WTO Ruling on Korean Shipbuilding Subsidies: Impact on Global Market Share

Strategic Insights -

The EU's decision to complain to the WTO against Korea's export credits for shipbuilding has led to a significant shift in global market share. Between 1999 and 2002, Korea's share of world shipbuilding grew from 28% to 36%, while the EU's market share fell from 20% to 8%. The WTO panel recommended that Korea withdraw the subsidies, which totaled $2.26 billion for Daewoo and $1.5 billion for Sambo, but rejected the EU's claims that these subsidies directly caused a loss in sales.

Key Takeaways:

  • Korea's share of world shipbuilding grew from 28% to 36% between 1999 and 2002 due to export credits.
  • The EU's market share fell from 20% to 8% over the same period.
  • The WTO panel recommended that Korea withdraw the subsidies within 90 days.
  • The subsidies totaled $2.26 billion for Daewoo and $1.5 billion for Sambo.
  • The EU Commission claimed that Korean state aid to shipyards included favourable loans and tax concessions that undercut EU market prices.
  • The WTO panel rejected the EU Commission's claims that the subsidies directly caused a loss in sales.
  • A separate WTO panel has been set up to investigate South Korean charges that the EU is giving illegal support to its shipbuilders.
  • The EU has included liquefied natural gas carriers (LNGs) among the beneficiaries of its temporary state aid to European shipbuilders since June 2003.

Statistics:

  • Korea's share of world shipbuilding grew from 28% to 36% between 1999 and 2002.
  • The EU's market share fell from 20% to 8% over the same period.
  • Total subsidies awarded to Daewoo: US$2.26 billion (Euro 2.6 billion).
  • Total subsidies awarded to Sambo: US$1.5 billion (Euro 1.7 billion).
  • Timeframe for Korea to withdraw subsidies: 90 days.

Sources:

  • European Commission: No specific date mentioned.
  • WTO panel report: No specific date mentioned.
  • EISnet: www.eis.be Advanced search Reference= EURE;2943;512.