is impossible to maintain the present level of employment of some 165 000 persons any action to reorganize the industry that does not take into account the social aspects of the 1 At this stage it does not seem appropriate to include warships because the building of these highly sophisticated vessels is not affected by the crisis. 9 exercise and seek to limit the effects on the labour force will be doomed to failure. 13. Once the objective of reorganization has been defined for the industry, the consequences for employment must be drawn; these will be of two kinds: -the retraining of workers within yards where the latter undertake internal conversion as part of the qualitative adaptation of production facilities; -redeployment outside the industry: here the Community should . bring into play all its resources for creating jobs outside shipbuilding, both within the yards themselves and, more particularly, for those made redundant, every effort being made to site the activities in the same district or region as the affected yards, so that these new activities may benefit from. the skills of the workers concerned; this process of creating new job must be accompanied by suitable social measures. In view of an expected level of demand of about 2.4 million cgrt in the early 1980s, the Commission estimates that an effective restructuring operation in this sector could affect approximately 75 000 jobs,1 15 000 of which it is estimated will be vacated by natural wastage. If the operation is extended to directly related industries, these would be affected in the same proportion which would make approximately 30 000 persons redundant. 14. As such results can only be achieved gradually, it will be necessary to continue to resort to holding actions which are essential for the direct or indirect support of employment. The Commission considers that, if the objective is to be achieved, Community action would be acceptable to the general public and to the workers only if it takes full accpunt of the different situations in the industry in each Member State, and the position the industry occupies in the economy of the Member State or region. Whether this operation will be used to demonstrate the Community's solidarity will depend on the political will of the Council. 10 Stimulating demand 15. The prospects generally agreed upon for shipbuilding in the Community presage the possibility of the industry's dwindling away, leaving the shipbuilders of non-member countries in a dominant position on the market and capable of taking action to the detriment of the Community fleet. In addition, the transfer of a significant proportion of the world fleet to flags of convenience has brought into the shipping market vessels which present both operating hazards (substandard ships) and a threat to the marine environment; and they are subject to social regulation which are unacceptable as far as the Community's labour laws are concerned. 16. International bodies are already trying to devise means of combating this form of unfair competition. The Community should step up the action it is already taking in this direction by taking steps towards the adoption of practical measures in the near future. -Certain environmental protection measures could lead to a partial reduction of the excess capacity in tanker fleets and alsQ appreciably stimulate the conversion of existing tankers. 2 -More stringent safety regulations would remove unfair advantages enjoyed by ships of nonmember countries, particularly those registered under flags of convenience, and thus act to the advantage of the shipbuilding industry, either directly (conversions and repairs), or indirectly (ships would be scrapped more quickly, and this would speed up the improvement of the transport market). Such regulations could also limit the trend for our shipowners to register their vessels under flags of convenience. 17. Owing to the unshakeable advantage of certain competing shipbuilders, at least in the short term, market forces will not ensure that certain types of ship are competitive on the international market-and this already seems to be the case 1 See Inventory of finance requirements for reorganizing the shipbuilding industry. page 19. 2 See point 27. S. 7/77 prices which do less and less to cover costs, have had the effect of maintaining temporarily an artificial level of demand. Moreover, the impression is that not a few recent orders have been placed simply because prices are so low, thus, in fact, anticipating the shipping market's future needs, particularly for bulk carriers. Compared with an annual world production in recent years, of upwards of 30 million grt (approximately 20 million cgrt), orders since 1975 have dropped to 13 million grt (approximately 13 million cgrt because the types of vessel are different). It is highly probable that orders will not even reach this level in 1977, and will fall further in the following three or four years. According to the available data, demand will probably be so low up to the beginning of the 1980s that the shipyards' level of activity will tend to settle at two-thirds to half that of 1975. Forecasts Assuming an average GOP growth of 4% for the period 1976 to 1985, the market will probably recover towards 1984. If the growth rate is lower, recovery will be delay"ed for a few years. Table 4 - Production forecasts In the Community, this recovery will bring an upturn in activity in shipyards, but at what level it stays will depend largely on the determination with which the industry and the authorities face up to competition on the world market. On the subject of competition, it is to be expected that Japanese shipyards will make every effort to adapt their advanced produced technology (developed for series production of technically rather simple vessels) to the building of more sophisticated ships. Countries which have recently developed shipbuilding industries will probably keep the advantage of very low wage rates for a considerable time to come. As a result, they will be able to win orders during the period 1976-1985 at prices unacceptable to Community shipyards, and therefore consolidate their position. Consequently any estimate of the limits to which their