The OECD announced it has launched negotiations on cutting overcapacity in the world's shipbuilding industry. A special negotiating group on shipbuilding which has met at the OECD recently was attended by representatives of OECD countries and non-member countries which together account for more than 95% of total world shipbuilding production. The talks were also aimed at addressing plunging prices in the ailing shipbuilding industry.
It was stated that current levels of overcapacity, estimated at around 15%, 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 result has been to push new ship prices to artificially low levels, as many shipyards reduce their prices to below economic levels in order to attract the business needed to keep their workforces employed. It is expected that without action to counter this trend, overcapacity in the shipbuilding industry is likely to rise to more than 30% 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. 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 negotiating group is scheduled for early March 2003, but the group only expects to complete its work by the end of 2005.