Brussels, 15/10/2009 (Agence Europe) - After two years of negotiations, and despite the concerns of the European motor industry, Trade Commissioner Catherine Ashton and South Korean Trade Minister Kim Jong-hoon initialled, on Thursday 15 October in Brussels, the bilateral free trade agreement (FTA) between the EU and South Korea. This is the most significant trade agreement ever negotiated by the EU with a third country. “This is the first 21st century free trade agreement for the EU, creating deep economic ties with another developed economy. It will create new market opportunities for European companies in services, manufacturing and agriculture”, Ms Ashton is pleased to state.
The agreement will provide additional trading outlets for EU operators as well as for South Korean operators. According to the European Commission, it should generate €19 billion in new trade flows for European exporters and lead to the elimination of nearly all tariff barriers and many non-tariff barriers between the two economies. According to DG Trade services, the EU/South Korea FTA provides for: - abolition, in the near future, of customs duties up to €1.6 billion, annually imposed by Seoul on European exports of industrial and agricultural products. The EU, for its part, will no longer receive €1.1 billion in duties annually. Thus, European exporters of machines and equipment and exporters of farm produce will save nearly €450 million and €380 million respectively in customs duties annually. Wine and cheese will enjoy duty free and tariff-free quotas respectively from day one; - abolition of major non-tariff barriers in all sectors, such as automotive, pharmaceutical and consumer electronics; - Korean consideration that many European standards are equivalent, with recognition of European certificates, thus eliminating red tape which was hitherto a deterrent and a barrier to trade; - the liberalisation of trade services, which offer new prospects for the telecommunications sector, environmental services, maritime transport, legal services and EU financial services; - transparency and predictability on regulatory issues such as protection of intellectual property (including through strengthened enforcement) and improved market access in government procurement, as well as a new approach on trade and sustainable development involving civil society in the monitoring of commitments; - a high level of protection for Community geographical indications; - a dispute settlement mechanism with arbitration ruling within 160 days, hence more rapidly than at the WTO; - a protocol on cultural cooperation; - a general safeguard clause allowing re-establishment of the Most Favoured Nation (MFN) duties for up to four years in case of a sudden surge in imports. The Commission assures it will closely monitor market developments in sensitive sectors, such as the automotive sector; - and the simplification of provisions on rules of origin, so that they are more favourable to business. At the same time, stricter rules will apply in sensitive sectors. Thus, for the motor industry, the agreement only moderately increases the level of permissible foreign content from 40 to 45%. For textiles and agriculture and fisheries products, the standard EU rules of origin are maintained, with only a small number of derogations foreseen. On the subject of duty drawback, the EU and South Korea will maintain the right to reimburse import duties on spare parts, in line with WTO rules. In the event of a significant rise in sourcing from countries that have not concluded an FTA with Korea, i.e. where MFN duties still apply, a special clause allows for a cap of the refundable duties at a level of 5%.
Initialling of the FTA is a key stage before the definitive signing of the agreement, after the formal endorsement given by member states and expected early 2010 by the Commission. The European Parliament should also validate the agreement that should take effect during the second half of 2010.
South Korea is the fourth EU trading partner. In 2008, trade in goods reached €65 billion. The EU currently has a deficit but the recent tendency allows one to believe, the Commission says, that the South Korean market offers considerable growth potential. EU exports on average increased 7.5% per year between 2004 and 2008 to reach €25.6 billion in 2008. Although EU car sales to South Korea went up by a total of 78% in unit sales (39% in value) between 2005 and 2008, the EU also has a solid trade surplus in other areas such as: - chemicals, pharmaceuticals, auto parts, industrial machinery, shoes, medical equipment, non-ferrous metals, iron and steel, leather and fur, wood, ceramics, and glass. Furthermore, South Korea is a very profitable export market for European agriculture, with annual sales worth over one billion euro. On the services side, the EU records a trade surplus of €3.3 billion, with exports and imports amounting respectively to €7.2 billion and €3.9 billion in 2007. (E.H./transl.jl)