Second probe ahoy for South Korean shipbuilders

Date: 15/11/01

By Laurence Frost

THE EU has launched a new investigation into alleged unfair pricing by South Korean shipbuilders in a bid to break the deadlock over possible action in the World Trade Organisation (WTO).

Competition Commissioner Mario Monti is coming under pressure to broaden a proposal for temporary subsidies to European shipbuilders to win crucial French backing. "[Trade Commissioner Pascal] Lamy is pushing very hard for this," said one EU official.

Lamy has previously said the Commission will only file the formal WTO complaint against South Korea agreed in May if governments back the aid, which has no majority in the Council of Ministers.

Germany, Spain, Italy, Greece and Portugal are understood to have given their support to the aid package, with the Netherlands, the UK, Sweden, Denmark and Finland opposed. France's support would be enough to ensure its adoption under the Council's voting rules. Officials are investigating pricing of liquefied natural gas (LNG) tankers, after signs that their inclusion in the aid package would win backing from Paris. The original plan covered just container ships and specialised tankers.

French firm Alstom has suffered a slump in cruise ship orders since 11 September, causing a cashflow crisis in its marine division, which contributes around 7 of Alstom's turnover. The firm has stepped up its lobbying for LNG tanker contracts.

The original investigation found no evidence of damage to European yards in the LNG market from 1997 to 2000. "This confirms that the accusations against Korea are merely a smokescreen for continued subsidy demands from European shipbuilders," said Lee Song Deuk of the Korean Shipbuilders' Association. But EU officials maintain that South Korean yards drew on illegal state aid to undercut European LNG prices in the following year, 2001, which saw a boom in orders, 80 to South Korea.

Consultants will report next week on the results of market monitoring of LNG prices. But attention is focusing on Korea's Daewoo shipyards, which a Commission report earlier this year said received state support worth €2.5 billion between 1997 and 2000.

The EU executive wants to present the results to a meeting of industry ministers on 5 December that could bring approval for the temporary 'defensive' subsidies. The original Commission investigation, launched under WTO subsidy rules, found several Korean yards had benefited from illegal state aid in the form of preferential loans and debt relief.

The EU has launched a new investigation into alleged unfair pricing by South Korean shipbuilders in a bid to break the deadlock over possible action in the World Trade Organisation (WTO).