| Author (Person) | Bower, Helen |
|---|---|
| Publisher | ProQuest Information and Learning |
| Series Title | In Focus |
| Series Details | 25.6.02 |
| Publication Date | 25/06/2002 |
| Content Type | News, Overview, Topic Guide | In Focus |
|
Representatives from the 15 Member States from the European Union have agreed to reintroduce state aid for European shipbuilders if an agreement with South Korea on alleged unfair subsidies to their domestic shipyards has not been reached by the end of September 2002. At a meeting of the Committee of Permanent Representatives in Brussels on 24 June 2002 diplomats agreed to use certain measures proposed by the European Commission in July 2001 as a temporary defensive mechanism to shipbuilding. Under the plans, state aid would only be reintroduced to those market segments which have clearly suffered by unfair South Korean practices, namely shipyards producing container ships and product and chemical tankers. These shipyards could receive aid worth up to 6 per cent of the contract value until the end of March 2004. The ambassadors, following the line of the European Commission proposal, also agreed that the EU should start legal action against South Korea at the World Trade Organisation and that any temporary defensive measures should only apply for as long as it takes the WTO to conclude proceedings. The row between South Korea and the EU over aid to shipbuilders has raged on for the last two years. State aid to shipbuilding was discontinued in the European Union from the start of 2001 following an agreement between the EU and South Korea in June 2000 which included commitments to avoid financially non-viable over-investments and price undercutting and an agreement that ship prices should reflect all cost factors. However, Korea did not fully honour this agreement and by the end of 2000 the European Commission reported that unfair competitive practices were still continuing on the international market which were seriously affecting European shipbuilding. Despite continued efforts by the European Commission to negotiate with Korea, no agreement had been reached by July 2001 and so the Commission proposed that the Council should adopt a regulation providing for temporary defence measures to the shipbuilding industry as well as taking action against South Korea at the World Trade Organisation. However, a stalemate ensued as Member States failed to reach an agreement on the proposal and the European Commission refused to go ahead with a WTO case against Korea until an agreement had been reached on the subsidy scheme. The European Commission itself has also been divided over the issue. Generally, the European Commission has been keen to reduce state aid to ailing industries. Mario Monti, the European Commissioner responsible for competition, has sought to limit the scope of the plan but Pascal Lamy, the European Commissioner for Trade, has battled to hard to help the shipbuilding industry. However, the latest proposal would limit the scope of aid in the manner requested by Monti. The plan also provides a compromise for the French who have repeatedly opposed previous proposals. The French government have sought to add a third category of ship to those which will be eligible for state aid, namely the liquefied natural gas carrier (LNG). Under the compromise, state aid for shipyards building LNGs will be allowed in the future if the European Commission can prove that during 2002 'the Community industry has suffered material injury and serious prejudice in this sector caused by unfair Korean practices'. While the latest proposal is supported by the French, five EU countries continue to oppose the proposal. The UK, the Netherlands, Sweden, Denmark and Finland are all against the principle of reintroducing state aid but they do not have sufficient votes to block the decision which should be formally taken by ministers on 27 June 2002. Links: European Commission:
Council of the European Union: European Sources Online: Financial Times:
BBC News Online:
European Sources Online: European Voice:
Organisation for Economic Co-operation and Development: Helen Bower Representatives from the 15 Member States from the European Union have agreed to reintroduce state aid for European shipbuilders if an agreement with South Korea on alleged unfair subsidies to their domestic shipyards has not been reached by the end of September 2002. |
|
| Subject Categories | Business and Industry |
| Countries / Regions | Eastern Asia |
