Document: WT/DS299/R Page D-1 ANNEX D ORAL STATEMENTS OF PARTIES AT THE SECOND SUBSTANTIVE MEETING Contents Page Annex D-1 Executive Summary of the Statement of Korea D-2 Annex D-2 Executive Summary of the Statement of the
Document codes: WT/DS299/R
Complainant: South Korea
Respondent: EU
Third parties: China, Taiwan, Japan, U.S.
Dispute stage: Panel
Agreements cited: Art. 1, 2, 10, 12, 14, 15, 19, 22, 32  Subsidies and Countervailing Measures (SCM)Art. VI:3  GATT 1994

ANNEX D

ORAL STATEMENTS OF PARTIES AT THE
SECOND SUBSTANTIVE MEETING

Contents Page
Annex D-1 Executive Summary of the Statement of Korea D-2
Annex D-2 Executive Summary of the Statement of the
European Communities
D-7

ANNEX D-1

EXECUTIVE SUMMARY OF THE
STATEMENT OF KOREA

(10 January 2005)

1. The EC repeatedly embraced self-serving met hodologies and arguments in this case. Rather
than objectively examining the facts, the EC had an outcome in mind and approached the facts from
that perspective. That is why the EC ignored th e shipment data for LG Semiconductor("LGS"). That
is why the EC distorted its price comparison met hodology. That is why the EC applied improper and
overbroad facts available. That is why the EC tr ies to cover gaps in its analysis by invoking the
"totality" of the evidence.

I. INJURY ISSUES

2. The EC argues that the only obligation set forth under Articles 15.1 and 15.2 of the SCM
Agreement is that the national authority "examine" and "consider" the evidence. Korea believes that
to satisfy the obligations of Article 15.1 and 15.2, the investigating authority must demonstrate that its
determination is, in fact, based on positive evidence and reflects objective examination . Moreover,
under Article 11 of the DSU the Panel must be allo wed to examine whether the evidence underlying a
determination is credible. The EC also asserts that Korea has not raised arguments under Article 15.1.
This assertion is wrong. Korea raised this claim in its Request for the Panel Establishment and in its
First Submission. In our Second Submission, we elaborated on those arguments.

Volume, Price Effects and the Condition of the Industry

3. On the issue of volume, Korea believes "significant" has both qualitative and quantitative
dimensions. By misrepresenting the LG Semiconductor figures, the EC improperly relied upon
figures for overall imports, inconsistent with Article 15.2. The inconsistent treatment of shipments by
LG Semiconductor and Hyundai Electronics also created a violation of Article 15.1, since the EC
approach simply cannot be considered objective examination.

4. Korea further believes that as a matter of law, the EC’s indexed figure of a 155 per cent
increase in this case
 cannot be considered "significant" give n the nature of the industry. More
importantly, the evidence before the EC demonstrat es unequivocally that, when analyzed properly to
include LG shipments, Hynix’s market share did not increase at all , but rather decreased over the
period examined.

5. With respect to price effects, we are forced to look at the output from the EC’s "black box."
The EC avoids the heart of the Korean argument – that the methodology was inherently unfair by
comparing a transaction price to an average price. The approach taken by the EC is inherently biased
and is thus inconsistent with Article 15.2, and is also a separate violation of Article 15.1.

6. The EC also found competition in the DRAM market takes place largely on price. Yet, the
evidence showed that Hynix steadily lost its shar e in the EC market from 1999 through 2001. EC

speculation to remedy the inconsistency in its logi c and the facts does not satisfy the obligations of
Article 15.2. The EC approach also does not satisfy Article 15.1.

7. With respect to the condition of the domestic industry, Article 15.4 of the SCM Agreement
establishes that the national authority must
 examine all of the enumerated injury factors. But the EC
did not address wages, a specific factor under Artic le 15.4, and it did not make sufficient data
available to be able to analyze what a proper analys is of "wages" would have produced. The EC also
effectively states it does not have to consider stat ements of its own domestic industry that have a
direct bearing on the Article 15.4 factors, throwi ng out any sense of accountability. Finally, the EC
has not explained adequately why just three of 13 enumerated factors under Article 15.4 compel its
conclusion that the domestic industry was suffering material injury.

