EU opens probe into S. Korea shipbuilding

EU opens probe into S. Korea shipbuilding

BRUSSELS (AFP): The European Commission said Monday it was opening an investigation into alleged unfair practices, including subsidies, within the South Korean shipbuilding industry.

The opening of the inquiry under the EU Trade Barriers Regulation follows a detailed examination of a complaint lodged October 24 by the Committee of European Union Shipbuilders Association, it said.

"We have looked carefully at the complaint of our industry and believe there are clear grounds for us to launch this investigation. We are treating the concerns of EU shipbuilders with the utmost seriousness," EU External Trade Commissioner Pascal Lamy said.

"If necessary, we will take this all the way to the World Trade Organization," he said in a statement.

The commission said last week it intended to use this inquiry as leverage for talks on a negotiated settlement with Seoul -- but that if this fails by May 1, 2001 it will file a WTO complaint.

In the inquiry, the commission will look at whether the South Korean practices breach Seoul's international obligations under WTO rules on subsidies and countervailing duties.

The specific practices alleged are export guarantees, export financing, debt forgiveness, debt-for-equity swaps, interest relief and special tax concessions, the commission said.

Brussels will submit its final investigation report to member states by April 2001.

Diplomats said a meeting on Tuesday of EU industry ministers would debate the issue, but will only take note of the commission's effort because of divisions between member states on the approach.

"The major issue is the continuation of operating aid where some member states want an explicit reference to that. But they will not succeed," one diplomat said.

"This time it could be a bit more heated than before. What is being said is that there have been negotiations for two years but what is the point," he said.

The commission last week decided against extending operating aid of up to nine percent for EU shipbuilders after its scheduled end on December 31, but said there could be a selective scheme if the South Korean talks fail.

Member states are split on operating aid. Britain, Finland and Sweden oppose such aid, while Germany, Spain, Greece, Italy and Portugal are seeking an explicit pledge in its favor, diplomats said.

In the absence of a commission proposal and a majority of member states opposing its extension, member states are likely to say little more than they take note of commission efforts, they said.