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France Blames Korea FTA For Auto Industry Slump

by Ulrika Lomas,, Brussels

25 October 2012

The European Commission (EC) has refused France’s request for a close monitoring of South Korean car imports, which could have been the first move towards a revocation of the reduced tariffs applicable under the European Union-South Korea free trade agreement (FTA).

The French government has been arguing that the reduced tariffs have led to a marked increase in car imports from South Korea, which has, in turn, cause significant damage to the French car industry as its market share has fallen.

PSA Peugeot Citroen's fall in sales has led to the announcement of a reduction to its labour force and closure of one of its manufacturing operations in France. On the other hand, the major South Korean car makers have increased their registrations in Europe by concentrating on selling smaller cars, even while the overall European car market has been shrinking.

Decreasing car sales by French companies is being blamed in France wholly on the operation, since it became effective in July last year, of the FTA’s reduced tariffs. The agreement immediately cut import duties on South Korean car imports from 10% to 8.3%, and they will be wholly eliminated by 2016.

However, even though it said that it will continue to keep an eye on the evolving situation, the EC has refused the French request to monitor South Korean vehicle imports into the EU, on the grounds that those imports have not been only seen in France and that the difficult current period for the European car industry cannot be wholly blamed on the FTA.

In fact, South Korea has claimed that a large proportion of its manufacturers’ cars imported into France are produced elsewhere in or close by the EU region, for example in Turkey and the Czech Republic, and not exported from South Korea, and that imports of European cars into South Korea have also risen sharply after the FTA’s effectiveness.

TAGS: tax | business | European Commission | free trade agreement (FTA) | law | tariffs | agreements | manufacturing | trade disputes | France | import duty | trade | European Union (EU) | Europe

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