Korea-EU Shipbuilding Dispute

The government and Korean shipbuilders decided to respond actively through "shipbuilding trade negotiation team" toward the EU executive committee’s allegation to file a legal suit with the World Trade Organization (WTO) against Korean shipbuilding companies.

As soon as the resolution of a board meeting is presented around 15th, the Korean Ministry of Commerce, Industry and Energy (MOCIE) will dispatch officials in working-level to the EU and will proceed to negotiate with the European Union until the deadline in the end of June. MOCIE is preparing a legal countermeasure against the EU, designating Shim and Kim Co. and Kussel Brothers Co. in Brussels as legal representatives.

- the EU`s assertion

Measures such as support of export finance to shipbuilding companies via the Export-Import bank of Korea, work-out, and creditors’ financing of equity and debt remission can be seen as government subsidies to Korean shipbuilders. The expansion of production facility in 1990s by Korea brought about a disorder in the international shipbuilding market such as price dumping. As a result, European companies suffered from degenerating management and increase of unemployment, etc. Until a final verdict is to be given after the filing of the lawsuit with the WTO, the EU will revive subsidies that were abolished at the end of last year, and will supply the damaged European shipbuilding companies with subsidies up to 14 percent.

- Korea`s position

The increase of order coupled with low-price was made possible by the rise of market competition due to the rise of money exchange rate and improvement in technology, not by price dumping. The Korean government was not supplying subsidies, and creditors independently decided for the redemption of securities on the basis of the commercial decision to maintain the business rather than to liquidate, which is more prospective. The Export-Import bank of Korea also lent the loans based on standards such as building capacity and a credit standing.

- Prospect

The government is planning to settle amicably via mutual concession, considering the friendly cooperative relations and trade scale with the EU. According to shipbuilding companies, because shipbuilding is not listed on the WTO antidumping convention, even if defeated in the lawsuit, there are no direct and practical sanctions. And it is prospected that even though the EU provides subsidies to European shipbuilding companies, it will not have serious impacts on the market, because Korean companies`s price competition is relatively high. But the government decided to discuss the plan with the Korean shipbuilding companies to raise the price of certain ships and strengthening the Export-Import banks` standards for loans in order to deter retaliatory measures toward other products among Korea`s chief export goods.

Kim Sang-Chul sckim007@donga.com