Korea’s FTA with EU

Korea becomes first Asian country to sign FTA with EU, which will favor car and electronics parts exports

Korea signed a free trade agreement (FTA) with the European Union in Brussels, Oct. 6, in a landmark deal that is expected to largely favor electronics and automobile parts exports from South Korea. Dignitaries watching the signing included President Lee Myung-bak and EU President Herman Van Rompuy, and European Commission President Jose Manuel Barroso, among others.
Korea became the first Asian country to sign such an accord with the world’s largest economic bloc that comprises 27 member nations.
The deal will take effect on July 1 next year provided it is ratified by the legislatures of both sides as scheduled. Some trade experts, however, say there is still a bumpy road ahead as lawmakers could dispute the agreement.
The two sides held a signing ceremony in the Belgian capital. South Korean and EU trade chiefs signed the accord with President Lee Myung-bak, EU President Herman Van Rompuy and European Commission President Jose Manuel Barroso in attendance.
“The South Korea-EU FTA was signed on the basis that we share such common values as democracy, human rights, rule of law and the market economy,” President Lee said at a joint press conference held in Brussels. “In that respect, the FTA holds great significance for South Korea.”
The President also said earlier in the day that the agreement was a clear message that promoting free trade, not protectionism, was the best solution to the global crisis.
European Commission President Barroso called it “by far the most important trade deal ever concluded by the European Union with one country.”
In a separate release, Cheong Wa Dae said the agreement will help South Korea lay the groundwork to grow into an FTA hub in East Asia linking it with Europe and the United States.
The leaders were visiting Brussels to attend the two-day Asia-Europe Meeting, which ended earlier in the day.
Cheong Wa Dae said Korea and the EU agreed that the FTA will spur trade and investment between the two sides, create more jobs and upgrade the well-being of all citizens.
The signing came about three years and five months after they started negotiations.
Both sides tentatively reached a settlement midway through last year but they had to delay the signing due to objections from some of the EU’s 27 member countries.
The EU is Korea’s second-largest trading partner after China with two-way trade totaling $78.8 billion last year. Once the FTA goes into effect, the country is expected to post a 20-percent gain in trade with the EU, according to the state-run Korean Institute for International Economic Policy. The pact would also see Korea’s real gross domestic product increase by 5.6 percent and create 253,000 jobs over the long-term.
Seoul officials hope this will encourage the U.S. Congress to urgently approve an FTA with Korea.
The European Parliament is also likely to endorse the FTA, under which around 90 percent of the agreements will be implemented. The remaining 10 percent will go into effect with the approval of each legislature of the EU member nations.
Under the accord, the EU will scrap all tariffs within five years, although 99 percent of them will be terminated in three years. Korea must reciprocate, removing tariffs for 96 percent of industrial products in three years.
The EU currently maintains relatively high tariffs at 5.6 percent on average, compared to 3.5 percent in the U.S. With the FTA, Europe’s tariffs will be lowered, making Korean products more accessible to European consumers.
In particular, automobile manufacturers and TV producers are expected to be the most outstanding beneficiaries because tariffs for their items are set as high as 10 percent and 14 percent, respectively, according to Korean officials.
In the South Korea-EU summit, the fifth of its kind, that took place back-to-back with the 8th Asia-Europe Meeting (ASEM) session, the leaders also pledged closer cooperation to denuclearize North Korea and produce substantial results in the President Lee Myung-bak, currently visiting Belgium, emphasized that the G20 Financial Summit next month will establish a framework for strong, sustainable, and balanced world economic growth, following earlier G20 resolve to implement reform measures for the global financial institutions and its regulatory system. This was said at the coordinated joint press conference after the 8th ASEM Summit in Brussels on Oct. 5.
“The G20 Summit in Seoul chose “Shared Growth Beyond Crisis” as its motto to indicate a long-term vision for the future that will go beyond just overcoming the current crisis, based on past achievements,” said President Lee.
The president also expressed his deep appreciation for the ASEM resolve to show active support for the G20 Summit in order to realize reforms needed for the recovery of the global economy. “The in-depth discussions and opinions that took place at the latest ASEM meeting will contribute much to the upcoming G20 Summit in Seoul,” said the president.
“I thank the ASEM summit for its great expectations for the G20 Summit in Seoul, and agreeing to work together for a successful outcome,” continued President Lee. “The Korean government will do its utmost to make the gathering a success, based on support from both member and non-member nations.”
The biggest achievement of the latest ASEM summit was the adoption of the Brussels Declaration on More Effective Global Economic Governance,” said President Lee, describing the action as a display of a strong political will to overcome the global economic crisis and establish a more effective world economy. nw

Korea and the European Union sign a free trade agreement in Brussels on Oct. 6 as Korean President Lee Myung-bak, EU President Herman Van Rompuy and European Commission President Jose Manuel Barroso look on.