EU To Propose Subsidy Program To Battle South Korea

The European Union is proposing to subsidize its embattled shipyards in a long-standing dispute over what it views as unfair competition from South Korea. The EU will make the proposal to an EU industrial council meeting in Sweden on May 15, said EU Ambassador to Korea Frank Hesske. Sweden is the current president of the 15-member group. The EU, which has been holding talks with South Korea about the issue for the past two years, could take the case to the World Trade Organisation (WTO), but that could take many years, thus the move for a subsidy program of its own. Hesske said the South Korean government was supporting the Korean shipbuilding industry through debt forgiveness programs by state-controlled banks. He said Daewoo Heavy Industries, currently under a debt workout scheme with its state-led creditors, was a prime example of this. The shipbuilding unit of the former Daewoo Group was taken over by creditors along with 11 other core units after the group plunged into insolvency in 1999. Korean shipbuilders, Hesske said, were offering to build ships for customers at 40 percent below costs. The Korean Shipbuilders' Association maintains that the country's shipbuilders have won market share through increased cost efficiency and quality following substantial investments. Last year, Korean shipyards received nearly 38.7 percent of global orders, compared to around 25 percent for Japan and around 16 percent for the EU. The EU sees the global shipbuilding industry in a crisis with excess capacity driving prices into a downward spiral and threatening the existence of European yards. - (Reuters)