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Orders of the Day — European Community (Shipbuilding)

Part of the debate – in the House of Commons at 12:00 am on 4th July 1975.

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Photo of Gerald Kaufman Gerald Kaufman Parliamentary Under-Secretary (Department of Industry) 12:00 am, 4th July 1975

I am fully cognisant of and greatly sympathetic with the views of my hon. Friends and the right hon. Member for Knutsford (Mr. Davies). We should be extremely careful in the way in which we handle this business. Having taken the view that I held up to the referendum, it would be inappropriate and slightly hypocritical of me if I were now to take a contrary view. I assure all hon. Members that, by coming before the House on a take-note motion, I do not assume that if that motion is accepted it thereby involves the approval of the House. If I were to do so, then indeed not only would I be in some contempt of the House—which I certainly would not seek to be—but I should not be behaving consistently with the views that I have held on these matters for a considerable time.

I in no way resent the points of order that have been raised. Indeed, far from resenting them, I think that right hon. and hon. Members have been absolutely right to make their points at this time so that we can all be perfectly sure of the basis upon which the debate is being conducted. I should like the House to understand that it is not the intention of Her Majesty's Government, and certainly not my intention, that we should take more out of the debate than a take-note motion would justify. I hope that all hon. Members will accept that assurance and allow me to proceed to explain the directive, because some hon. Members have expressed concern about it.

I shall now explain the purpose and scope of the directive. It may be asked—it is certainly a question that I should have asked as probingly as I could—why do we need a directive on shipbuilding at all? From our point of view, and I am sure that of other member States, the best argument for a directive is its permissive nature. It does not restrict our powers. It legalises aids which are being given and which might otherwise be prohibited. Article 92 of the EEC Treaty prohibits State aids which may distort competition, other than those listed in paragraphs 2 or 3. The exceptions listed in sub-paragraphs 3(a) to 3(c) include aids to promote the development of special areas and of certain economic activities, such as aids given under Section 7 of the Industry Act in the United Kingdom.

The Shipbuilding Directive is made under Article 92(3)(d) which allows the Council to add other categories to those already listed. Its effect is to widen the list of exceptions to the general prohibition of State aids contained in Article 92, but it does not preclude us from proposing to the Commission additional aids if the need arises.

In the absence of a directive, all aids to shipbuilding will have to be justified under the Treaty of Rome. For instance, we would need to seek approval for our Home Credit Guarantee Scheme. This does not mean that any directive will do and, throughout our negotiations in Brussels, we have endeavoured to explain our point of view and to ensure that our shipbuilding industry could continue to get the support it needs to safeguard its position among shipbuilding nations. The market for ships is an international one and the directive is not particularly concerned with competition in intra-Community trade in ships, which is not very significant. Its aim is to place all EEC shipbuilders on an equal footing to compete in the world market.

This directive, like its predecessor, takes account of international agreements to regulate aids made under the OECD, to which all EEC member States have subscribed. They have been working effectively since their introduction in the late 1960s and all the signatories have expressed their strong wish to uphold them against the background of deteriorating order books and intensifying competition.

There is a long history of support given by Governments to their shipbuilding industries, culminating in a subsidy race in the 1960s when Governments tried to outbid each other in order to maintain or increase their share of the market. In 1969, OECD shipbuilding countries signed the Understanding on Export Credit for Ships, which was a major and successful step towards orderly marketing and fair competition on equal credit terms. In 1972, the same nations undertook to remove progressively all obstacles to normal competitive conditions in the world market for ships under an OECD agreement known as the General Arrangement.

This provides, among other things, that direct subsidies to shipbuilding should be eliminated by 1975 and that no new aids specific to shipbuilding should be introduced. The General Arrangement has worked well and discussions are proceeding on what further steps could be taken, bearing in mind the problem of over-capacity. Naturally, all Governments, including Japan, which now has a 50 per cent. share of world output, are deeply concerned about the difficulties ahead and particularly the dangers inherent in fierce competition.

Neither we nor the other EEC countries want to breach our obligations unilaterally by increasing our aids to shipbuilding. That is not the way to deal with the problem. Together, we shall discuss with Japan and other major shipbuilding countries in the OECD what measures can be taken in the common interest.

It is against this background that we must examine the purpose of the directive. It deals essentially with four subjects—direct building subsidies, Government assisted credit, investment aids and rescue of companies in difficulties.