Japan complains again to WTO over South Korean shipbuilding

A dispute begun by Japan over subsidies to South Korean shipyards has escalated with Japan reportedly filing a second complaint at the WTO.

Reuters reports that in its latest filing Japan said that it had complained to South Korea on 31 January over measures related to the development, production, marketing and sales of commercial vessels. Japan circulated it to other WTO members on Monday.

According to Reuters, Washington’s two biggest Asian allies are embroiled in a widening political and economic dispute which erupted over forced labour in World War Two. 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. Japan said the contested measures include loans below market cost and equity infusions, loans and refund guarantees on terms that are not commercially reasonable and unfair subsidies for vessels complying with environmental standards.

The complaint mirrors Japan’s filing with the WTO in November 2018, which also took aim at South Korean measures to help shipbuilders, including financing to enable them to stay in business in prolonged periods of low prices. Japan and South Korea have 60 days of “consultations” to settle the dispute, after which Japan can ask the WTO to adjudicate. The two are technically still in consultations over the 2018 complaint.

In the wider dispute, Japan has enraged South Korea with a plan to “normalise” trade procedures, effectively curbing exports to South Korea and erecting a barrier that could disrupt the global supply of semiconductors. That followed a ruling in 2018 by a South Korean court that Japanese companies had to pay compensation to South Koreans forced to work in Japanese factories during Japan’s occupation of the Korean peninsula from 1910 to 1945.

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