Causation and Non-Attribution

8. The EC injury analysis rests in large part on an erroneous and ina ppropriate finding of an
absolute increase in subject imports, with or without including LGS. Even if this approach somehow
complies with Article 15.2, it does not comply with Article 15.5 read in light of Article 15.1. And
even if Article 15.5 were read so narrowly as to permit a finding of causal relationship in this
situation, the analysis is still not objective, represen ting another aspect of the EC determination that is
inconsistent with Article 15.1.

9. On non-attribution, the EC has yet to explain how it separated and distinguished a number of
other causal factors raised in the underlying proceedi ng. For example, the EC erroneously dismissed
the role of the drop in demand fo r 2001, along with the accompanying "inventory burn." The EC also
ignored evidence on changes in relative capacity that confirmed the dominant role of other suppliers
who increased their capacity much more than Hynix. Although the EC tried to address the role of
unsubsidized imports, it either ignored or distorted th e key evidence. The EC’s response is merely to
assert that it did consider these causal factors and ensu red that they were separated and distinguished
from subject imports, but mere assertions do not satisfy Article 15.5.

II. SUBSIDY ISSUES

10. The EC argues that this Panel should not cons ider the evidence relied upon by the authorities.
This approach is just wrong. Pursuant to Article 11 of the DSU, this Panel must consider the evidence
provided by the EC authorities with respect to each element of a subsidy. The EC also argues that
every piece of evidence is relevant to every actor an d every transaction. But this Panel has the job of
reviewing that evidence, and deciding whether a reasonable and objective authority could have
reached the decision that it did.

11. In their determinations, the EC authoriti es discussed individual transactions and individual
banks. The EC now tries to hide behind the "totality" of the facts, in an effort to obscure the reality
that the "facts" actually address much less than the authorities would like. The EC tries to avoid the
question of which
 banks were entrusted or directed to do what . The legal standard for entrustment or
direction requires the EC authorities to answer these questions; they did not.

12. The EC also tries to defend its use of adve rse inferences, but the EC fails to distinguish
between inference that may turn out to be a dverse, and inferences that are intentionally
 adverse.
Having identified a particular fact, the EC then pr oceeds to draw inferences with no limits. The EC
also tries to blur the distinctions between parties to the investigation and third parties who might have
relevant information. In sum, the EC drew in tentionally adverse inferences, beyond the permissible
scope of Article 12.7.

Financial Contribution

13. Korea would also like to point out that with respect to public bodies, the EC determinations
are fixed and cannot now be expanded. With respect to private bodies and the meaning of "entrusts or
directs," the EC would like to ignore the core m eaning of "entrusts" and "directs" as provided in
Article 1.1(a)(1)(iv), but its efforts to distinguish US -- Export Restraints from this case simply fail.
The factual differences in this case and that case ha ve little relevance to that panel’s careful and
reasoned articulation of the appropriate legal standard.

14. On a more general level, Korea believes th ere are fundamental problems in the way the EC
has approached the context of this case, the issues creditors confront in a restructuring situation, and
the reality that governments can take an interest in restructurings without engaging in entrustment or
direction. The EC also continues to blur the dis tinction between financial c ontribution and benefit.
By doing so, the EC improperly focuses on the effects
 of alleged entrustment or direction, inconsistent
with US-Export Restraints.

15. Syndicated Loan . The EC first argues that it need not show any entrustment or direction,
because there were some public bodies. But the mere fact that FSC granted a loan waiver in no way
establishes that a public body has granted the loans. The EC has improperly blurred the distinction
between granting a waiver of a regulatory requireme nt and providing a loan. It also ignored the
decision by seven other banks to lend to Hynix as part of the syndicated loan. Since the EC so
regularly invokes the "totality" of the evidence, this approach seems odd.

16. KEIC Insurance
. The EC argues that it need not show entrustment or direction. But this
argument assumes that the insurance and the loans being insured are one in the same. On the contrary,
the KEIC provides the insurance, but the individual banks – not the government -- provide the short-
term financing. If the EC intends to treat the KEIC insurance as a grant in the total value of the D/A
credit line, as opposed to the methodology prescribed in Annex I(j) of the SCM Agreement, the EC
must demonstrate that Hynix’ creditors were entrusted or directed to provide the D/A financing.

