South Korea ready to fight EU over shipping subsidies

South Korea ready to fight EU over shipping subsidies

SEOUL (AFP): South Korea is ready to cross swords with the
European Commission if it takes World Trade Organization action
against alleged shipbuilding subsidies, officials said Wednesday.

"If the European Commission takes action at the WTO, we would
actively defend our position as we believe we have a strong
case," warned a foreign ministry official.

"South Korean shipyards share the view that the European Union
is picking a quarrel with them in order to justify the resumption
of its own subsidies to the European shipbuilding industry," he
said.

The European Commission said Tuesday it would appeal to the
WTO over alleged state subsidies to South Korean shipyards unless
an accord is reached by June 30.

Concurrently, the commission said in a statement, the European
Union will adjust its own subsidies to its shipbuilders who claim
to be suffering at the hands of the Korean subsidies.

An investigation carried out under the Trade Barriers
Regulation "has established that substantial subsidies have been
granted to Korean shipyards through both export and domestic
programs which contravene the WTO's 1994 Subsidies Agreement,"
the commission said.

EU Trade Commissioner Pascal Lamy said: "Following the results
of our investigation, which confirm the suspicions of the EU
industry, we will recommend to the Council that the EU should
pursue this matter through the WTO by June 30."

EU industry ministers are to meet next week to take a final
decision on a WTO panel.

"Although we have not closed the door to an amicable solution
with the Korean authorities, the clock is now ticking," said
Lamy.

Officials here insist South Korea sticks to OECD guidelines
for export financing for the shipbuilding industry and therefore,
it does not contravene WTO rules.

The EU has accused South Korea of giving unjust subsidies to
Daewoo Shipbuilding and Marine Engineering Co. by bailing it out
with a debt rescheduling program.

Creditor banks seized managerial control of the country's
second largest shipyard after the Daewoo Group collapsed in
August 1999. The shipyard made a dramatic turnaround after it
shed its heavy industries division in October last year.

South Korean officials have said the rescue package, given by
creditors, was only part of nationwide efforts to restructure
many ailing industries here.

"Taking productivity into account, the average wage in
shipbuilding industry here is one fourth of that of Germany.
South Korean shipyards also profit from cheaper steel and the
weak won," the foreign official said.

South Korea took more than 40 percent of global orders for new
shipping last year. Seoul claims that was due to the weakness of
its national currency, which made its industry more competitive.

South Korean and EU negotiators have been engaged in two years
of tough but fruitless negotiations on shipbuilding.