1. The European Union (EU) on October 21 requested that the South Korean government hold bilateral consultations under the WTO Agreement on Subsidies and Countervailing Measures (ASCM) in respect of the latter's alleged violation of obligations under this agreement, and at the same time notified the WTO Secretariat of its action.
   
   The EU regards the following acts by the Korean government as violations of the
   agreement:
   

   i. Relief measures granted to virtually bankrupt Korean shipbuilders through a government-controlled financial institution (the Korean Development Bank) and the existence of special tax concession available to these companies, and
   
   ii. The existence of export contingent financing available to them from the Korean Export-Import Bank.
   

2. The Shipbuilders' Association of Japan (SAJ) believes that official subsidization would adversely affect the market and should be abolished in order to develop a free and fair competitive environment in which the market price mechanism can function normally.
   
   
3. The SAJ in particular perceives that assistance extended by official Korean institutions to Korean shipbuilders, which were close to bankruptcy as a result of their own management decisions, was enabling them to offer low prices and thereby disturb the international shipbuilding market. These actions have greatly inhibited normal competition in shipbuilding industry and its impact still remains.
   
   
4. As Japanese shipbuilders operate within the global shipbuilding market, we are greatly affected by the current course and the eventual outcome of the EU/Korea dispute.
   
   Therefore the SAJ, in view of the points noted above, has requested the Japanese government for its third party participation, under Article 10 of Marrakesh Agreement Annex II, in this dispute brought before the WTO.
   
   

Toshimichi Okano
Chairman
The Shipbuilders' Association of Japan