17. KDB Programme
. The EC argues that it need not show entrustment or direction. But like it
did with the KEIC insurance, the EC is mischa racterizing the programme. The KDB alone did not
absorb all of the bonds, holding only a small fraction of them. Yet, the EC takes the position that it
may countervail the entire amount of bonds refinanced under the KDB as a grant provided by a public
body. This position is illogical in light of the na ture of the programme, including the burden sharing
explicitly contemplated by the programme.

18. May 2001 Restructuring
. The EC implies it need not show entrustment or direction. The fact
that two lenders may have been public bodies, how ever, does not address the numerous other lenders
that were not public bodies. For these private bodies, the EC must show entrustment or direction. But
the EC instead brushes aside fairly decisive evid ence of Hynix’ creditors making rational decisions
and protecting their decisions through the financing they formulated. In particular, nowhere does the
EC mention the GDR when it addresses financial contribution and the May 2001 restructuring
package.

19. October 2001 Restructuring
. The EC implies it need not show entrustment or direction. The
fact that two lenders may have been public bodies, however, does not address the fact that other banks
were not public bodies. For these private bodies, the EC must show entrustment or direction. The EC
stresses the degree of government ownership of th e banks. Again, such evidence simply cannot
establish entrustment of direction. The EC also cites to banks taking into account public policy
considerations. This approach reflects a flawed understanding of the legal standard. There is nothing
unusual about banks taking in to account a wide range of factors when making a loan. The EC also
alleges a "pattern of continuous involvement," but in doing so misstates the facts. Finally, the EC
turns to an analysis of evidence for several specific banks. This discussion of "evidence," however,

never provides any credible basis to find entrustment or direction. It also ignores the key fact with
respect to the October restructuring package – the banks had choices.

Benefit

20. With respect to benefit, as a legal matter, if the EC’s findings on financial contribution are
found inconsistent with the SCM Agreement, then the EC findings on benefit must also fail. Korea
has also properly challenged both the finding and measurement of benefit under both Articles 1.1(b)
and 14 of the SCM Agreement.

21. Looking at benchmarks, Article 14 applies ve ry concrete terms focused on the "usual" or
"prevailing" conduct in the market under investigation, or "comparable" conduct. With respect to the
amount of benefit, Article 14(b) and (c), in particular, state that the amount of benefit conferred "shall
be the difference" in the costs of the instrument s compared. With respect to the provision of goods,
Article 14(d) requires a comparison of the goods or services provided versus the adequate
remuneration for such goods or service s, which "shall be determined in relation to prevailing market
conditions." The EC wants to escape these terms, claiming they are mere guidelines and nothing in
Article 14 specifies a particular methodology measuring benefit. But the guidelines are still
mandatory; they must still be considered and aut horities may not use methodologies inconsistent with
these guidelines.

22. In US – Softwood Lumber , the Appellate Body found that "the possibility under Article 14(d)
for investigating authorities to consider a benchm ark other than private prices in the country of
provision is very limited ." An authority may do so only when "it has been established that those
private prices are distorted, because of the predom inant role of the government in the market as a
provider of the same or similar goods." Moreover, even if it establishes market distortion, an
authority must still validate an alternative benchmar k. The EC claims that the Appellate Body’s
holding in US – Softwood Lumber is distinguished by the fact that it only dealt with the language of
Article 14(d), and must be restricted to Article 14(d) on that basis. But such a reading completely
ignores the clear preference for primary benchmarks (i.e., those present in the market under
investigation) found in the other paragraphs of Article 14.

23. The EC has tried to explain the dramatic changes between the provisional and definitive
regulations, but this explanation just underscores the defects in the EC approach. The EC uses the
"totality" of the facts to obscure the important distinction between "financial contribution" and
"benefit" under the SCM Agreement. Even if one assumes there mi ght have been some basis to
reevaluate the determination of fi nancial contribution, the EC has offered not explanation for why it
changed its approach to benefit and market benchmarks.

