Responding to the increased competition and the dwindling shipbuilding orders which have brought an idle period for the domestic shipbuilding industry, the Republic of Korea has developed and implemented a range of measures to provide financial support to its shipbuilders. These measures include providing both "producer support," such as direct financing provided to Korean shipbuilders that, inter alia, enables their continued market presence and prolonged periods of otherwise unsustainable low pricing, and "sales support" to Korean shipbuilders and their customers, which is designed to stimulate sales for Korean shipbuilders, including during periods of relatively low demand.

GET THE SAFETY4SEA IN YOUR INBOX!

Japan considers that certain measures taken by Korea provide subsidies that are inconsistent with its obligations under the SCM Agreement and the GATT 1994. The measures in question relate to the development, production, marketing, and/or sale or purchase of commercial vessels, including vessels designed to carry crude oil, LNG, and shipping containers.

Namely, the EU supports that it wishes to take part in this non-ending complaint that was filed by Japan against South Korea's shipbuilding industry. As stated in Yonhap, Korea directly or through private or public institutions, made multiple dubious exports and local content subsidies to Korean shipbuilders and their customers.

EU highlighted that it is a producer and exporter of a great importance of both ships and maritime equipment globally. So, it is thought that the measures referred to the consultation request might have a negative effect to the price of ships, ship engines and other equipment. Also, it could possibly have an impact on trade flows.

Moreover, according to experts, S. Korea should be prepared for possible complaints to be filed by the EU.

Ahn Duk-geun, a professor of international studies at Seoul National University, stated that EU's wish to take part in the consultation might be a sign that it pursues to file a suit against S. Korea. That's why, the EU previously addressed an issue similar to Japan's at the Organization for Economic Cooperation and Development.

Finally, the EU sued South Korea, in October 2002, supporting that the restructuring of local shipbuilders is based on government funding. In March 2005, WTO agreed and accepted the majority of South Korea's arguments.