In reaching this decision the OECD Council took note of the advice by Ambassador Neple that, despite intensive efforts to restart negotiations, the differences of view amongst some parties on the treatment of pricing, in both the negotiations and in any final Agreement, had proven impossible to bridge. The pricing issue had also been identified by the Chair of the Special Negotiating Group, Ambassador Jaggi, when he paused the negotiations in 2005.

“The members of the Working Party, and China, which has been fully involved throughout our efforts to restart the negotiations, explored many possible alternatives to try to find a package that would meet the needs of all the participants, but in the end this proved impossible”, Ambassador Neple said.

The Ambassador went on to say that the issue of a pricing mechanism was central to some key participants, who believed that this was a crucial element of any workable Shipbuilding Agreement. However, others held the view that pricing distortions were not prevalent in shipbuilding, and that it would be better to focus on government subsidies and other support measures, without which such pricing distortions could not be sustained.

In the end, these differences of opinion led to the situation where, after five years of intensive efforts, no common ground could be found.

“It seems pointless to continue efforts to restart the negotiations when after all this time there has been no significant narrowing of those differences,” Ambassador Neple said. “In the end the OECD decided that it would be best to terminate the negotiations and allow the Working Party to focus on other important work, such as a better understanding of market distortion, greater transparency of government support, the state of the shipbuilding market and environmental and climate change issues affecting the industry.”

The decision to terminate the negotiations will not affect the Working Party on Shipbuilding, which will continue to carry out work in fulfillment of its mandate, which is scheduled for review by the end of 2013.

In particular, the WP6 will continue its efforts to strengthen its contact with non-OECD economies with significant shipbuilding sectors, which are becoming increasingly important in world shipbuilding. China, now acknowledged as the world’s largest shipbuilder, reaffirmed its desire to continue to be involved in the work of the WP6 when it participated at the last WP6 meeting held at the beginning of November 2010.

The OECD has provided the forum for the negotiation of a multilateral Shipbuilding Agreement since 1989, when negotiations were commenced in Paris.

Those negotiations led to the conclusion amongst OECD members of the 1994 Agreement Respecting Normal Competitive Conditions in the Commercial Shipbuilding and Repair Industry. While successfully negotiated, this 1994 Agreement never entered into force because one signatory was unable to ratify the Agreement (the entry-into-force provisions required that all signatories ratify the instrument).

Eventually, those signatories that had ratified the 1994 Agreement decided that it would be very unlikely that it would ever come into force, and in June 2002 the OECD Council approved the commencement of fresh negotiations, with a deadline of December 2005 for their conclusion.

A significant difference between the two negotiations was that in 2002 the OECD Council decided to invite non-OECD economies with significant shipbuilding capacities to participate on an equal footing with OECD members.

Those negotiations were paused in 2005 by the then Chairman, Ambassador Jaggi (Switzerland) to allow participants to consider their positions on a number of issues where there were significant differences of view, in particular regarding the inclusion of a pricing mechanism in any Shipbuilding Agreement.

Such a pricing mechanism was intended to deal with pricing distortions, and would have been the shipbuilding equivalent of the WTO Anti-Dumping Code. The WTO mechanism, and its remedies, deals with the import of products produced in series, while ships are rarely produced in series and are infrequently imported.

However, there were significant differences of view amongst participants as to whether such pricing distortions actually exist in the shipbuilding market.

The WP6 has been working since the end of 2005 to try to restart the paused negotiations.

In April 2010 the OECD announced that the Council Working Party on Shipbuilding had reached agreement in principle to restart the negotiations, but in the end differences on how to deal with the issue of pricing proved impossible to overcome.