24. The EC also challenges the relevance of consid ering the perspective of inside investors. The
relevant treaty text focuses on the "usual investment practice." When the facts of a particular case
show that inside investors took into account thei r existing stake in a company, then the authority
cannot ignore this factual reality. The EC says that it rejects the inside-investor analysis. If this
approach is the "usual investment practice" in a particular country – as it was in Korea during these
debt restructurings – then it is legal error for the EC to reject this approach.

25. The EC seems to think that perfect "undistorted" commercial markets exist. The reality is that
every market is distorted to some extent. Governme nts exist, and they take actions that influence the
market. Nothing in the SCM Agreement requires a perfect "undistorted" commercial market to allow
for market benchmarks. Moreover, the EC can point to no linkage
 between an alleged GOK
commitment to Hynix and the asserted serious distortion in the Korean capital markets.

26. The EC argument on benefit is reduced to the proposition that Hynix could not raise capital
without GOK pressure on lenders. But this EC ar gument focuses on Hynix’ financial condition in

general, and ignores the inconsiste nt facts about Hynix successfully raising new funds. The EC also
obscures the factual context of the Hynix restructuri ng. Providing new money to Hynix is one issue.
But the October restructuring also involved debt-equity swaps and debt forgiveness. The EC seems to
think that existing creditors could simply insist on full repayment. That approach ignores the reality
of debt restructuring.

27. Finally, the EC would like to obscure the fact that in the presence of legitimate benchmarks, it
chose to simplify the equation by effectively treating every financial transaction at issue as a grant.
Thus, it offers its long discussion of risk capital an d the prospect of not being repaid. However,
nothing in the SCM Agreement permits a Member to recast a transaction out of hand.

Calculation Errors

28. The EC ignored timely Hynix comments re garding the obvious double counting of alleged
benefit from the KDB programme bonds and the oversta tement of the debt roll over as part of the
October 2001 restructuring. The EC’s failure to co rrect the errors plainly identified by Hynix is
inconsistent with Articles 1.1(b) and 14. Another fundamental error in the EC’s approach to both the
KDB programme and the October 2001 restructuring programme was the treatment of interest-bearing
instruments as grants. If the EC was committed to this flawed approach, it should have, at a
minimum, deducted interest from any subsidy calculati on to remain consistent, at some level, with
Article 1.1(b) and 14.

Specificity

29. As a legal matter, to the extent that the EC’s findings on financial contribution are found
inconsistent with the SCM Agreement, then its findi ngs on specificity must also fail. But even if
financial contribution is presumed, the EC’s specificity findings are inconsistent with Articles 1.2 and
2. With respect to the KDB Programme, the EC sugg ests that it considered all the factors outlined in
Article 2, but this is not obvious in the lone paragraph cited from its Provisional Regulation . With
respect to May and October, the EC argues that it does not consider that what happened to Hynix
happened was according to the normal application of generally applicable bankruptcy laws. This is
correct. What happened to Hynix was according to the normal application of a generally applicable
bank "work-out" framework, as an alternative to tr aditional bankruptcy. But under the EC approach,
one would find the application of traditional bankruptcy laws to be no less specific.

Articles 19.4, 10 and 32.1 of the SCM Agreement and Article VI:3 of GATT 1994

30. In choosing to use Hynix’ unconsolidated sales, the EC confused the scope of the
investigation (DRAMs) with the question of which prod uct and entity benefited from the alleged
subsidies. It is not because the EC investigated the DRAMs market that subsidies granted to Hynix
can automatically be viewed as benefiting only H ynix as a parent entity and only with regard to
DRAMs. By taking this approach, the CVD duties imposed by the EC exceed the limits imposed by
Article 19.4 of the SCM Agreement and Article VI :3 of GATT 1994. Moreover, every violation of
the specific provisions of the SCM Agreement identified above triggers a parallel violation of
Articles 10 and 32.1, once the decision to impose duties was made.

ANNEX D-2

EXECUTIVE SUMMARY OF THE STATEMENT
OF THE EUROPEAN COMMUNITIES

(9 December 2004)

Mr. Chairman, Members of the Panel,

I. INTRODUCTION

1. In the long run, we are all dead. Very drole. Very true. Except in the case of Hynix,
apparently. And in one sense that’s what this case is all about. If a government "thinks big enough" –
that is, thinks "too big to fail" - almost anything is possible - with a little help from the taxpayer and a
little flexing of state muscle, of course.

