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EU Criticizes S. Korean Subsidies

June 26, 2002

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BRUSSELS, Belgium (AP) _ The European Union threatened Wednesday to take South Korea to the World Trade Organization over alleged unfair subsidies to shipyards, and said it would introduce its own support for European shipyards if needed.

``What we are trying to do is equip ourselves so we can persuade the Korean shipbuilding industry to forgo certain practices which are distorting the world shipbuilding industry and doing considerable injury to EU shipbuilding,″ said EU trade commissioner Pascal Lamy.

The European Commission says South Korean subsidies help their shipbuilders to sell ships below production costs.

Talks with South Korea over its alleged unfair practices would resume next month, Lamy said. If the two sides fail to reach an agreement by the Sept. 30 deadline, Lamy said the EU would file a complaint with the WTO in Geneva.

At the same time, the EU would also adopt subsidies of 6 percent for its own shipyards, using the support to last through the international procedure, he said.

A year ago, the commission proposed reintroducing subsidies temporarily for European shipyards, but disagreement among the 15 member states blocked the plan. General operating aid was abolished in the EU in 2000.

Competition commissioner Mario Monti said a compromise plan reduces the amount of subsidies from the originally proposed 14 percent, and also limits its duration and scope.

Container ships and product and chemical tankers would be eligible for the support. The commission will reinvestigate the market for liquefied natural gas tankers, to decide early next year whether they will also be included.

The plan was slated to receive formal approval from EU ministers on Thursday.

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