An analysis of market-distorting factors in shipbuilding

Abstract

This document, as well as any data and any map included herein, are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. Note by Turkey The information in this document with reference to "Cyprus" relates to the southern part of the Island. There is no single authority representing both Turkish and Greek Cypriot people on the Island. Turkey recognises the Turkish Republic of Northern Cyprus (TRNC). Until a lasting and equitable solution is found within the context of the United Nations, Turkey shall preserve its position concerning the "Cyprus issue". Note by all the European Union Member States of the OECD and the European Union The Republic of Cyprus is recognised by all members of the United Nations with the exception of Turkey. The information in this document relates to the area under the effective control of the Government of the Republic of Cyprus.

Measuring distortions in international markets: Below-market finance

“…Results using a set of binary variables indicate that the 10% of companies receiving the highest proportion of below-market borrowings as a share of their revenue invest about 50% more than companies with zero below-market borrowings (Figure 20). 69 For government grants, this corresponds to a smaller 10% that is not statistically significant. When scaling variables by company assets (right panel), the results suggest that the 10% of companies receiving the highest proportion of below-market borrowings have an investment-asset ratio that is on average 4.4 percentage points higher than companies with zero belowmarket borrowings.…”

“…Yearly movements in global steelmaking capacity are largely driven by how much capacity China adds or subtracts from the global total (Figure 21; left) given that the country accounted for nearly 60% of global crude steel output in 2020. Following the large net increases observed between 2010-13, crude steelmaking capacity began to decrease on a net basis in 2015, before finally resuming positive growth in 69 Coefficients are estimated relative to a control group consisting of firm-year observations with zero below-market borrowings. Govt grants/assets BMB/assets 2019.…”

Local content requirements and their economic effect on shipbuilding

“…For instance, there are differences in the policy coverage, ranging from goods, services, data storage, to staff or subcontractor requirements. Some policies also oblige or encourage firms to provide additional economic benefits to the local economy, such as in the form of in-country investments, transfer of technology or knowledge, production under license, or marketing/exporting assistance (Gourdon, Bastien and Folliot-Lalliot, 2017 [5]). 3 Regarding the necessity for compliance, one can distinguish between: (i) whether compliance with the requirement is mandatory in order to access the market or to receive other benefits in the form of tax, tariffs and price concessions; or, (ii) whether non-compliance entails the payment of a penalty tariff rate on intermediate inputs (Grossman, 1981[5]; Hufbauer et al, 2013 [3]).…”

“…However, with the LCR policy in place, firms are obliged to purchase less competitive and more expensive intermediate inputs domestically than they could acquire on the international market. 5 The policy results in the intended increase in output of the local upstream sector, increasing welfare, but only in the short-term. In the long-term, the higher prices of domestically procured components will increase the price of the final good and, as a result, the quantity sold will decline as will domestic welfare.…”

“…4 In the context of public procurement provisions, Hufbauer et al (2013[3]) claim that LCRs are "the norm rather than the exception". 5 The ideal choice (in the market equilibrium) would stipulate that local producers of a good source the optimal amount required for profit maximization from abroad. 6 Which effect dominates depends on the degree the target industry is already fulfilling the LCR (i.e.…”