2. With deep enough pockets, you can fix the cap ital markets the way you want them to achieve
your policy objective. A bit like a billionaire playing "double or quits" in a small town casino –
which is precisely why there are limits on the maxi mum bet - as Nick Leeson eventually discovered.
It is also precisely one of the reasons why we have the SCM Agreement - to regulate the power of
government in markets. At least on this point the parties agree.

3. So let’s take "government" out of the equati on. Given what is known and uncontested about
Hynix’s dire financial state, the dire state of the DRAMs market, and the dire state of the Korean
financial markets, what do you think would have happened to Hynix if the GOK had done nothing
 at
all? No repeated "requests" from the Economic Mi nisters of Korea. No Syndicated Loan from KDB,
KEB and KFB. No extension of the prudential rules by the FSC. No guarantee from KEIC. No
guarantee to KEIC. No KDB Debenture Programme. No implied guarantee that Hynix was too big to
fail. No new capital or roll-overs or debt write -offs from public bodies. No massive GOK payments
to Citibank/SSB, which was busy "marketing" th e GDR issue to unsuspecting and, it turns out,
deluded international investors. No CRPA. No high level GOK attendance at creditors’ meetings.
No menacing statements of intent by the Korean Deputy Prime Minister. No massive GOK capital
injections to banks. No Prime Minister’s Decree No 408. No Memoranda of Understanding. No
interference with the appointment of mangers of banks. No threats to banks. No threats to credit
rating agencies … After-all, this is the kind of St alinist view of history that Korea would have us
swallow, isn’t it?

4. Assuming these facts, and placing yourself at the end of 2000/beginning of 2001, if you were
forced to stake your sole family property/life savings/professional reputation one way or another ,
what would you bet? Would you bet that Hynix would have succumbed to the normal judicial
bankruptcy procedures? Or would you bet that, miraculously, Hynix would somehow claw its way
back from the abyss unaided? Consider the mountai n of evidence (the EC has listed some 867 facts)
pointing towards bankruptcy before making your choice. I know what I would bet my house on (if
forced to bet). There isn’t really any choice, is there? We all know that Hynix would have gone bust,
just as Daewoo had before it. In fact, Hynix was "technically" bust already. We all know that the
GOK, which itself created the situation by forcin g through the LG Semicon merger, saved Hynix’s
skin – essentially unscathed. The GOK achieved its policy objectives.

5. Fortunately, none of us have to make that c hoice. The investigating authority made it for us.
The only thing that we need to discuss in these proceedings is whether or not that choice was so
outlandish, so unreasonable, so lacking in objectivity, that it leaves no choice for this Panel – indeed
any Panel considering the matter – but to intervene and rule against the investigating authority. I must
confess that, based on the totality of the facts and evidence available, I simply find it impossible to
understand how anyone could reasonably come to th at conclusion. I simply cannot accept that the
effect of everything that the GOK did amounted to nothing
, when it so obviously rescued Hynix from
oblivion. In fact I do not think that, given the evidence, any even-handed and objective investigating
authority could reasonably do anything other than find that the GOK subsidised Hynix.

II. SUBSIDY

6. With regard to subsidy, Korea again resort s in its rebuttal to repeatedly making various
assertions about the alleged "intent" of the investig ating authority. Apart from being nonsensical and
inappropriate, such assertions will not advance Kor ea’s case. Nor should this Panel be fooled by
Korea’s attempts to mask the weakness of its case with such rhetoric.

7. The investigating authorities in this case had no "zeal to protect the EC producers".
1 They
simply conducted an objective and even-handed inves tigation. On the contrary, the record facts and
evidence overwhelming support the view that the GOK had a policy that Hynix was too big fail,
which policy it pursued zealously. Thus, the trade distorting measure in this case is the GOK subsidy,
imposed in pursuit of government policy. The countervailing duty is only the remedy, imposed after
an objective examination of the totality of the f acts and evidence by an objective and even-handed
investigating authority.

