WRITTEN QUESTION E-0076/03

by Daniel Varela Suanzes-Carpegna (PPE-DE) to the Commission

(23 January 2003)

Subject: Situation of the EU shipbuilding sector and unfair competition from South Korea

Following South Korea's failure to meet its obligations vis-à-vis the EU arising from the agreed minutes signed on 22 June 2000 and given that an amicable settlement could not be reached by 30 September 2002, the Commission has had to resort to a dispute settlement procedure at the WTO. During the Spanish presidency, a temporary defence mechanism was adopted for the EU shipbuilding industry (Regulation (EC) 1177/2002(1) of 27 June 2002), which will apply for the duration of the WTO procedure. This regulation and, therefore, the mechanism set up by it will remain in force until 31 March 2004. The Commission has recently presented its Sixth Report on shipbuilding in the world, in which it once more stresses as in the five previous reports the problem of unfair competition from South Korea and its damaging effects on the EU shipbuilding sector.

1. Does the Commission consider the proposed period of validity of this defence mechanism to be sufficient, in the light of the likely duration of the dispute settlement procedure at the WTO, the persistence of South Korea's unfair competitive practices, and the longer recovery period needed by the affected parts of the shipbuilding sector?

2. In the context of its obligation to undertake monitoring and regular revision of the situation of the various specific segments of the market (Regulation 1177/2002, Article 2(5)), is the Commission carrying out, or does it intend soon to carry out, an analysis of other market segments which could be, or already are, affected by South Korea's persistent unfair competitive practices, and which could therefore become eligible for the provisions of the above-mentioned temporary defence mechanism (or a similar mechanism), as is implied in its Sixth Report on shipbuilding in the world?

3. Can the Commission state what action, whether directly or via the IMF, it intends to take with a view to ensuring the monitoring and evaluation of a possible full-scale restructuring of the South Korean shipyards, in order to prevent any further instance of exclusive assistance being granted by the South Korea authorities on lines similar to those which have brought about the existing unfair competitive practices?

(1) OJ L 172, 2.7.2002, p. 1.

Answer given by Mr Lamy on behalf of the Commission

(21 March 2003)

1. The Temporary Defensive Mechanism (TDM) is an exceptional measure, designed to support WTO action against Korea. It is limited in scope and time. The Commission has explained on many occasions that its scope is intentionally narrow and focuses only on those market segments where it has been clearly demonstrated, in the Trade Barriers Regulation(1) (TBR) Report, over a reasonable period of time, that Korean practices are causing the most severe adverse effects on Community industry. The Regulation expires on 31 March 2004, which takes into account the time necessary for the completion of the WTO procedure.

2. The Commission will continue to monitor the market and, in particular, the sectors of container ships, product and chemical tankers, and liquefied Natural Gas (LNG) carriers. The Commission will continue to reflect on its position in light of this monitoring. However, in view of the exceptional nature of the TDM, the possibility of granting aid to LNG carriers in particular is subject to confirmation, by the Commission on the basis of a new investigation under the TBR covering the year 2002.

As regards the further investigations covering 2002, the Commission launched a TBR questionnaire to the industry in December 2002. On the basis of their replies, the Commission expects to present the result of this further investigation no later than March 2003.

3. The Commission is closely monitoring the developments of the world shipbuilding market (especially as far as the Korean yards are concerned) and reports annually to the Council. Such monitoring covers not only movements in prices and market shares but also financing aspects such as restructuring operations financed by state resources. It should be noted, however, that the International Monetary Fund (IMF) has no mandate to become involved in possible Korean shipyard restructuring operations.

(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, OJ L 349, 31.12.1994.