SEOUL: The European Union and South Korea failed to defuse an escalating trade row over EU demands that the Asian shipbuilding giant sell ships at higher prices, officials said yesterday.

Both sides have been defiant during two days of talks, which began here on Monday, but agreed to meet again next month, said South Korea's Commerce, Industry and Energy Ministry.

"We will seek a breakthrough in the next round of talks in June in Brussels," a ministry official said, admitting the two-day meeting made little progress.

The EU insisted South Korean shipyards cover their costs by raising selling prices by up to 15 per cent, but South Korea rejected the demand, the official said.

"We refused to accept their demands but expressed our hopes that the two sides should solve problems through further dialogue," he said.

EU officials were unavailable for comment. The EU delegation, headed by Karl Falkenberg, a director for trade at the European Commission, was to leave yesterday. The shipbuilding talks were aimed at averting a World Trade Organization (WTO) showdown. The EU has threatened to take WTO action against South Korean shipyards unless an agreement is reached by June 30.

South Korea, which took more than 40 per cent of new global shipbuilding orders last year, has attributed their success to the weak local currency and low steel prices.

But European shipbuilders believe South Korean shipyards have dominated the global market by bidding below cost.

They have also accused South Korea of giving unfair subsidies to shipyards, notably Daewoo Shipbuilding and Marine Engineering Co, by bailing it out with state money.

Agencies via Xinhua