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South Korea | Brussels, 1 July 2013

EU-Korea FTA sees strong rise in EU exports

Today marks the second anniversary of the entry into force of the EU-Korea Free Trade Agreement (FTA), the most ambitious trade deal ever concluded by the EU and its first with an Asian country. The full impact of the FTA will only be known once all the tariffs have been eliminated, but so far EU exports to the peninsular country have grown strongly giving the EU a trade surplus with Korea for the first time in 15 years.

EU exports to Korea are up by 16.2%, from €32.5 billion in 2011 to €37.8 billion in 2012. At the same time EU imports from Korea have grown less, from €36.2 billion in 2011 to €37.9 billion in 2012 (4.7%). As a consequence, by the first quarter of 2013 the EU had a trade surplus with Korea for the first time in 15 years. In addition, the EU’s share of total imports to Korea has increased steadily, from 9.0% in 2011 to 9.7% in 2012, the largest increase when comparing with imports from China, Japan and the US. EU exports that have got the biggest boost from the FTA are North Sea oil, machinery and motor vehicles and parts.

The growth rate of Korean exports to the EU has been clearly affected by the current economic climate in the EU and consequently the shift in the balance of trade in the EU’s favour. The decline in Korea’s exports can also partly be explained by the fall in exports of electronics due to a large extent to production from Korea relocating to South East Asia. These products, which are doing well worldwide and in the EU are not being exported from Korea under FTA preferences but rather from other Asian countries.

The focus is now on implementation - both sides need to make sure that what has been agreed is being effectively implemented on the ground.

The car sector

EU car exports to Korea are up from €2 billion in 2011 to €2.5 billion in 2012 (27.7%). This corresponds to an increase from 75 000 to 95 000 cars.

At the same time EU imports of cars from Korea have grown less; from €3.4 billion in 2011 to €3.9 billion in 2012 (14.9%). This corresponds to an increase from 383 000 to 402 000 cars. In consequence, our trade balance in the sector, although still negative, has improved.
Korean medium range cars (Hyundai and Kia) sell very well in the EU. These Korean carmakers have also invested in production plants in the EU.

German premium cars sales in Korea (BMW, Mercedes, Porsche, etc.) are doing very well. In addition, in April 2012, the French automaker Citroen resumed sales on the Korean market after a decade-long hiatus, in the wake of the EU-Korea FTA. Recently, Italy's Fiat also returned to Korea for the first time since 1997.

Trade in services

The EU-Korea FTA is by far the most ambitious FTA concluded so far in respect of trade in services, both in terms of numbers of sectors covered and depth of market access commitments. Certain sectors will benefit from the implementation of the FTA due to legislative changes in Korea, subject to phase-in periods ranging from two to five years after the FTA went into effect.

A lot has been achieved already, in particular in the insurance sector, telecommunication services, environmental services and legal services. In the sectors which have phase-in periods, there is still some work to do to fully implement the FTA commitments.

Tackling non-tariff barriers to trade

This FTA breaks new ground in tackling significant non-tariff barriers to trade, with a focus on the automotive, pharmaceuticals, medical devices and electronics sectors.

In particular in the automotive sector, non-tariff barriers were seen by EU-industry as the biggest obstacle to exporting to Korea. The FTA's Car Annex provides a good basis to remove the existing barriers, setting out provisions whereby Korea accepts the equivalence of international standards or EU standards for all its major technical regulations.

Some positive results have been achieved, for example with regard to radio wave bands for new technologies, tyre marking and car part registration procedures, but further work is needed to align EU and Korean standards.

As regards electronics, thanks to the FTA, Korea introduced a self-certification system for electromagnetic compatibility (EMC) and electric safety, applicable to industrial machines, industrial computers, and railway transport equipment. These products, which represent a third of total EU exports to Korea in value, can now enter the Korean market without having to be certified in a Korean laboratory.

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