EU Makes Bold FTA Approach To South Korea

by Ulrika Lomas, Tax-News.com, Brussels

18 July 2007

The European Union has said that it has "set the bar high" with its bold offer for a 100% tariff-free market access agreement with South Korea.

The announcement came as negotiators from the EU and South Korea on Monday began their second round of Free Trade Agreement negotiations in Brussels, building on initial market access offers exchanged two weeks ago.

The EU has never before taken such an ambitious position in a bilateral free trade negotiation; but the offer is dependent on Korea making "a similarly ambitious offer".

The EU is looking for substantial new access to the growing Korean market in key areas like automobiles, manufactured goods, and business services.

The EU is also seeking new access for EU investors in Korea, including the removal of restrictions on EU investment. This is a crucial area for Europe, in which no WTO disciplines currently exist. The EU is the biggest investor in Korea, and 45% of foreign direct investment (FDI) inflows to Korea came from the EU last year (US$5 billion).

In addition, the EU wants to put a new focus on non-tariff barriers and 'behind the border' issues in Korea - regulations that are unnecessarily complicated and burdensome, and which may in some cases present greater obstacles than tariffs.

EU Trade Commissioner Peter Mandelson launched the negotiation with Korean Trade Minister Kim Hyun-chong in May 2007. The new round of talks is being led by senior officials from both sides.

As part of the Global Europe strategy set out in October 2006, Mandelson has launched a new generation of bilateral trade agreements that will boost the EU's presence in growing emerging markets, and complement the multilateral WTO system by pushing liberalisation in key areas like investment, not currently covered by WTO rules. They will provide new opportunities for EU companies, and help generate jobs and growth in Europe.

Studies commissioned by the EU suggest that an ambitious EU-Korea FTA could increase EU exports to Korea and Korean exports to the EU by between 30 and 40%. For Europe, an FTA means wider access to the prosperous Korean market with its huge appetite for quality European goods. Korea is likely to see big gains in areas like manufacturing and access to competitive EU business services. Launching the negotiations in May, Mandelson said that they represented the EU "turning towards a stronger focus on Asia".

The third round of negotiations will be held in September.

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