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The EU should not forget the maritime technology industry

In the light of COVID-19, SEA Europe calls for urgent, tailor-made sectoral support to safeguard the survival of Europe’s strategic maritime technology industry

”If the EU fails to adopt tailor-made sectoral policies and support – beyond its horizontal policies and general support to all sectors – Europe risks to lose its strategic maritime technology sector to Asia, at a time that shipyards and maritime equipment manufacturers will be key in offering solutions for the European Green Deal and for other strategic EU policies,”, says Kjersti Kleven, SEA Europe’s chairwoman. “Such a loss would make Europe entirely dependent on Asia for the design, building, repair, retrofitting, maintenance, conversion and equipment of civilian and naval ships, with devastating effects for Europe’s autonomy, defence and security, maritime economy and workforce.

Like other sector, the COVID-19 outbreak has also hit Europe’s maritime technology sector very hard, but the economic consequences will last much longer than for many other sectors, due to the specificities of the maritime technology sector. These economic consequences create an additional challenge for the sector, beyond already existing severe competitive distortions from Asia. They have forced SEA Europe to set up an internal task force to monitor weekly the local situation in Member States and to assess the impact for our companies, employees and supply chain”, Mrs Kleven concluded.

SEA Europe welcomes the recent initiatives from the European Commission, in response to the COVID-19 outbreak, as they aim at minimizing the impact of this outbreak on all European industries. However, these general initiatives apply regardless of the specific needs and challenges of individual industries and sectors. Hence, SEA Europe urges the European Commission to complement its general initiatives for all industries with sectoral policies and financial support, tailored to the specific needs and challenges of Europe’s shipyards, maritime equipment industry and their supply chain (known as “the maritime technology sector”). These measures should enable maritime technology companies to cope with the severe economic and financial consequences of the COVID-19 outbreak and, ultimately, safeguard the survival of this strategic sector for Europe’s autonomy, defence and security, access to seas and trade, European Green Deal, and Europe’s mobility and Blue Economy.

Like the aerospace and automotive industries, Europe’s maritime technology sector has been hit very hard by the COVID-19 outbreak. Production has decreased dramatically or even stopped, as a result of national safety measures and supply chain disruptions. Most workers stay at home or are in temporary unemployment. Orders for new built ships or for repair, conversion, retrofit and maintenance activities have been postponed, declared “force majeure” or could not take place since ships were prevented from entering ports. Many shipyards and maritime equipment companies face serious liquidity problems or are in need of bank credit, which is a very serious problem for an industry that is – by nature – highly capital-intensive.

Unlike the aerospace and automotive industries, however, Europe’s maritime technology sector will feel the real negative consequences from the COVID-19 outbreak more acutely in the medium and long-term. This is because shipbuilding and maritime equipment manufacturing are export-oriented businesses, which very much depend on global macro-economic trends, trade volumes, and market sentiments. Moreover, shipbuilding is characterised with very long lead production times (with, on average, a 2-3 years’ time laps between the ship’s contracting and delivery) and heavily depends on a well-functioning supply chain (i.e. 70-80% of the ship’s value derives from the supply chain).

The global trading environment in which most maritime technology companies are operating in, was already heavily impacted by growing trade protectionism, trade tensions, market imbalances and aggressive competitive distortions (e.g. “Made in China 2025” directly targets Europe’s global leadership in both complex shipbuilding and advanced maritime equipment manufacturing). Following the COVID-19 outbreak, production of and demand for ships and maritime equipment will be negatively impacted as shipowners and their consumers will first want to wait for better market conditions, before regaining their confidence and start placing new orders with shipyards and maritime equipment manufacturers. However, experts have forecasted that growth of global trade for goods and raw materials will first slow down considerably, as will demand for cruise and ferries. Hence, it will take time before the maritime technology sector will recover from the impact of this sanitary crisis on international trade, tourism and mobility patterns.

In October 2017, a European Commission study on Europe’s maritime technology sector concluded that the next decade will determine whether this sector will continue to grow and survive or decline and eventually disappear. Regrettably, the COVID-19 outbreak adds an additional layer to the global and competitive challenges that Europe’s maritime technology companies were already confronted with. For these reasons, SEA Europe urges the European Commission to adopt tailor-made sectoral policies and financial support, beyond its horizontal policies and general support given to all industries, to enable maritime technology companies to survive the COVID-19 crisis, to cope with their global and competitive challenges and needs and to play their role as a solution provider and key enabler for e.g. the European Green Deal, the European Defence Industrial Development Programme or the Blue Economy

Without any tailor-made sectoral policies and financial support, including state aid, there is a big risk for Europe to lose the remaining part of its strategic maritime technology sector to Asia. Such loss of a critical competence would have many devastating effects for Europe, notably:

– More than 1 million people working in maritime technology companies would lose their job

– The added value created by the maritime technology sector, i.e. €120 billion, would be lost.

– Without its own shipyards, Europe will become entirely dependent on foreign countries, mainly located in the Asia, for the building, repair, retrofitting, maintenance and conversion of civilian and naval ships. Moreover, in such case, Europe will be entirely dependent from foreign ships for its security and defence (e.g. for border and coastal protection and access to seas and trade) as well as for transport of goods and passengers.

– Without shipyards in Europe, the business of Europe’s maritime equipment companies will become entirely dependent on foreign (mainly Asian) markets, where already today they face more business obstacles and trade protectionism. Moreover, these companies produce equipment, systems and technologies that are strategic and essential for e.g. transforming Europe’s waterborne transport into a climate-neutral mode of transport or for implementing Europe’s Blue Economy (e.g. offshore renewable energy or aquaculture).

The COVID-19 outbreak has already clearly demonstrated the disastrous and dangerous effects of Europe becoming entirely dependent on foreign nations (e.g. in the field of medical equipment). Such example should not be replicated in shipbuilding and maritime equipment manufacturing, especially now that international political tensions and trade protectionism are increasing or in times when the European Commission’s aims at making the EU the first-ever climate neutral society by 2050. Hence, making Europe entirely dependent from foreign nations, in particular from South Korea and China, for maritime technology would be devastating for Europe’s industrial assets’ capabilities, its strategic autonomy and long-term policies. For this reason, SEA Europe also welcomes the European Commission’s recommendation to Member States to be very vigilant in the coming months/years and use all EU and national tools, including the application of the Foreign Direct Investment Screening Regulation, to avoid that the current crisis leads to a loss of critical assets and technology.

Against this background and more than ever, SEA Europe urges EU – and national – decision-makers to act in support of Europe’s maritime technology sector, as the sector is equally hit very hard by the COVID-19 outbreak, like the aeronautics and automotive industries. With proper tailor-made EU sectoral policies and financial support in place, Europe’s maritime technology sector will be able to recover and continue to play its key role as strategic sector and solution provider for Europe.

Source: maritimes.gr