shipbuilding industry can expand in uncertain. Finally, orders for tankers, even after the current surplus has been absorbed, can never be expected to regain the artificially high level, based on a gross overestimate of the expansion of requirements, of the years preceding 1973. In the light of these comments, the forecasts in Table 4 should be regarded as at the upper limit: (in million grtlcgrt) Forecast for production Estimated production Modified estimate in 1985, based 1975 production in 1980, based of 1985 on some optimistic on foreseeable demand assumptions (AWES) production grt cgrt grt cgrt grt cgrt grt cgrt EEC 7.8 4.4 2.4 3.9 3.1 Rest of AWES 5.3 3.2 1.5 2.6 2.1 -- -- -- -- -- AWES 13.1 7.6 3.9 6.5 5.2 Japan 17.0 7.7 3.9 6.5 5.2 Rest of the world 4.2 4.2 4.0 7.2 5.8 -- -- -- -- -- -- Total, world 34.3 19.5 10.4 l1.8 20.2 16.2 Notes I. These forecasts are consistent with studies carried out by AWES in mid 1976. They are based on an assumed 496 growth in GDP during !976-85. 2. The forecast for world production in column IV is modified in line with the assumption that GDP will grow by 3.596 p.a. during 1976·85. 3. The geographical distribution of world production is therefore based on the following assumptions: -countries other than AWES and Japan (the rest of the world), will not increase the level of their activities until after !980, but will do so thereafter both by better use of existing capacities, and by some expansion; ·· -AWES yards, and the Japanese, will, as in the recent past, have equal shares, measured in cgn.; it is hoped that international cooperation within OECD will bring this about; -shares within AWES between the Community and the rest will, as before, be 60/40. 18 s. 7/77 Inventory of finance requirements for reorganizing the shipbuilding industry Financial instruments available to the Community should make a real contribution towards providing the financial stimulus needed to adapt or convert production facilities. In view of the present surplus of production capacity, however, it is out of the question that these financial instruments should be used for production support schemes. Any restructuring of the shipbuilding industry will mean heavy investment for rationalizing and the modernizing equipment,. production techniques, management and sales and, above all, for the redeployment of the labour made redundant by the crisis either in the same or another industry. It is therefore ·necessary to estimate L-even to a first approximation from the overall data now available-the possible cost of the scheme and then outline how it can be financed. Cost of reorganization schemes Given the uncertainty in the sector and the need to check all the factors and data with the Member States, the industry and trade unions, it is particularly difficult to produce an estimate amounting to anything more than a first approximation of the order of magnitude. The difficulties are all the greater since the estimates cover a large number of people who, it is realized, will be encountering difficulties in their working life without the Commission being able to do much at present beyond displaying its firm intention to seek solutions causing the least possible difficulties. Intervention will vary in amount according to the type of scheme and the industry attracting it. -In the shipyards themselves: • Over five years estimated natural wastage will reduce employment by 15 000, bringing the total labour force down to !50 000. If production levels out at around the expected volume of demand (2.4 million cgrt), a 45% reduction in production capacity would result; this would probably mean an even greater reduction in employment owing to the hoped-for increase in productivity. Consequently, it is hard to see how the (by then) sound companies could employ more than 90 000 persons at the end of the five-year period, which means that about 60 000 jobs for redundant shipyard workers would have to be created; in addition, under regional economic policies, provision should be made for replacing the 30 000 jobs lost since 1975 through natural wastage. Where employment in the shipyards is concerned, it can be estimated from experience that the average cost of creating a new job outside will be 50 000 u.a. The 60 000 jobs to be S. 7177 created for redundant shipyard workers, then, would cost 3 000 million u.a. • On the basis of investment in recent years, both in Member States and Sweden (where it has been particularly heavy) it is possible to estimate the cost of shipyard restructuring and internal conversion at 900 million u.a. (10 000 u.a. x 90 000 jobs). - In the allied industries, it is difficult to estimate the split between conversion inside and outside an industry, as it will depend partly on the industry to which they are converted. Nevertheless, the cost of converting these industries may well be proportionately lower owing to a greater ease of conversion to other activities. using a cost of 25 000 u.a. per job created as a basis, the estimated cost of converting approximately 30 000 jobs will be 750 million u.a. Over a period of five years from 1978, therefore, the cost of conversion and restructuring schemes would be of the order of 4 650 million u.a., i.e. about one thousand million u.a. per year. Methods of financing The cost of financing these schemes must be shared between the authorities' ·budgetary resources and companies' own resources or such funds as the latter can raise on the market. At present the Member States support the shipbuilding sector to the tune of 600 million u.a. per year. More might be needed over the next few years. Moreover, the outlook is such that intervention by States should progressively be directed towards attainment of the common objectives of reorganizing the shipyards. Where Member States apply to the Regional Fund for the creation of jobs to employ labour made redundant by the shipyards, Community resources would be added to national aids. Again at the request of the Member States, the Social Fund could help with vocational training. The estimated contribution from public-authority budgets. to the creation of jobs outside shipyards and allied industries will average some 30%, entailing expenditure of 1150 million u.a. spread over five years. The contribution from public funds to internal schemes would be at a higher rate in view of the financial difficulties of the industry. The financial contribution for which the shipbuilders are re- . sponsible cannot be significant in view of their liquidity position and their considereable burden in maintaining production facilities but it is to be hoped that they can participate in financing a third (300 million u.a.) of the estimated expenditure necessary to bring about over a period of five years their modernization and internal reconversion to other types of 1 All estimates are based on 1977 values. 