Union turns to WTO in fight against subsidies and other trade barriers

Date: 23/11/00

By Tim Jones

COMPARED with its 5-billion euro sanctions threat to the US over tax breaks to exporting multinationals, the EU's recent spats with lesser trading powers look paltry.

Yet, away from the deal-making involved in launching a new multilateral trade round and the usual squabbles over anti-dumping, the Union has been involved in a number of high-profile disputes with countries ranging from Australia to Russia.

Top of the list, in terms of size and intractability, is the long-running scrap with Korea over allegations that Seoul systematically aids its shipyards. The yards are now world-beaters, taking 40% of all new orders in the first eight months of this year compared with 16% for the EU and Norway and 60% of all new containership orders against EU/Norway's 8%.

The European Commission is convinced that the accumulated losses of many shipyards are being indirectly cleared by the government, while cheap state-backed funding and subsidised contracts are allowing them to quote prices as much as 40% below cost.

This would be contrary to the conditions of Seoul's International Monetary Fund bail-out from 1997 and an aid-limiting package brokered through the Organisation for Economic Cooperation and Development.

The Commission thought it had a deal when the two sides signed 'agreed minutes' in June but practical monitoring proved impossible to enforce after Hyundai Heavy Industries, the country's largest shipbuilder, refused to supply cost breakdowns to Commission inspectors for an 80-million euro order from German shipper Hapag-Lloyd.

Union industry ministers will meet early next month to give the Commission approval for further action, including filing a complaint at the World Trade Organisation under the Trade Barriers Regulation (TBR).

The Commission wielded the TBR against Argentina in December last year, when it investigated a complaint by the European Apparel and Textile Organisation (Euratex) that requirements and customs formalities for importing textiles and clothing to Argentina were a deliberate non-tariff barrier to trade.

Similar action was taken against neighbouring Chile in April, challenging the country's unilateral ban on EU vessels (for which, read Spanish boats) unloading swordfish catches in its ports. The EU used the

TBR, which is an instrument of the Union's market-access strategy, to request formal consultations with Chile.

The Commission's move killed two fish with one stone.

It enabled officials to tackle a specific 7-million euro claim but also establish the principle - not always adhered even within the EU - that environmental issues, in this case fish conservation, "should be dealt with on a multilateral basis, and not by resorting to the use of discriminatory unilateral measures".

In its dealings with Russia, the Commission has deployed the soon-to-die European Coal and Steel Community Treaty to restrict steel imports after Moscow violated the terms of a deal reached in 1997.

Earlier this year, the Commission sliced 20% off Russia's export quota after the federation imposed a temporary customs duty of 15% on exports of steel scrap and waste, so pushing up the international price of scrap.

The EU's dispute with Australia was much more 'new economy' - media coverage of the Sydney Olympics. The games' organisers planned to curb access for foreign media which had not bought exclusive rights, but Trade Commissioner Pascal Lamy filed a formal complaint with the Australian authorities warning that the plan threatened to cause a WTO dispute by violating the General Agreement on Trade in Services.

Eventually, a compromise was struck under which the organisers issued official guidelines to ensure that a number of passes would be granted to non-rights holders. International non-rights holders would be given passes in a daily ballot while permanent passes would go to Reuters, Associated Press and CNN International.

Article forms part of a survey on trade.