After several rounds of talks, the European Union and South Korea have reached agreement on measures to help resolve the crisis facing the global shipbuilding market - hit by significant over-capacity and plummeting prices. The agreement focuses on several key issues including non-subsidisation, banking, financial transparency (regarding international accounting standards), commercial pricing practices, and means of establishing effective consultation.
The aim is to promote fair and competitive market conditions in the world market, and to work together to stabilise the market by helping to raise prices to commercial levels. Both sides said they expected the agreed objectives would contribute "in a major way to restoring normal competitive conditions" to the market, and provide an effective means of protection against the sale of ships at below cost prices.
According to a statement from the European Commission, the world-wide shipbuilding industry has been hit by downwards spiraling prices, mainly due to excess capacity developed in Korea - fuelled by indirect South Korean Government intervention in various forms, such as guarantees and debt write-offs. According to the monitoring study undertaken by an independent consultant for the EU, South Korean yards offer ships on a large-scale at prices "considerably below costs".
These practices (strongly denied by the South Koreans) jeopardise the future of the European shipbuilding Industry, said the statement, quoting figures showing EU market share of the world market fell sharply from 25% in 1998 to 17% in 1999. In January 2000 the situation worsened with South Korea taking 72% of the new orders compared to 7% for the EU.
More information: EUbusiness, 11th April 2000