Brussels, 11/04/2000 (Agence Europe) - The European Union and South Korea concluded, on Monday, an amicable agreement on shipbuilding. The aim is to control the world crisis in the shipbuilding sector, which is partially due to production over-capacity and dumping practised by South Korean shipyards, South Korea today being the leading world producer before Japan. According to Commission information, prices practised by shipbuilders allowed Korea to win 72% of new contracts in January 2000, with only 7% for the European Union. The EU's share fell from 25% in 1998 to 17% in 1999 on a market which represents some 2,000 ships a year.
Presented in the form of "agreed minutes", the agreement commits Korea not to subsidise its shipbuilding industry at a loss, to guarantee transparency in accounting and ensure prices are determined according to market criteria (inclusion of investment costs, debt repayment, etc.). The dispute settlement mechanism provides for the parties to be able to appoint independent experts to examine all allegations of unfair practices. The agreement is, however, not binding in the event of disputes over specific cases, and the EU could have recourse to its regulation on trade barriers, and then to the dispute settlement body of the WTO.
The Industry Council had, last November, invited the European Commission to begin dialogue with South Korea to make it comply with market economy principles. The EU reproached Korean shipyards with selling ships below cost price making banks and state financial institutions cover their debt. Part of the IMF loans would thus have served to finance the surplus capacities of the Korean shipyards. An inquiry presented by Industry Commissioner Erkki Liikanen showed that some Korean yards were selling their ships at a loss of 40-50% of the contract price. "The Korean government also has an interest in addressing the situation since debt financing for shipyards ends up being covered by Korean taxpayers", stresses one European negotiator.
Once approved by qualified majority in Council, the agreement should be rapidly signed and come into force within two or three months for an unspecified time. For now, only Spain does not seem pleased with the result of negotiations, considering that this does not really allow over capacities of the Korean shipbuilding industry to be reduced. The Commission, however, is optimistic about the results of voting in Council.