A. FACTS AVAILABLE

8. This Panel must give due weight to the fact that there was systematic non-cooperation by the
Korean respondents in this case, leaving the investig ating authority with no alternative but to make its
determinations on the basis of the totality of the facts and evidence available, as provided in
Article 12.7 of the SCM Agreement, where appropriate drawing inferences, which inferences could be
adverse.

9. Korea asserts repeatedly and at length th at the European Communities’ position is that
Article 12.7 of the SCM Agreement is "punitive" – an assertion of which Korea attempts to make a
great deal.
2 However, that assertion is simply false. The European Communities has never made any
such statement. Korea is now driven to make the inevitable admission that Article 12.7 of the SCM
Agreement allows an investigating authority to draw inferences 3, if information is missing. Logically,
that must mean that the inference might be adverse (it is impossible to be certain, because the relevant
information is missing). This is confirmed by Annex II of the Anti-Dumping Agreeement, which both
parties have agreed is relevant context. Korea’s attempts to draw a distinction with Annex V of the
SCM Agreement are therefore misplaced. 4 The provisions of Annex V of the SCM Agreement do no
more than confirm the approach adopted by the investigating authority in this case.

10. The European Communities is ab solutely confident that, having read the questions repeatedly
posed by the European Communities
5, having read the answers given by Korea, and having reviewed
the documents, the Panel will agree that the investig ating authority was entitled in this case to rely on

1Korea rebuttal, para 118.
2 See, for example, Korea rebuttal, para 130 and following.
4 Korea rebuttal, paras 131 to 133.
5 EC replies to questions 58 and 9.

the "facts available". Words are just an abstract representation of reality - so there is always some
residual degree of "ambiguity" 6 in all language. That does not entitle respondents in a subsidy
investigation to be endlessly disingenuous. The questions posed were sufficiently precise – indeed
right on the point, and the answers given fell woefu lly far short of the requirements of good faith co-
operation required by Article 12.7 of the SCM Agreement.

11. Korea asserts that the Europ ean Communities would leave the application of "facts available"
entirely at the discretion of the investigating Memb er, without any consideration of "the underlying
facts".7 Both of these assertions are simply false. The European Communities has never made any
such assertions. On the contrary, the European Communities has explained in detail the kind of
criteria an investigating authority will apply when weighing the totality of facts and evidence before
it.8 It has also explained how it took into consider ation all the facts and evidence before it in this
case.9 It is Korea, not the European Communities, that seeks to ignore the mountain of facts and
evidence about, for example, Hynix’s dire financial state, the dire state of the DRAMs market and the
dire state of the Korean financial markets.

12. Korea asserts that any inferences draw n on the basis of Article 12.7 of the SCM Agreement
can only be drawn in relation to a specific "transaction". 10 That assertion is manifestly erroneous as a
matter of law. There is no such obligation in Article 12.7 of the SCM Agreement or otherwise. The
inferences to be drawn will simply depend in each case on the facts and evidence in question. 11
Korea’s concept of "transaction" is arbitrary a nd self-serving, and there is no basis in the SCM
Agreement for imposing it on investigating authorities12.

13. Contrary to what Korea asserts, the Eur opean Communities took a very balanced and
moderate approach to the issue of facts availa ble in this case, affording the Korean respondents
repeated and full opportunity to respond. The c onduct of the investigating authority was exemplary.
The Korean respondents have only themselves to bl ame for the inevitable consequences of their own
actions.

14. Korea continues to assert that the documents relating to the Economic Ministers’ meetings,
which expressly refer, inter alia, to direct subsidies to Hynix (s uch as the KEIC guarantee), were not
germane to the investigation and were not requested by the investigating authority.
13 This entirely
counter-factual assertion requires no further comment. It is a fact that the investigating authority
repeatedly and expressly requested all information a bout the attendance of GOK officials at meetings;
and it is a fact that the information regarding the 10 March 2001 creditors’ meeting was withheld.
Furthermore, the record evidence indicates that there were at least two high level officials present. No
proper written record of what was said or done by su ch officials has ever been produced by any of the
Korean respondents. A full copy of the Arthur Andersen Report was repeatedly requested but not
provided, including at verification. An investigati ng authority cannot be expected to verify what has
not been provided and what is not on the record. Citibank refused to permit a proper verification at its
premises. Interested parties are not required to make "overtures"14 to an investigating authority. They
are required to co-operate. They are required to answer questions completely and truthfully. They are
required to provide necessary information. They ar e required not to impede the investigation by
refusing access to premises or documents. Absent co-operation, investiga ting authorities have no

