Japan Files Complaint with WTO over Korean Gov’t Shipbuilding Support

Japan has requested World Trade Organization (WTO) dispute consultations with South Korea concerning alleged subsidies provided by the Korean government to its shipbuilding industry.

Japan’s request was circulated to WTO members on November 13, 2018.

As informed, Japan claims that the challenged measures, which include funds, loans, guarantees, insurance and other financing, are inconsistent with the WTO’s Agreement on Subsidies and Countervailing Measures (SCM Agreement) and the General Agreement on Tariffs and Trade (GATT) 1994.

Korea has recently developed and implemented a range of measures designed to provide financial support to its shipbuilders – Daewoo Shipbuilding and Marine Engineering (DSME), Sungdong Shipbuilding & Marine Engineering and STX Offshore & Shipbuilding.

These measures include providing both “producer support,” such as direct financing provided to Korean shipbuilders that enables their continued market presence and prolonged periods of otherwise unsustainable low pricing, and “sales support” to the country’s shipbuilders and their customers, which is designed to stimulate sales, including during periods of relatively low demand.

They relate to the development, production, marketing, and/or sale or purchase of commercial vessels, including vessels designed to carry crude oil, liquefied natural gas (LNG), and shipping containers.

Japan believes that the subsidies distort the market and hinder the resolution of oversupply problems in the industry.

However, Korean government has denied claims that the financial backing was in breach of international trade rules.

The request for consultations will give the parties an opportunity to discuss the matter and to find a satisfactory solution without proceeding further with litigation. After 60 days, if consultations have failed to resolve the dispute, the complainant may request adjudication by a panel.