TALKS LIKELY TO YIELD KEY DECISIONS ON FATE OF SHIPBUILDING SUBSIDIES

TALKS LIKELY TO YIELD KEY DECISIONS ON FATE OF SHIPBUILDING SUBSIDIES

Officials taking part in talks aimed at hammering out an agreement to eliminate shipbuilding subsidies say decisions on whether a breakthrough can finally be reached this year will come at the beginning of next month.

The negotiations are being sponsored by the Paris-based Organization for Economic Cooperation and Development (OECD) under the chairmanship of Staffan Sohlman, Swedish ambassador to the 24-member organization.Participating countries agreed to come back to the table in June following an informal meeting with Mr. Sohlman. The talks began under the initiative of the United States, which then walked out in April when no progress was made.

Experts from all of the participating countries, including EC members, the United States, the Nordic countries, Japan and South Korea, met last week to discuss export credits, unfair pricing, home credit schemes and indirect support.

Participants say it is difficult to say whether any real progress was made

because talks were technical. But they say they will have a much better idea of whether political will exists to reach an agreement after a plenary session involving higher level officials on Sept. 30 and Oct. 1.

Some delegates who attended the talks described them in broad terms such as "a good exchange of ideas" and "cautiously optimistic" but acknowledge that not much has changed since the last meetings in April 1992.

Proposals for reducing subsidies have been on the table since January 1992. Under discussion at the expert level meetings were annexes, which include the terms of the phasing out of direct and indirect aid to industry.

Participants also faced the complex task of putting teeth into a future agreement to guard against predatory pricing, designed to drive foreign competitors from the business. Officials said any deal must contain stipulations for dispute settlement.

One more series of meetings is scheduled next week on injurious pricing before the plenary session. According to officials, this last session will be crucial in determining whether talks at the OECD on shipbuilding are to go any further.

"We can lay the groundwork but it will then be time for the difficult political questions to be answered," one official said.

These include where to place the limits on defining indirect help to industry.

The EC Commission is negotiating on behalf of EC members and while there seems to be broad consensus among EC members in favor of reaching an agreement, there are some contentious points such as the schedule for phasing out subsidies.

Representatives from industry gave mixed reaction to the announcement of renewed talks in Paris.

European Community subsidies currently are capped at 9 percent for large vessels and 4.5 percent for small vessels, a limit that has been progressively reduced in the past years. But the EC has no timetable for their complete elimination.

While Japan does not have a direct government shipbuilding subsidy program, EC and U.S. shipbuilders say the loans granted to industry by the Japan Development Bank for Japan-flagged ships - which are all built in Japan - are a form of government aid. The Japanese government maintains that it is support for shipping and not shipbuilding.

European shipbuilders also complain about South Korea's policy to devalue its currency to make its yards competitive and the U.S. Jones Act, which prohibits foreign vessels sailing domestic U.S. routes.