The Korean government has started preparations to file a countersuit next month against the European Union (EU) at the World Trade Organization (WTO) to challenge the shipbuilding subsidy accusation made by the EU Commission. According to Korean officials, the government has concluded that European reintroduction of operating subsidies, after phasing them out at the end of 2000, does not conform to WTO regulations. They believe the EU subsidies were not for restructuring of its shipbuilding industry but for direct support of ship prices. Korea demanded details on the EU decision to provide subsidies to European yards last October as well as all data related to subsidies, equal to 9 percent of contract money, unilaterally provided for all vessel types until the end of 2000.
The EU reactivated the shipbuilding subsidy system after October 2002, after the negotiations between Brussels and Seoul again ended in deadlock in September. A temporary defensive mechanism for European shipbuilders allows a maximum 6-percent subsidy of the contract value for containerships and product and chemical tankers. The European shipyard aid program will expire in March 2004. The trade conflict began in 1999 when the EU claimed the Korean government had provided subsidies to local shipbuilders in the course of their restructuring. Since then, the two sides unsuccessfully continued their negotiations until September last year.