By Simon Zekaria - 16th January 2004
The European Commission on Wednesday next week is set to renew laws offering temporary aid to boost ailing EU shipbuilding, as its legal dispute with South Korea continues.
European state aid regulators are ready to extend the aid measures until 31 March 2005, as the present legislation reaches its expiry date.
The ‘regulation’ from June last year outlines the so-called ‘temporary defensive mechanism to shipbuilding’, set down by Brussels in the wake of its legal dispute with South Korea over anti-dumping practices in the shipbuilding industry.
Under the terms of the law, EU regulators allow member states to offer aid payments, normally seen to contravene strict EU competition policy, to their shipyards involved in constructing tankers carrying gas, chemicals and containers.
Brussels set a 6 per cent total threshold for aid of total contract sums in a bid to balance need for subsides and excessive sector-based competitive advantages.
And while renewal of European legislation is a standard procedure, Brussels’ outstretched hand in offering a temporary aid boost has been forced by the intransigence of Seoul.
Brussels accuses South Korea of pricing ships below manufacture cost and ‘dumping’ them on EU territory, so driving European firms out of the market.
The bloated subsidies arrived via a bi-lateral agreement between the shipyards and the state-owned Korean Export-Import Bank (KEXIM).
Having tried and failed to reach an amicable settlement with the country over illegal shipbuilding subsidies on three separate occasions between November 2002 and May 2003, the EU started legal proceedings at the World Trade Organisation.
The market share for European shipbuilding has dropped 15 per cent since 1999, with the Korean slice reaching 38 per cent in 2003.
The temporary aid measures are only one part of a twin Brussels attack to revamp European shipyards.
In November last year EU competition authorities authorised national governments to double research aid spent on ailing European shipyards – as one part of a 30 stage project from January this year to boost EU shipbuilding by 2015.
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