The EU signed a free-trade deal with South Korea on Thursday, ignoring pleas to back down from automakers that echo US caution running all the way up to President Barack Obama.
The agreement, still to be ratified by the EU’s 27 member states and the European Parliament, was given a guarded welcome by Seoul but slammed by the head of the European carmakers trade association, ACEA.
“We call on the EU member states not to ratify the current text,” Ivan Hodac said in a statement.
“The Korean negotiators have not only obtained unrestricted access to a market of over 500 million people, the European Commission has in addition allowed South Korea to subsidise exports from its key industries to the EU.
“This constitutes unfair competition and will lead to economic distortion,” the ACEA head said.
His association claims the EU’s trade deficit with South Korea will only increase from its current level of around 15 billion euros (22 billion dollars) per year under the terms negotiated.
Signed by European Union trade commissioner Catherine Ashton and South Korean Trade Minister Kim Jong-hoon, virtually all tariffs will go and Brussels said EU exporters would win new business worth 19 billion euros.
Of the auto sector’s fears, Ashton said EU negotiators had introduced “safeguards” that “will address the concerns the car industry rightly has.”
Each side has three percent of the other’s car market but the EU’s market is much is bigger and Ashton said a surge in South Korean imports would trigger a “return to our tariffs.”
She also said a “cap” would be triggered if ‘duty drawback’ rises, referring to a mechanism which allows manufacturers to reclaim tariffs paid on imported materials used to make products for export.
South Korean manufacturers import many parts from China and Ashton denied that a raft of anti-dumping duties applied to various imports from China were somehow linked.
The EU, the world’s biggest single trading bloc, was South Korea’s second-largest trading partner after China in 2008, with two-way trade totalling more than 90 billion dollars.
The EU was also the biggest foreign investor in South Korea last year.
Washington and South Korea reached a trade agreement in 2007 but Obama opposed the pact as a senator and ordered a policy review on taking office amid concerns over the impact on the US auto sector.
“I didn’t do this in order to steal a march on anyone,” Ashton said of the United States. “This was just a very, very good deal for European industry.
“I’m very proud of the fact that in a time of economic downturn, not only do we talk about fighting protectionism, but actually we do the deal.”
Calling it the “first of a new generation of free-trade agreements,” she said a similar “push” is underway, primarily with India, several southeastern Asian states and Canada.
However, there are “no plans” to start discussions with Japan.
The commission said the agreement makes “major advances in areas such as intellectual property, procurement, competition policy and trade and sustainable development.”
South Korea is to liberalise its telecommunications, environmental, legal, financial and shipping sectors.
“Should the deal come into effect, bilateral trade investment will significantly increase,” South Korean Trade Minister Kim Jong-hoon said after the signing.
Products made in an inter-Korean industrial complex in the North Korean border city of Kaesong are expected to be treated as South Korean-made goods.
“We’ve got chapters within our agreement on sustainable development (and) issues to do with labour laws,” Ashton added of European Parliament concerns there.
Negotiations were completed three months ago and the deal is expected to be ratified some time in the middle of 2010.
