Korea, EU conclude FTA talks
The Korean Herald/Asia News Network | Tue, Jul 14, 2009
Korea, EU conclude FTA talks
Korea and the European Union Monday declared the conclusion of more than two years of negotiations for a free trade agreement.
The landmark deal to scrap tariffs for an annual US$106 billion (S$155.2 billion) trade within five to seven years is expected to take effect as early as the first half of next year, following a formal signing and ratification.
The announcement was made by President Lee Myung-bak and Swedish Prime Minister Fredrik Reinfeldt during their summit in Stockholm. Sweden holds a rotating presidency of the 27-member European Union.
The leaders hailed what would be the biggest free trade accord for both sides.
"This would bring about an epochal change to our trade, more than any other FTA has done," Lee told Koreans through a fortnightly address on radio and the internet early in the morning before he met Reinfeldt.
The European Union is Korea’s second-largest export destination, and Korea is the EU’s fourth-biggest non-European trade partner. Two-way trade reached $98.4 billion last year.
At the summit, the Swedish leader said the deal will also help the world out of the slump early by encouraging other economies to pursue the free flow of goods, services and investment.
Seoul officials predicted the two sides will be able to initialize a final agreement in September. A formal signing is expected to take place in February and parliamentary ratifications would be done in the first half of next year, they said.
The agreement calls on Korea to phase out tariffs on 96 per cent of goods from the EU in three years and go fully duty-free in seven years, excluding rice and some other sensitive products.
Brussels will lift import duties for 99 per cent of Korean goods in three years before fully opening its market in five years.
The deal still faces domestic opposition, most fervently from European carmakers and Korean cattle and dairy farmers.
A European automobile industry association last week described it as "unacceptable," raising concerns about the home market being flooded with cheaper Korean cars.
Last year, Korea sold 446,000 cars to the EU and imported 37,000 cars from the bloc, according to industry figures.
They especially complained about Seoul’s refunding of tariffs on imported parts when manufacturers export the final products.
European companies said Korea could cut prices by using cheap Chinese products.
The drawback scheme was one of key sources of contention between the Korean government and the European Commission.
They at last agreed that they maintain the rule but will cap the refund if there is a significant increase in the amount of imported parts and components used by Korean companies.
The FTA talks began in May 2007 and made a headway during hectic negotiations for the past three months.
Summit diplomacy by Lee is also said to have a decisive role in easing opposition from some EU members, such as Italy and Poland.
Lee visited the two countries last week for summits with Polish President Lech Kaczynski and Italian Prime Minister Silvio Berlusconi, with the FTA top on the agenda.
"The visits were arranged after we were heard that Poland and Italy had strong reservations on the FTA," a senior presidential official said.
Following the summits, Poland and Italy both began to support the free trade deal
Lee told reporters in Stockholm that his "sincere and tailored" persuasion with the two leaders bore fruit.
The state-run Korea Institute for International Economic Policy estimated that the FTA would boost Korea’s gross domestic product by 2-3 per cent and exports by 2.5-5 per cent.
