WRITTEN QUESTION E-2546/00

by Laura González Álvarez (GUE/NGL) to the Commission

(28 July 2000)

Subject: Crisis in the European shipbuilding industry

What specific and detailed measures has the Commission adopted, or will it adopt, to implement the conclusions reached by the Council of the European Union at its meeting of 18 May 2000 in order to:

- bring pressure to bear on the Republic of Korea fully to apply the agreements adopted and undertake to improve the market situation, particularly as regards price levels and shipbuilding capacity;

- call immediately for consultations on the matter with the Korean Government so as to introduce monitoring of the principles laid down in the agreements;

- gather further evidence on any damaging price-fixing and other conduct in breach of market mechanisms;

- keep the IMF and World Bank informed of its findings and call for strict monitoring of the conditions under which aid is granted to the Republic of Korea;

- continue its efforts within the appropriate international organisations to standardise the rules applicable to the shipbuilding sector?

Do the agreements reached by the Commission and the Korean Government offer sufficient legal basis to ensure that the Republic of Korea will correct its policy? What trade policy instruments could be used to bring additional pressure to bear on the Republic of Korea?

Is the Commission willing formally to propose an extension of state aid to shipbuilding beyond 31 December 2000, if the Korean Government fails to rectify the situation?

What steps has the Commission taken, or will it take, to encourage the integration of the European shipbuilding industry in order to help ensure its survival?

Answer given by Mr Lamy on behalf of the Commission

(28 September 2000)

On signing the Agreed Minutes on 22 June, the Commission officially requested ad hoc consultations with Korea, which it finally accepted.

The consultations, held in Seoul on 18/19 July, took place in an open, constructive atmosphere. The outcome of the first round can be considered as fairly positive.

The Commission is currently analysing a considerable amount of legal, economic and financial information and documentation provided by Korea as part of the transparency exercise.

Two further important results were also achieved:

- agreement in principle to conduct a survey in the shipyards on the basis of an antidumping questionnaire to check that the prices of contracts offered by Korean shipyards are in line with normal prices under the GATT (General Agreement on Tariffs and Trade) Anti-dumping Agreement;

- agreement to hold a second round of consultations in September to examine the overall functioning of the Agreement, and, more importantly, to concentrate on finding effective solutions in order to resolve the bilateral dispute. To this end, the announcement by the shipyards of a 5 % to 10 % price increase for certain ships and the price monitoring mechanism set up by the Korean authorities can be considered as early encouraging signs.

The Commission has also written to the International Monetary Fund (IMF) informing it of the problems posed by Korea's practices in this area and drawing its attention to the monitoring such practices require.

Although the Agreed Minutes do not contain any binding provisions for sanctions, they still constitute an international agreement binding both parties legally. Korea has repeatedly expressed its intention to apply all the Agreement's provisions in full. The second consultation meeting in September will show whether Korea's goodwill gestures at the first meeting will be transformed into practical solutions. In any case the Commission will remain vigilant regarding the implementation of Korea's commitments. Korea is perfectly aware that if the results of the consultations do not fulfil the Community's expectations, the European industry will probably lodge a complaint under the Trade Barriers Regulation (TBR)(1). This procedure could, if necessary, lead to World Trade Organisation (WTO) action to penalise the Korean use of subsidies and dumping, and to remedy the situation.

The Commission does not plan to extend aid for contracts. However, Council Regulation (EC) No 1540/98 of 29 June 1998 establishing new rules on aid to shipbuilding(2) covers aid for modernisation, allowing support for the European industry's efforts to adapt to world competition.

(1) Council Regulation (EC) No 3286/94 of 22 December 1994 laying down Community procedures in the field of the common commercial policy in order to ensure the exercise of the Community's rights under international trade rules, in particular those established under the auspices of the World Trade Organisation (WTO) (OJ L 349, 31.12.1994).

(2) OJ L 202, 18.7.1998.