EU reconsiders yard subsidies

In November EU industry ministers have to decide whether shipyard aid should stop at the end of 2000. The production subsidies will stop unless the current legislation is changed.

Ahead of the meeting the EU is gathering information on the funding of shipyards world-wide and especially in Korea. If there is sufficient evidence, the EU would consider action at the WTO against Korea on the grounds of illegal subsidies or for the effective operation of a barrier to trade.

Proving the operation of illegal subsidies would be difficult because of the complex funding situation within chaebols. To support a trade barrier claim, the EU requires a sustainable complaint from a European yard which feels it has lost a contract to a Korean yard that has benefited from unfair subsidies.

A spokesman for the Union of European Shipbuilders says that support to Korean yards is effectively a loss refund system. Yards accumulate large losses by taking low price contracts and when these losses emerge the government steps in and clears the debt while the yard continues on trading, he says.

He highlights the proposal for Hyundai to take over the management of Halla but without the accumulated losses.