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WTO sides with S Korea against EU in trade dispute

The WTO ruled in favor of South Korea, the world's largest shipbuilding nation, in a dispute with the EU over subsidies to shipyards, the country's foreign ministry said in a statement.

Loans and guarantees given to shipyards before their delivery of vessels do not violate trade laws, and subsidies given by the South Korean government are not the same as state aid, according to the statement posted on the ministry's Web site. Export credits given to shipbuilders from January 1997 to May 2003 were deemed illegal, the WTO said.

"The WTO ruling was expected to be in favor of us," said Lee Jong-seung, an analyst at Woori Securities Co in Seoul. "It really just reaffirms what we already knew."

South Korean shipbuilders including Hyundai Heavy Industries Co and Daewoo Shipbuilding & Marine Engineering Co have been getting record numbers of contracts to build vessels for carrying containers, liquefied gas, crude oil and commodities. Order backlogs for Korean-built ships run to 2007, enough to keep some dockyards fully occupied in the next three years.

South Korea made 36 percent of the world's ships in 2002, increasing the nation's share of the global shipbuilding industry from 28 percent. That was done with aid by the South Korean government, said the EU, whose market share fell to 8 percent from 20 percent.

"As we have won on the main issue about subsidies, it has provided a footing for our shipbuilders to expand and continue to be the No. 1 in the world," South Korea's statement said.

The WTO judges didn't say Korean loans had undercut the EU's market prices or directly caused a loss in sales. That means the decision doesn't go far enough for European industry, said Reinhard Lueken, secretary general of the Committee of European Shipbuilders' Association, which represents EU and Norwegian shipbuilders including Aker Kvaerner ASA.

"What we needed was clarity, and this is an inconclusive decision because every side can take something out of it and that's not good enough," Lueken said from Brussels on Monday. "We were faced with someone going on the market at an extremely low price, below their own costs. This is a lost opportunity."

EU shipbuilders must now rely on negotiations at the Paris-based Organization for Economic Cooperation and Development, or OECD, to set international standards for aid, he said.
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