Japan takes South Korea to WTO over financial support for its shipbuilders

GENEVA (Reuters) – Japan has launched a complaint at the World Trade Organization (WTO) to contest what it says is illegal financial support given by South Korea to commercial shipbuilders, according to a WTO filing published on Tuesday.

"The measures in question 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's complaint said.

Japan said South Korea had implemented a range of measures to help its shipbuilders, including "producer support" such as direct financing that enabled shipbuilders to remain afloat in prolonged periods of otherwise unsustainable low pricing.

It also provided "sales support" to the shipbuilders and their customers, which helped to stimulate sales, including during periods of relatively low demand.

The complaint detailed Japanese concerns such as the restructuring of Daewoo Shipbuilding & Marine Engineering from 2015 onwards, including loans from the Korea Development Bank and the Export-Import Bank of Korea, and restructuring of other shipbuilders since 2007.

Other disputed measures included pre-shipment loans, subsidies to replace old ships with new "eco-ships," and guarantees and other insurance.

South Korea's shipbuilding and shipping companies have undergone massive restructuring in recent years amid a slowdown in global demand and rising competition from China.

These heavy industries, which helped propel South Korea's growth in past decades, have cut tens of thousands of jobs, hurting local economies and households.

South Korea now has 60 days to settle the dispute, after which Japan could ask the WTO to adjudicate.