{"id":287690,"date":"2010-02-06T20:32:03","date_gmt":"2010-02-07T01:32:03","guid":{"rendered":"http:\/\/worldtradelaw.typepad.com\/ielpblog\/2010\/02\/government-support-for-domestic-companies-building-nuclear-reactors-abroad.html"},"modified":"2010-02-06T20:32:03","modified_gmt":"2010-02-07T01:32:03","slug":"government-support-for-domestic-companies-building-nuclear-reactors-abroad","status":"publish","type":"post","link":"https:\/\/mereja.media\/index\/287690","title":{"rendered":"Government Support for Domestic Companies Building Nuclear Reactors Abroad"},"content":{"rendered":"

The Economist has a piece<\/a> on competition in the market for building nuclear reactors, in which they discuss how state support for domestic competitors may be playing a role:<\/p>\n

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… the United Arab Emirates (UAE) completed a tender for four nuclear plants in December, Vietnam is planning a similar deal this year and many other countries, from Italy to Indonesia, are hoping to build new reactors soon.<\/p>\n

Yet the $40 billion contract in the UAE, won by a consortium led by Korean Electric Power Corporation (KEPCO), South Korea\u2019s largely state-owned electricity monopoly, has caused consternation among the six big firms that have dominated the industry for decades: GE and Westinghouse of America, Areva of France, and Toshiba, Hitachi and Mitsubishi Heavy Industries of Japan. Russian and Chinese firms hope to follow the Koreans\u2019 lead. Suddenly the incumbents are confronted by emerging-market \u201cnational champions\u201d with the full backing of their governments\u2014an invaluable asset in a high-liability business like nuclear power. <\/p>\n

\u201cIf you find out how they won, let me know,\u201d quips Hirotada Nagashima, a senior executive in the nuclear division of Hitachi, whose joint venture with GE lost out to Kepco, as did a consortium of Areva and other French industrial behemoths, including Electricit\u00e9 de France (EDF), Total and GDF-Suez. But there is little mystery. The South Korean consortium, which includes the heavy-industry arms of Doosan, Hyundai and Samsung, three of the country\u2019s biggest conglomerates, and uses some of Westinghouse\u2019s technology, has worked together for decades, building and operating most of South Korea\u2019s 20 reactors. It offered not just to build the plants, but also to run them and even to find the fuel they will need\u2014at a fixed price, for the most part. \u201cIt was very easy to bring them together and offer the UAE a complete package,\u201d says Mark Yoon of CLSA, a financial-research firm.<\/p>\n

The South Korean government also played its part. The president, Lee Myung-bak, flew off to Abu Dhabi on the eve of the decision to gladhand the locals, promising to help the barren statelet recreate South Korea\u2019s economic miracle. Hiroki Mitsumata, director of nuclear energy at Japan\u2019s Ministry of Economy, Trade and Industry (METI), believes that support from the South Korean government may also have allowed Kepco to offer the lowest price, because the state can backstop cost overruns and accident liability.<\/p>\n<\/blockquote>\n

The future looks just as competitive:<\/p>\n

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The next test of the nuclear vendors\u2019 mettle will be the bidding this year to build four nuclear reactors in Vietnam. Mr Mitsumata of METI thinks the government-run Japan Bank for International Co-operation, an export-credit and project-finance provider, and state-backed trade insurance could be used to boost the Japanese entrants. There is talk of a joint bid with a big utility such as Tokyo Electric Power. The government \u201cis trying to increase the level of industrial support for the Vietnam project and the utility companies have been talking more seriously about that,\u201d he says. But Kepco has hinted that it, too, is eyeing Vietnam\u2014as well as other middle-income countries such as Turkey, Jordan, Indonesia, Thailand and South Africa.<\/p>\n<\/blockquote>\n

In addition to government support for specific foreign projects, government support for domestic projects is also important:<\/p>\n

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American and Japanese nuclear firms\u2019 chances of maintaining an edge may depend on how far their governments are willing to push nuclear power at home. Mr Obama\u2019s sudden enthusiasm has given the American firms hope. But the Department of Energy has yet to hand out any of the previous batch of loan guarantees approved in 2005. Regulators in Florida have squelched local utilities\u2019 plans to build new reactors. Recriminations about rising costs have held up another project in Texas. It is a far cry from South Korea, where six reactors are under construction and another 14 are on the drawing board. <\/p>\n<\/blockquote>\n

Presumably, governments are likely to go to domestic companies for domestic projects, which would give these companies additional profits and allow them to bid lower on foreign projects.<\/p>\n

It's a little unclear what the government measures at issue are here, but it seems like WTO rules should have something to say.  Or is this one of those "subsidies to services" issues, which we have talked about before (e.g., here<\/a>), where there are no direct rules?  Not no rules at all, of course, but nothing equivalent to the detailed rules of the SCM Agreement.<\/p>\n

Then again, maybe this isn't just a service.  Maybe there is a "good" in here somewhere as well (i.e., there are elements of both goods and services).  When you pay someone to build you a nuclear plant, you end up with a big, physical structure.  Isn't that a good?  Or does the physical thing you end up with have to be resellable (at least to some limited extent)?  One online dictionary defines<\/a> "goods" as:  "Items; chattels; things; any personal property<\/font><\/a>."  This seems pretty broad.<\/p>\n

Perhaps the nuclear plant purchase is sort of like an American buying a car by having Toyota come to your house and assemble it in your driveway.  If they did that, would you be buying a service (assembly of a car) or a car itself?  But they don't do that, of course, so I'm not sure there is a parallel out there that provides much guidance.<\/p>\n

Anyway, the point I was getting to was that if it is a good, then maybe we could apply the SCM Agreement to the issue, which would be much more helpful for thinking up WTO claims.  And then, just briefly, if we do get to the SCM Agreement, if a company builds a nuclear reactor abroad, is it "exporting" a good?  Does it depend on where the inputs come from, i.e., are they shipped in from another country?<\/p>\n

\n<\/img><\/a> <\/img><\/a> <\/img><\/a> <\/img><\/a> <\/img><\/a>\n<\/div>\n

<\/p>\n","protected":false},"excerpt":{"rendered":"

The Economist has a piece on competition in the market for building nuclear reactors, in which they discuss how state support for domestic competitors may be playing a role: … the United Arab Emirates (UAE) completed a tender for four nuclear plants in December, Vietnam is planning a similar deal this year and many other countries, […]<\/p>\n","protected":false},"author":4125,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7],"tags":[],"class_list":["post-287690","post","type-post","status-publish","format-standard","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/287690","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/users\/4125"}],"replies":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/comments?post=287690"}],"version-history":[{"count":0,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/287690\/revisions"}],"wp:attachment":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/media?parent=287690"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/categories?post=287690"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/tags?post=287690"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}