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International relations

Japan to sue South Korea at WTO if shipbuilder subsidy talks fail

Move follows Korean court order on Nippon Steel, as relations sour

Daewoo Shipbuilding & Marine Engineering’s shipyard is seen in Geoje, South Korea.   © Reuters

TOKYO -- Japan plans to ask South Korea to launch bilateral talks over a possible violation of international trade rules, a step toward filing a complaint with the World Trade Organization, government sources said Tuesday.

Japan has been asking Seoul to reconsider its subsidies to struggling South Korean shipbuilder Daewoo Shipbuilding & Marine Engineering, saying the public support is excessive and harming the healthy formation of market prices.

"We are in the middle of final arrangements with relevant authorities for making actions, including a dispute settlement procedure based on the WTO agreements," Japan's Minister of Land, Infrastructure, Transport and Tourism Keiichi Ishii told reporters on Tuesday.

In late October, the governments of Japan and South Korea held talks on the issue. The South Korean side rejected reviewing its subsidies. This led Japan to conclude that the Asian neighbor is violating WTO rules on subsidies.

If the bilateral talks fall apart, Japan will ask the WTO to set up a dispute settlement subcommittee.

If Japan sues South Korea over the issue at the WTO, it will be the fourth dispute between the two countries brought to the world trade body.

Regarding relations between the countries, the Japanese government reacted strongly against the South Korean Supreme Court's ruling in late October ordering Japanese steel company Nippon Steel & Sumitomo Metal to compensate laborers forced to work during wartime.

The circumstance has raised concerns about deterioration of bilateral ties.

The global shipbuilding industry is facing a supply glut, having ramped up production capacity during the economic boom prior to the 2008 collapse of Lehman Brothers Holdings.

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