19 production, the balance (9()()-300) of 600 million u.a. being borne by the States. Taken as a whole, therefore, the contribution from the public purse to the rationalization of the sector may be estimated at about I 750 million u.a. The financial contribution made in the companies may be assessed, by deduction, at 2 900 million u.a. supplied by their funds. The Community could participate in this category of financing by turning to the financial market, both through the EIB,l with its own procedures and methods, and by recourse to 'community borrowing. I The interventions or the EIB would be made on the basis or projects which are technically and financially viable and in accordance with available guarantees and the way in which exchange risks can be covered if necessary. 20 Proposal for a Council decision setting up a Shipbuilding Committee The Council of the European Communities, Having regard to the Treaty establishing the European Economic Community, Having regard to the proposal from the Commission, Whereas on .............................. 1977,1 the Council adopted a Resolution concerning the reorganization of the shipbuilding industry, Whereas it is necessary to ensure the implementation of common objectives by coordinating national and Community action in this field, and to establish a standing concertation procedure on matters affecting shipbuilding, Whereas a Shipbuilding Committee is required for this purpose, Has decided as follows: Article 1 A Shipbuilding Committee, hereinafter referred to as the 'Committee', is hereby established to advise the Council and the Commission and to contribute towards the coordination of national and Community policies. Article 2 I. Pursuant to the Council Resolution adopted on ........ . the Committee shall monitor trends in the level of demand and contribute towards organizing the adjustment of production capacities to that level and inproving production structures. 2. At the request of the Council or the Commission, and without prejudice to the authority conferred on other bodies by the Treaty or acts deriving therefrom and particularly the competences of the Commission under the rules on competition, the Committee shall also undertake studies relating to: (a) trends in the economic, social and financial situation in the Community shipbuilding industry; this study shall be continuous and comprehensive; (b) any criteria likely to persuade the Member States to practise solidarity in carrying out the requisite reduction of capacities and to ensure that market trends and the relevant guiding principles laid down by the Council are taken into account in the process; (c) national and Community means and methods of enhancing the competitiveness and resilience of the sector and for I See point 31 or the Communication. s. 7177 promoting the redeployment of personnel having to be directed to activities outside the sector; (d) developments in other fields that may influence production. 3. The Committee shall report its findings to the Commission and the Council. Article 3 I. Member States and the Commission shall each nominate one full member and one alternate. Members of the Committee and their alternates shall be chosen from among senior officials responsible for shipbuilding policy; the full member representing the Commission shall be a Member of the Commission nominated by the latter. 2. Unless otherwise decided by the Committee, members may call on the assistance of qualified persons representing the interests concerned. Representatives of the Commission departments may take part in meetings of the Committee or its working groups on subjects within their responsibilities. 3. The European Investment Bank may appoint an observer. Article 4 I. The Chairman of the Committee shall be the Commission representative. 2. The Committee may remit specific questions to working parties comprising certain of its members assisted by alternates or experts. 3. The Commission shall provide the secretariat of the Committee. 4. The Committee shall lay down its own rules of procedure. Article 5 On specific questions, and in accordance with its rules of proCedure, the Committee may seek the opinion of the interests concerned. Done at Brussels, For the Council s. 7/77 21 European Communities -Commission Shipbuilding -Reorganization Programme Supplement 7/77 - Bull. EC Luxembourg: Office for Official Publications of the European Communities 197724p.- 17.6x25.0cm DA, DE, EN, FR. IT, NL Catalogue number: CB-NF-77-007-EN-C BFR 25,- DKR 4,- DM 1,70 FF 3,50 LIT 600 HFL 1,75 UKL 0.40 USD 0,70 The outlook for the Community shipbuilding industry's output is gloomy. Because of the worldwide structural imbalance between production capacity and demand, the Community's shipyards are likely to suffer a drop in production of approximately 46% between 1975 and 1980. This trend is bound to affect employment. It entails the redeployment of some 60 000 persons. The Commission's programme for reorganizing the shipbuilding sector emphazises the need for all action to be based on the realities of the demand situation and hence on the need to adjust production capacities quantitatively and qualitatively. As this kind of adjustment is bound to have social repercussions, the Commission advocates a concurrent programme for finding new jobs for workers affected by the reorganization. Care must also be taken to ensure that trends in demand are not affected by distortions in world competition and that the Community is ensured of a minimum of independence in shipping so that it can carry out its economic and trading activities.