Select Committee on European Union Forty-Ninth Report


Letter from the Chairman to Alan Johnson MP the Chairman

  Thank you for your Explanatory Memorandum dated 29 May 2002 which Sub-Committee B considered at its meeting on 24 June. As you know, I have already lifted the Scrutiny reserve on this document.

  Your EM makes it clear that the UK would wish to see the Commission, on behalf of all Member States, take action with the World Trade Organisation (WTO) against Korean subsidies. In paragraph 11 you write "WTO action has, however, been severely delayed because the Commission has since proposed the reintroduction of limited shipbuilding subsidies". In the same paragraph you confirm that the Commission's approach has consistently failed to gain the support of Member States.

  We should be grateful if you could clarify for us whether or not a case has been lodged by the Commission in the WTO against Korea. We note that your Department has consistently argued in the Working Groups, and in the Council, to press the Commission to launch WTO action against Korea as soon as possible, and to de-link this from the proposal to reintroduce limited operating subsides. We infer from this that a case has not been lodged, that it cannot be lodged until there is agreement in the Council, and that only Commission can lodge such a case on behalf of Member States. We should be grateful for your confirmation that this understanding of the situation is accurate.

  We support, wholeheartedly, the policy which the Government has adopted in this matter, and we support the line taken by your Department in negotiation.

27 June 2002

Letter from Alan Johnson MP, Minister of State for Employment Relations, Industry and the Regions to the Chairman

  Thank you for your letter of 27 June 2002 concerning the EU/Korea dispute on shipbuilding, in which you ask whether the Commission has launched WTO action against Korea. WTO action has not yet been launched but the decision has not been taken for the Commission to do this. The current position on this complicated issue is as follows.

  The Industry Council gave further consideration to this matter at its 6 June meeting, which I attended, but again the Commission's dual approach of WTO action linked to limited subsidies was not supported. However, the Spanish Presidency/Commission attempted to win French support with an amended proposal with a clear commitment to include liquid natural gas carriers in the subsidy proposal, albeit subject to further analysis of the market and a reduced subsidy ceiling of 6 per cent for all the market sectors covered. In addition, the amended proposal recommended a further round of bilateral consultations with Korea, to be completed by the end of September. If this brought no progress the Commission would immediately launch WTO action and activate the subsidies mechanism, as a "temporary defensive mechanism" until March 2004. However, as France was in the middle of its general election French Ministers could not give a view at that stage. The UK continued to resist the reintroduction of subsidies and pressed for the immediate launch of WTO action.

  The new French administration has since given its support to the Commission's amended proposal, thereby ending the blocking minority that had been in place over the past year. Following the change in the French position, the Spanish Presidency was determined to finish this business before its term expired and put this issue on the agenda of the 27 June Agriculture Council as an "A" Point (ie for clearance without discussion), despite the objections of the UK and its allies (Netherlands, Finland, Sweden and Denmark). The Commission subsidies measure was subsequently adopted by a Qualified Majority at the Agricultural Council. We and our allies restated our opposition to the subsidies proposal at the Council and voted against it, joining in a joint declaration with our allies opposing it. We urged the Commission to pursue quickly the talks with the Korean authorities and to launch immediate WTO action if those negotiations were to fail.

  The Commission will now hold a series of further negotiations with the Korean authorities and we will keep a close watch on how these progress. But much as we would like to see a bilateral settlement, which we had seen as the best remedy, we have no real expectation that the new round of negotiations will be any more productive than the previous round, where Korea failed to offer any effective bilateral solution and hence the EU decision to pursue WTO action. Our current view therefore remains that WTO action offers the only effective way to tackle Korean unfair subsidies and if the new round of bilateral negotiations is not successful the Commission will lodge, on behalf of Member States who cannot themselves initiate such action, the WTO case in October.

9 July 2002

Letter from the Chairman to Alan Johnson MP

  Thank you for your letter dated 9 July which Sub-Committee considered at its meeting on 22 July.

  We are naturally disappointed that the Spanish presidency was able to push through the proposal on subsidies in the face of opposition from HMG, the Netherlands, Finland, Sweden and Denmark.

  We note that the Commission intends to hold further negotiations with the Koreans before launching action at the WTO. We look to the Government to keep the Commission focused on the need for WTO action at the earliest possible opportunity.

23 July 2002

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