South Korea and the European Union have agreed to set up a consultative body to seek a negotiated settlement of their shipbuilding dispute.

The agreement was announced by the European Commission Thursday after a two-day meeting of E-U trade ministers in Brussels, Belgium.

The agreement came at a meeting in Brussels, Monday between Minister for Trade Hwang Doo-yun and Pascal Lami, a member of the European Commission responsible for trade.

The E-U is threatening to bring the dispute to the World Trade Organization if the two sides fail to find a negotiated settlement by the end of next month.

The E-U is accusing South Korea of subsidizing its shipbuilding industry to undercut European shipbuilders. But South Korea is denying the charges.