S Korea welcomes free trade pact with EU

17:43, September 17, 2010      

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South Korean market and media gave a warm welcome to the report that the European Union (EU) approved the South Korea-EU free trade pact which was initialed in October, 2009.

Approving the trade deal, the EU also agreed to have it go into effect from July 1, 2011, as a result of long-lasting rounds of bilateral negotiation.

The two sides are expected to seal the accord at a summit in Brussels on Oct. 6 if ratified by both South Korean parliament and the European Parliament.

PROGRESS REPORT OF S. KOREA-E.U. FREE TRADE DEAL

South Korea and the European Union (EU) officially launched the bilateral free trade negotiations in May 2007, with difference over industrial tariffs and auto trade initially hampering progress.

The two sides have held eight rounds of free trade talks, together with several inter-session meetings, for 26 months to narrow the gap in their stances over sensitive issues.

After going through years of struggles, the two sides settled a "provisional" agreement on the bilateral free trade negotiations in late March, reaching a compromise in various points.

The provisional agreement said that the two sides reached a tentative agreement on eliminating or phasing out tariffs on 96 percent of EU goods and 99 percent of South Korea's goods within three years.

They have also agreed to abolish tariffs on all industrial goods within five years after the pact takes effect, together with agreeing to eliminate tariffs on cars within three years to five years.

Amid growing expectations on an early settlement, the thorniest issues held back the final agreement for which South Korean Trade Minister Kim Jong-hoon and his EU counterpart, Catherine Ashton, met at a ministerial-level meeting in London.

During the meeting which was held on the sidelines of the G-20 summit, the two ministers discussed over the remaining sensitive issues, such as a duty drawback scheme and rules of origin, which caused the leaders to meet again in Paris later in June.

On the final draft of the agreement, the EU agreed to allow a duty drawback system for South Korean companies, which it does not allow for Chile and Mexico under current free trade agreements, South Korean Deputy Trade Minister Lee Hye-min said.

Concluding the negotiations in July, the two sides initialed the pact in October, seeking to finalize follow-up process in 2010.

The process, however, was halted for a while as the EU's Foreign Affairs Council postponed its decision to sign the deal due to opposition from some member countries such as Italy.

After months of talks, the South Korean side succeeded to convince its counterparty, finally gaining the approval from the council.

EXPECTED RESULTS & MEDIA EVALUATIONS

The EU have been South Korea's second-largest trading partner after China, with two-way trade reportedly reaching around 98.4 U. S. dollars in 2008 and 78.8 billion U.S. dollars in 2009.

If the deal goes into effect, it is likely South Korea will see a 20 percent gain in its trade with the EU, according to studies by the state-run Korea Institute for International Economic Policy (KIEP).

The KIEP also predicted it will contribute to the sluggish job market as well, creating up to 600,000 jobs over the long term.

South Korean media, together with the government and state-run trade agencies, point at the local auto industry as the top beneficiary of the trade pact, with the world's single largest economic bloc, is now scheduled to phase out a 10 percent tariff on their auto products.

As tariff elimination will lead to price drops for South Korean- made cars in the European market, South Korean automobiles will become more competitive against other Asian rivals," South Korean media Newsis said.

Along with the auto industry, the electronics sector would see large gains in sales as the EU cuts its some 10 percent tariffs on electronic goods, such as fridges, air conditioners, and TV sets.

South Korea will not only reap gains in the real economy sector, but also in financial markets, as it will help draw more foreign investments, the state-run Korea Institute for Industrial Economics and Trade (KIET) said.

In addition, the KIET said the South Korea-EU pact will contribute to rebuilding South Korea's image as an 'advanced trading country,' together with the deal with the U.S. which is now awaiting ratification.

On the other hand, the pact is expected to hurt the local agricultural sector which is to suffer around 2.3 trillion won (2 billion U.S. dollars) in losses, struck most harshly in pork and dairy product sectors.

Despite the inevitable losses in the agricultural sector, South Korean media is still relieved that the deal is decided to take effect.

As the EU endorsed the South Korea-E.U. free trade pact, it will have a pressure on the pending South Korea-U.S. FTA, local media said, urging U.S. parliament on its imminent ratification.

Striking the free trade deal in 2007, South Korea and the U.S. have been struggling to pass it in legislatures in both countries.

While the trade committee in South Korea agreed to pass the bill in 2009, making it more likely it will be ratified in a plenary session, the deal is still harshly opposed in the U.S. mainly due to the thorny beef and auto industry issues.

Earlier in the week, however, President Obama once again vowed that he will seek ratification of the KORUS FTA as soon as possible after resolving outstanding issues.

Source: Xinhua

(Editor:李牧(实习))

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