Brussels, 02/07/2012 (Agence Europe) - While the Commission provides a positive assessment, the car industry is concerned at the skewed relationship and South Korea's continued non-tariff barriers.
After just nine months in application, the EU-South Korea free-trade agreement, which came into force on 1 July 2011, saw EU companies make cash savings of €350 on customs duties and increase their exports by €6.7 billion, up 35% on 2007 levels. “This agreement is already proving its worth as an important step on Europe's path to economic recovery”, said EU Trade Commissioner Karel De Gucht. Only one year into application of the agreement, it is possible to get no more than a very approximate initial picture of the impact, the Commission acknowledges, indicating that most of the tariff benefits will only be felt after a longer time period - five to ten years - and after most of the regulatory changes have been implemented. The agreement eliminates tariffs for industrial and agricultural goods in a progressive, step-by-step approach. The first tariffs cuts took effect on 1 July 2011. By 1 July 2016, 98.7% of import duties of EU and South Korea in trade value for both industrial and agricultural goods will have been eliminated. By July 2031, 99.9% of EU-South Korea bilateral trade will be duty free. Overall, only a limited number of agricultural products are excluded from tariff elimination.
This encouraging overall picture is supported by the fact that EU exports to Korea have grown faster where the tariffs were eliminated or partially removed on I July 2011 - an increase of €2.7 billion, or 46%, in wine, some chemical products, textiles and clothing, iron and steel products, machinery and appliances, which represent a third of EU exports to South Korea - or partially liberalised - a rise of €3 billion, or 36%, in cars and agricultural products, which account for 44% of the EU's exports to Korea. The Commission notes, too, that exports of some products have grown faster than the average: exports of pork have risen by almost 120%, or almost €200 million in new trade, exports of machinery used for manufacturing semiconductors went up by 75% or €650 million in additional exports, and car exports increased by over 70%, which translates as €670 million in new car sales in Korea.
EU car industry remains wary. The European Automobile Manufacturers Association (ACEA) is unhappy about South Korea's persistent non-tariff barriers and highlights the “asymmetrical trade flow relations” between the two partners. The figures used by the association for the first 11 months of the agreement reveal a huge increase in exports from South Korea of passenger cars and relatively modest gains for the EU industry. According to the ACEA, South Korea exported 400,000 domestically-manufactured passenger cars to the EU, up 40% from the same period one year earlier, and imported 73,000 European passenger cars, an increase of only 13%. Since the agreement came into force, South Korean import duties have come down from 8% to about 6%, and EU import duties have been reduced from 10% to approximately 8%. While it is “still too early to say if there is a direct relationship between the entry into force of the FTA and the increase in trade flows”, ACEA Secretary General Ivan Hodac notes that “what is clear however is that European exports are being hampered by the continuing existence of automotive non-tariff barriers (NTBs)”. (EH/transl.rt)