Dispute Settlement Body 11 April 2005

WTO dispute body adopts panel ruling on Korean shipbuilding measures

The Dispute Settlement Body on 11 April 2005 adopted the panel report on Korea's measures affecting trade in commercial vessels, a case brought by the European Communities.

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This summary has been prepared by the WTO Secretariat’s Information and Media Relations Division to help public understanding about developments in WTO disputes. It is not a legal interpretation of the issues, and it is not intended as a complete account of the issues. These can be found in the reports themselves and in the minutes of the Dispute Settlement Body’s meetings.

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Adoption of reports

When a panel report comes out, it is either adopted by the Dispute Settlement Body or appealed by one or more parties to the dispute. When the Appellate Body report comes out, it is automatically adopted by the DSB — unless there is consensus to reject it — and becomes binding.

DS273: Korea — Measures affecting trade in commercial vessels

Korea declared itself satisfied on the whole with the panel report. Korea commented on the panel's findings regarding the following issues: the restructuring of certain Korean shipbuilding companies and alleged subsidies; and the advanced payment refund guarantees and pre-shipment loans. Finally, Korea said that it need not take any further step to implement. Korea explained that the loans and guarantees which the panel found to be subsidies had by now been repaid, or had expired, or were no longer in effect.

The European Communities expressed its disagreement with some aspects of the panel's reasoning. The EC also said that it was pleased with the panel's conclusion that Korea had been providing illegal subsidies to its industry for many years through loans and guarantees. The EC was disappointed however that the panel did not support its claim concerning the subsidization of Korean ship yards through debt restructuring measures.

The EC explained that it had not appealed the panel because it intended to continue the dialogue with Korea and other OECD Members concerning the problem of injurious pricing in the shipbuilding sector.
Finally, the EC said that it did expect Korea to withdraw its subsidies within 90 days, as recommended by the panel.

The United States, as third party, commented on some aspects of the panel report, including the “mandatory/discretionary” distinction and the meaning of the phrase “entrusts or directs” in the WTO Subsidies and Countervailing Measures Agreement.

The DSB adopted the panel report.

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Next meeting  

The next regular DSB meeting will be on 20 April 2005.

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