LexisNexis(TM) Academic - Document

Financial Times (London, England)

June 28, 2005 Tuesday
London Edition 1

SECTION: MIDDLE EAST & INTERNATIONAL ECONOMY; Pg. 15

LENGTH: 341 words

HEADLINE: US wins WTO appeal on Hynix import duties

BYLINE: By FRANCES WILLIAMS

DATELINE: GENEVA

BODY:


The US yesterday won an important victory in the World Trade Organisation when the WTO appeals body overturned an earlier ruling faulting US anti-subsidy duties on imports of semiconductors from Hynix of South Korea.

The decision means the US can keep its countervailing duties of 45 per cent on Hynix D-RAM memory chips, imposed in 2003. Washington accused Seoul of providing illegal subsidies to the struggling company, which received huge loans from state and private banks as part of a financial restructuring package in 2000

and 2001.

In February a WTO panel upheld a South Korean

challenge to the duties, saying the US had failed to demonstrate that the banks were acting on government orders. The appellate body has reversed that judgment.

Rob Portman, US trade representative, said: "This is an important turnaround for US high-tech manufacturers as well as the international trading system . . . The appellate body report will help to ensure that governments play by the rules. Governments shouldn't be able to give unfair subsidies by pressurising banks to provide non-commercial loans."

Earlier this month a separate WTO panel agreed with the European Union that four of the five restructuring measures in the Hynix package were government-directed, though it said the EU had not calculated its 35 per cent countervailing duties correctly.

Taken together, the two judgments mark a serious setback for South Korea, which had previously claimed vindication. They also set an important precedent for WTO jurisprudence on what constitutes an

illegal state subsidy.

In the Hynix case, the issue revolved around whether the Seoul government had directed the banks to provide assistance and the standards of proof required to justify countervailing action. The panel said the US had not presented convincing evidence that the banks acted under pressure, but the appellate body disagreed. The panel agreed with the US that imports of cheaper chips from South Korea had injured US producers, the other justification needed to impose anti-subsidy duties.

LOAD-DATE: June 27, 2005