Shipbuilding Dispute
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Shipbuilding Dispute


Top trade officials of the European Union and South Korea have recently confronted one another in a bitter dispute over whether South Korean shipbuilding companies are unfairly "dumping" their goods on world markets. The union's trade commissioner, Pascal Lamy, ended his session with Shin Kook Hwan, South Korea's minister of commerce, industry and energy, as he had started it - with a pledge to bring the case before the World Trade Organization in Geneva by early May if Europe's demands were not met.

The Europeans say that Korean shipbuilders typically sell ships at 20 percent below fair value, and sometimes as much as 40 percent, and that the government subsidizes shipbuilders by rolling over loans and using government-backed entities to help them issue bonds cheaply. Kim Young Hak (Korean delegation) said, "We explained the reasons why our shipbuilders are increasing their volume." Mr. Kim cited "productivity, the benefit of the exchange rate and efficiency," not unfair subsidies, as the source of the price advantage for Korean shipbuilders. Mr. Lamy, in a speech before the European Chamber of Commerce here, begged to differ. "Expansion of already over-leveraged Korean yards was largely debt-financed and made possible by financial institutions' not operating under market conditions," he said, adding that "indirect state intervention" had enabled Korea to increase capacity artificially. "This excess capacity," he said, "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."

Mr. Kim said his government rejected as "impracticable" a proposal by Mr. Lamy for a joint study of the industry's costs because of concerns about the confidentiality of trade secrets. If the European Union makes good its threat to subsidize its shipbuilding industry, a ministry spokesman said, South Korea would retaliate with unspecified countermeasures.

The New York Times, 16 February 2001, by Don Kirk  

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