BRUSSELS The European Commission proposed on Wednesday launching negotiations with Seoul on South Korean shipyard practices, which the European Union sees as unfair, AFP reported.
At its weekly meeting, the EU's executive branch decided that Trade Commissioner Pascal Lamy should try again to negotiate a settlement, but that talks should reach "a concrete and satisfactory" result by May 1, 2001.
"There are two things.
Operating aid (as planned) under the EU regulation will expire December 31, 2000. The second thing is we send a very strong political signal to South Korea," a commission source said.
"We see a start to negotiations with Korea. We hope it will now be on a serious basis," he said, though he was unable to comment on any recent contacts with Korea.
If there is no negotiated deal then, the commission proposes a reinstatement of operating aid up to nine percent, but on a selective basis where European yards show they have suffered unfair Korea competition, he said.
"This is a clear signal to Korea that if they are not serious we will start a World Trade Organization case. And that pending a WTO procedure we will apply aid to contracts suffering injury," he said.
"This proposal safeguards the position of European industry and does not leave it unarmed against Korean trade practices," he said.
The source was unable to say if the aid would be applied retroactively on contracts signed between January 1-May 1 next year if there is no negotiated settlement.
The talks with Seoul are expected to focus on a price monitoring mechanism similar to the one the commission proposed in talks earlier this year, aimed at inclusion of all Korean yard costs, he said.
The temporary selective aid scheme, if it has to come in, will include the possibility of operating aid for cruise ships, one of the few segments where European yards are still strong, he said.
"Clearly Europe is strong in cruise ships but there is an indication the Koreans are moving in.
If there is unfair pricing (by the Koreans) the system would also apply to cruise ships," he said.
The commission is also proposing that member states consider an overhaul of research and development and innovation aid to make it easier for EU shipyards to apply, he said.
The commission believes its proposal will appeal to EU industry ministers, who met next week to discuss the issue, but who have been split over whether to continue operating aid after the end of this year, he said.
Wednesday's decision followed a joint proposal from Lamy, competition commissioner Mario Monti and Industry Commissioner Erkki Liikanen.
In a statement, the commission said that the talks with South Korea would be sought after the commission opened shortly its trade barrier investigation into a complaint against Korean yards by European industry.
"If no satisfactory negotiated solution can be reached with Korea, the commission will report to (EU member states) by May 1, 2001, proposing to bring a panel against South Korea in the WTO," it said.
A spokesman for Monti said the commission had not decided the level of any temporary selective aid scheme and nor was there any position on contracts signed between January 1-May.
Shipyards have known that operating aid is stopping at the end of this year and will sign contracts during the first four months without aid, he said.