South Korea | Brussels
EU and South Korea initial free trade deal
EU Trade Commissioner Catherine Ashton and Korean Trade Minister Kim Jong-hoon have initialled a free trade agreement (FTA) that is the most important ever negotiated between the European Union and a third country. The deal, estimated to be worth up to EUR 19 billion in new trade for EU exporters, will remove virtually all tariffs between the two economies, as well as many non-tariff barriers. The agreement will create new market access in services and investment. The deal also makes major advances in areas such as intellectual property, procurement, competition policy and trade and sustainable development. The FTA signals an important upgrade of the EU-South Korea relationship, together with a new Framework Agreement.
Speaking following the initialling in Brussels, Commissioner Ashton said: "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. This agreement is particularly important in the current economic climate, helping to fight the economic downturn and create new jobs."
One of the key benefits of the deal for the European Union is the quick elimination of EUR 1.6 billion of duties for exporters to Korea. The agreement also tackles key non-tariff barriers including regulations and standards in industries of European interest, like automotive, pharmaceutical and consumer electronics. Services sectors such as telecommunications, environmental, legal, financial and shipping are expected to see some of the greatest benefits, with substantial commitments from Korea to liberalise these sectors.
The initialling of the FTA signifies the closing of negotiations with a stable legal text, which the European Commission will formally present to EU Member States in early 2010. Following signature of the agreement by the EU Presidency and the Commission, the FTA will be presented to be approved by the European Parliament. Entry into force of the agreement would then be expected in the second half of 2010.
EU-Korea goods trade was worth around EUR 65 billion in 2008. The EU currently runs a deficit with Korea in goods trade, although trends suggest that the Korean market offers significant growth potential. For instance, EU car sales to Korea went up by a total of 78% in unit sales (39% in value) between 2005 and 2008. For products like chemicals, pharmaceuticals, auto parts, industrial machinery, shoes, medical equipment, non-ferrous metals, iron and steel, leather and fur, wood, ceramics, and glass, the EU enjoys a solid trade surplus. Similarly, for agricultural products Korea is one of the more valuable export markets globally for EU farmers, with annual sales of over EUR 1 billion. On services, the EU has a surplus with Korea of EUR 3.3 billion, with exports of EUR 7.2 billion in 2007 and imports of EUR 3.9 billion.