European Union had taken a row with South Korea over the shipbuilding subsidies to the World Trade Organisation because bilateral talks had made no progress. The European Commission, the executive arm of the EU, said it had launched a disputes procedure by asking the WTO to start formal consultations. The EU alleges that South Korea subsidises its shipbuilding industry, the largest in the world. Seoul says its manufacturers are simply more efficient than those of other countries. "The lack of progress in our bilateral discussions so far has left us with no option but to take Korea to the WTO," European Trade Commissioner Pascal Lamy said in a statement.
Talks between the two broke down in September after South Korea rejected Commission demands that it raises the price of its ships. The Commission will also allow European governments to start handing out limited subsidies to their shipbuilders to fight the South Korean competition, relaunching aids to the industry, which were phased out at the end of 2000. An industry group, the Committee of EU Shipbuilders' Associations, said four European Commission reports have shown that Korean prices have been up to 39 percent below the cost of construction, and that Seoul has granted billions of dollars of aid to manufacturers, including the world's second largest shipbuilder, Daewoo Shipbuilding and Marine.