Japan Files WTO Consultation Request Over Korean Shipbuilding

(Bloomberg) -- Terms of Trade is a daily newsletter that untangles a world embroiled in trade wars. Sign up here. 

Japan filed fresh dispute proceedings at the World Trade Organization against South Korea over alleged shipbuilding subsidies, a sign that bilateral tensions may be resurfacing after a period of apparent calm.

Japan requested “a bilateral consultation as part of the WTO’s dispute settlement procedure over South Korea’s measures to restructure the shipbuilding industry,” South Korea’s trade ministry said in a statement, adding the request was made Friday. “We find Japan’s claim groundless and will fully explain that the measures comply with international norms,” it said.

The origin of the dispute goes back to November 2018 when Japan complained to the WTO that South Korea provided funds, loans, guarantees, insurance and other financing in violation of the organization’s subsidies agreement, resulting in losses for its shipbuilders. That led to a first consultation in December 2018, but Japan later deferred its request for WTO involvement.

In the new proceedings, Japan has added further allegations on ways that South Korea helps its shipbuilders, the ministry said, without elaborating.

Leader Summit

A request for consultations marks the first stage in the WTO dispute settlement process and both sides should initiate talks within 30 days. If Japan and South Korea fail to resolve the dispute after 60 days, Japan can ask a WTO dispute settlement panel to investigate the matter.

The move follows a summit between the leaders of the two countries in December where they agreed to tone down a feud that had led to a sharp deterioration of trade and political ties, including a steep decline in tourism to Japan and a boycott of Japanese products by South Koreans.

Japan slapped a series of export restrictions on South Korea last year after South Korean courts ruled that its companies must compensate Koreans conscripted to work in factories and mines during the 1910-45 colonization of the peninsula. South Korea responded with a WTO complaint against the export curbs and a threat to terminate a military intelligence-sharing pact.

In the 2018 complaint, the subsidies at issue dealt with the restructuring of Daewoo Shipbuilding & Marine Engineering Co. from 2015 onward, as well as the restructuring of other shipbuilders such as Sungdong Shipbuilding & Marine Engineering Co., STX Offshore & Shipbuilding Co. and Daehan.

A call to Japan’s Ministry of Economy, Trade and Industry wasn’t answered outside of business hours.

--With assistance from Min Jeong Lee.

To contact the reporter on this story: Kanga Kong in Seoul at kkong50@bloomberg.net

To contact the editors responsible for this story: Shamim Adam at sadam2@bloomberg.net, James Poole, Stanley James

©2020 Bloomberg L.P.