6 Korea rebuttal, para 123.
7 Korea rebuttal, para 123.
8 EC replies to questions 63 and 64.
9 EC replies to questions 7 and 9.
10 Korea rebuttal, para 124.
11 EC reply to question 63.
12 EC rebuttal, paras 10 to 31.
14 Korea rebuttal, para 151.

choice but to rely on the totality of the facts and evidence available. Korea’ s continuing efforts to
prosper in these Panel proceedings as a result of de nying evidence to the investigating authority and
eventually this Panel should be rejected.

B. SUBSIDY

15. A great deal has been said about "entrustment or direction". However, this Panel must not
forget that where there are direct subsidies, in cluding guarantees from the government, as in this case,
it is unnecessary for this Panel to discuss the con cept of "entrustment or direction". When a
government gives a guarantee, express or implied, that is a financial contribution. The benefit or
amount of subsidy is the missing market premium that should have been paid by Hynix for the
guarantee. At maximum risk, including when the company would otherwise be bankrupt, the
premium is at least equivalent to the capital amount covered by the guarantee. Another way of saying
essentially the same thing is that the banks, in pr oviding capital to a bankrupt company, had been
entrusted or directed to do so. The benefit a nd the amount of the subsidy are the same, whichever
way you look at it. We must not forget that th e record categorically proves that all through 2001 the
GOK publicly gave Hynix an express guarantee because it was considered too big to fail.

16. Korea continues to assert that this case is only about "entrustment or direction". That
assertion is false, and a factual and legal erro r of monumental proportions. As the European
Communities has set out in detail in the regulations a nd in its submissions to this Panel, this case did
not just involve issues of "entrustment or direction", it also involved direct subsidy. Korea having
chosen to ignore this fact, and having failed to present any serious evidence or argument in this
respect, Korea’s submissions on the question of subsidy must inevitably fail.

17. The parties agree that the concepts of subsid y and benefit are legally distinct, but that the
same facts and evidence may be relevant to both. However, despite paying lip-service to this general
statement, it is Korea, not the European Communiti es, that continues to run the two legal concepts
together. Thus, Korea repeatedly asserts that an i nvestigating authority can only determine that a loan
or a guarantee is a "financial contribution" within the meaning of Article 1.1(a)(1)(i) of the SCM
Agreement if it confers a benefit.
15 That assertion is manifestly false as a matter of law. According to
the express terms of the SCM Agreement, once it is established that a government (including a public
body) has granted a loan or guarantee, that is a financial contribution. Whether or not there is a
benefit involved is an entirely different matter.

18. Korea asserts that entrustment or direction by a public body does not fall within Article 1 of
the SCM Agreement.
16 That assertion is false. Article 1.1 of the SCM Agreement defines
"government" for the purposes of the entire agreement as "a government or any public body within
the territory of a Member". Consequently, the word "government" in Article 1.1(a)(1)(iv) of the SCM
Agreement necessarily encompasses a public body.

19. Korea again asserts that what this Panel must do is re-cast the SCM Agreement, testing the
measure at issue against only the "core" m eaning of the words "entrusts or directs"
17, by which it
means the meaning that best serves Ko rea’s interest in this case. That assertion is false. This Panel
must, where appropriate, assess the measure at issue against the words "entrusts or directs", giving
those words their full ordinary meaning. Last week a stranger stopped me in the street and asked me
for directions to the Grand Place, in Brussels. I gave him directions. Did I command him? Certainly
not. Did he follow my directions? I haven’t a clue. Did I direct him? I most certainly did.

15 See, for example, Korea rebuttal, para 190 and following; and para 194 and following.
16 Korea rebuttal, para 168.
17 Korea rebuttal, para 157.

