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June 27, 2002

EU agrees strategy to counter unfair
Korean shipbuilding practices
Today the Council of the EU approved a twin-track strategy proposed by the European Commission to counter what it claims are unfair Korean practices in the shipbuilding sector.

The EU has set a deadline of the end of September to resolve the dispute amicably. Failing such a settlement, it will:

  • immediately launch procedures for a Panel against Korea in WTO and
  • activate a "temporary defensive mechanism" (based on limited subsidies) for European shipbuilding.

The Commission will now hold a series of further negotiations with Korean authorities in an attempt to restore normal trading practices in this sector.

EU Trade Commissioner Pascal Lamy said "Korea now knows that if we fail to resolve this dispute in the few weeks between now and the end of September, we will take them to the WTO and provide the opportunity for our industry to benefit from temporary support for the period during which the case is heard. This time Korea knows it is for real"

Competition Commissioner Mario Monti emphasized that the "temporary support" i envisaged is "not a reintroduction of the generalized operating aid of up to 9% for all shipbuilding activities ...which was definitively abolished at end 2000."

"If activated under the conditions set out in the regulation," he explained, "the support under our temporary defensive mechanism will be strictly limited in scope, time and also aid intensity to a maximum of 6%, as proposed by the Commission, rather than the 14% originally envisaged."

Enterprise Commissioner Erkki Liikanen said, "European shipyards are suffering as the world shipbuilding market faces serious difficulties, while Korea continues to price ships below cost. I welcome today's decision by the Council. It clarifies our position and I hope that it will allow us to move quickly forward towards reaching an agreement with Korea to correct this unfairness."

The Council of Ministers signed on to the twin track strategy after the Commission modified some of its original proposals.

As a result the temporary defensive subsidies will be limited to a maximum of 6% of contract value. They will be available for containerships; product and chemical tankers and LNG tankers;

Subsidies will be authorized for containerships and products and chemical tankers as soon as the Commission gives notice in the Official Journal that it has launched the WTO procedure against Korea.

Subsidies will be available for LNG carriers if a Commission investigation under the Trade Barriers Regulation (TBR) covering the full year 2002, confirms that Community yards building this type of ship suffer material injury and serious prejudice, caused directly by unfair Korean practices;

In a statement to the Council, the Commission promised to report to the next Industry Council on the latest developments regarding the negotiating process and on the situation in world shipbuilding.

As regards the further investigations covering the period of 2002, the Commission made clear that it is committed to launching the TBR questionnaires to industry in early December 2002. On the basis of the replies by the industry, the Commission expects to present the result of this further investigation at the beginning of 2003 and no later than before the end of March 2003.

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