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February 16, 2001

EU still poised to take WTO action against Korea
Speaking in Seoul earlier this week, European Commissioner Pascal Lamy made it clear that the European Union is very ready to take its dispute with Korea over shipbuilding pricing to the World Trade Organization. It is also considering restoring direct subsidies to European shipyards in order to help them compete against Korean underpricing.

In a speech at the EU Chamber of Commerce, Seoul, Commissioner Lamy said "the most intractable [trade] problems confronting us are those related to sectors where our perception is that non-market behavior continues in Korea. Most important of these by far is shipbuilding."

"The world-wide shipbuilding industry is in a crisis of spiralling downward prices due to excess capacity," he continued. "In this respect, the expansion of already over-leveraged Korean yards was largely debt-financed and made possible by financial institutions not operating under market conditions. We are firmly of the view that indirect state intervention in various forms has enabled Korea to maintain in existence capacity which, if normal commercial criteria were to be applied, would be reduced to reflect real market demand. This excess capacity acts as a dead-weight on the world's shipbuilding market and is threatening the very existence of competitive European yards, their workers and their families, even in market sectors where Europe has traditionally been in a leadership position."

"To be very frank, and friends are always frank," warned Lamy, "the Korean government now needs to move rapidly to find a solution if we are to avoid both a controversial WTO case, and indeed, the reactivation of a subsidy support mechanism for EU shipyards pending the outcome of that case."

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