20. If this Panel does find it necessary to consider th e concept of "entrustment or direction", what
this Panel must do is relate the facts of this case to that legal rule. This Panel must not substitute the
words in the SCM Agreement with other words. The SCM Agreement does not refer to an "affirmative
act". It does not use the words "delegation" or "command". To read these words into the SCM
Agreement when, manifestly, they are not there, would represent an ex-post rationalisation of the
negotiation process, and would be a legal error. It is not this Panel’s task to legislate.

21. Korea’s reliance on the words "a private body" to assert that a bank-by- bank analysis is the
only possibility under the SCM Agreement
18, and that an investigating authority cannot rely on the
totality of the facts and evidence available, may be dismissed with ease. It is self-evident that a
government could give a direction addressed to 2 ba nks, or for that matter any number of banks, in
one document, mentioning each by name. Such an event would certainly be capable of being caught
by Article 1 of the SCM Agreement . The situation is no different if the banks, rather than being
identified by name, are identified in some other wa y, such as all banks that are creditors of the
bankrupt company in need of funds. Korea’s defence boils down to the assertion that it is impossible
for a bank (or a group of banks) to be entrusted or directed to "save" a company. Why, if a
government has repeatedly and publicly stated that a co mpany is too big to fail? Such an assertion is
simply wrong.

22. Korea asserts that it "goes thr ough the EC evidence, piece by piece".
19 That assertion is false,
insofar as Korea ignores the great body of facts and evidence set out in the regulations 20, electing only
to discuss certain isolated facts and evidence. What is true is that Korea proceeds "piece by piece" –
an admission that its entire case simply fails to ad dress what the investigating authority did in this
case – that is, consider the totality of facts and evidence before it.

23. This Panel must consider the totality of f acts and evidence relied on by the investigating
authority. It must also take into account the profound economic links, as well as the legal links,
between the different elements of the subsidy. Part icularly, the inside investor way of looking at the
world that the Korean respondents have so ofte n invoked. The GOK put Hynix and the banks on a
steep and slippery slide - and then held their hands all the way down.

III. INJURY

24. With regard to injury, Korea’s suggestion that the position of the European Communities in
this case does not reflect the language of the SCM Agreement is entirely contrived from an
incomplete, inaccurate and out-of-context quotation.
21 The Panel should not be fooled by such
desperate rhetoric. The European Communities has discussed in detail in its submissions all aspects
of all the provisions in respect of which Korea has made claims in this case.

25. With regard to LG Semicon, as with most of this case, the simple facts settle the matter in the
European Communities’ favour. On March 2001 HEI was merely renamed Hynix (the underlying
legal person remained unchanged). HEI first acquired LGS on 7 July 1999. HEI was then re-named
HME and then merged with HEI effective 13 October 1999.
22 So, tracing backwards in time, the
European Communities followed Hynix/HEI (the same legal person, with a diffe rent name). It was
not required to follow the LGS production facility pr ior to its acquisition by Hynix/HEI, and there
were very good reasons for not doing so.23 The table and chart (which is not even before the Panel) in

18 Korea rebuttal, para 167.
19 Korea rebuttal, para 120.
20 See, for example, EC replies to questions 7 and 9.
21 Korea rebuttal, para 14.
22 EC FWS, para 67.
23 EC rebuttal, paras 32 to 47.

the complaint to which Korea alludes
24 make no reference to LGS – the investigating authority based
itself on the data provided by the Korean res pondents, as verified. Finally, Korea’s assertion 25 that
appropriate data were submitted in a timely manner is false – the true facts are set out in the European
Communities first written submission. 26 In any event, a 155 per cent increase in the volume of
subsidised imports is, on any view, and certainly in the circumstances of this case, significant.

26. Mr. Chairman, Members of the Panel, if, as Bismark would have it, government or politics is
the art of the possible, then perhaps law is the art of the reasonable, and the SCM Agreement, in a
sense, a meeting place. The GOK’s policy that Hynix was too big to fail, no matter the cost, was
made possible by throwing vast amounts of taxpayer money at the problem, and by putting the banks
into a position where they were entrusted or dir ected to do the same. The investigating authority
came to the only conclusion reasonably supported by the totality of the facts and evidence available.
There is no lawful reason for this Panel to disturb its findings.

Thank you for your attention.

24 Korea rebuttal, para 31.
25 Korea rebuttal, para 33.
26 EC FWS, paras 74 to 85.