South Korea apparently getting the short end of FTA with the EU

Posted on : 2013-03-02 13:56 KST Modified on : 2019-10-19 20:29 KST
European Commission’s analysis conflicts with South Korean government’s, which paints rosier picture for domestic companies
 including Lee Jeong-hee of the United Progressive Party and Cho Seung-soo of the New Progressive Party hold signs calling for revision of the South Korea-European Union Free Trade Agreement in the National Assembly
including Lee Jeong-hee of the United Progressive Party and Cho Seung-soo of the New Progressive Party hold signs calling for revision of the South Korea-European Union Free Trade Agreement in the National Assembly

By Lee Jeong-hun, staff reporter

The terms of the South Korea-European Union Free Trade Agreement have benefitted the EU far more than South Korea, an analysis shows.

According to the Annual Report on the Implementation of the EU-Korea FTA, submitted to the European Council on Feb. 25 by the European Commission, EU exports to South Korea were up 37%, while South Korean exports to the EU rose by just 1%.

The report also showed EU exports to South Korea jumping by 54%, or 4.4 billion euros, for items where tariffs were totally abolished for the one-year period after July 2011, when the FTA was signed. This rate was double the 27% increase in exports to the entire world over the same period. An increase of 35%, or 3.9 billion euros, was also recorded for items where tariffs were partly abolished.

According to the EU, the only 1% increase in South Korean exports was a result of South Korean companies moving their production bases to Europe. Indeed, automakers Hyundai and Kia currently have factories in the Czech Republic and Slovakia, respectively, while South Korean electronics companies have plants in several EU member countries. The report's conclusion was that this contributed to job creation and economic growth for the EU.

South Korean car exports to the EU rose by 20%, or 663 million euros, but this was still 37% below their 2007 peak. It is also debatable whether the rise was due to the FTA, since tariffs rates fell by just 1.7 to 3% from 10%, while the value of the euro declined by 7.2%. Over the same period, the EU exported 840 million euros worth of automobiles, for a 69% increase from the previous year. This analysis conflicts with accounts from the South Korean government, which claimed that exports rose by 38% for cars and 15.8% for car parts after tariffs rates dropped with the FTA.

The EU predicted further gains going ahead, with the South Korean government planning additional FTA-related revisions to the law in the areas of communications services, finance, the environment, and professional services.

Please direct questions or comments to [english@hani.co.kr]

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