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Source: www.asiaecon.org |

EUROPEAN UNION CAUTIOUS ABOUT FREE-TRADE DEAL WITH SOUTH KOREA


Talks between South Korea and the European Union about a free trade agreement have nearly finished Tuesday. In a provisional agreement between the two, both parties will open each others' markets up to freer trade, dropping tariffs on a wide range of products, making them easier to buy and sell.  


Talks between South Korea and the European Union about a free trade agreement have nearly finished Tuesday. In a provisional agreement between the two, both parties will open each others’ markets up to freer trade, dropping tariffs on a wide range of products, making them easier to buy and sell.

Negotiators from South Korea and the European Union have concluded two days of talks saying they almost have a deal. Although the two sides have agreed in almost all areas, the deal must be finalized by their governments’ trade ministers in London next month.

“Until everything is agreed upon, nothing is agreed to”, South Korean chief negotiator Lee Hye-min said.

Despite quick responses by both sides to dampen suggestions that the agreement was almost signed, the European Commission’s chief negotiator, Ignacio Garcia Bercero was optimistic. He was “convinced that this is an agreement that not only will bring tangible economic benefits for all sectors of our economies, but also it will be a very timely signal of our commitment to open markets in a very difficult economic situation”.

Many automobile companies reacted vehemently to a freer (or more open?) economy, as the protection they received from tariffs helped them keep afloat in the midst of an economic downturn. South Korea wants the tariffs to be eliminated within three-to-five years, while the European automakers want tariffs to be eliminated in five-to-seven years.

Issues are still left unresolved, such as a timetable for eliminating Europe’s 10 percent tariff on imported cars, the right of South Korean exporters to reclaim duties paid on imported components, and several issues on the rules of origin where goods have been made, for the purpose of trade agreements.

“I don’t believe this is a good agreement for the E.U.”, Ivan Hodac, chief of the European Auto Manufacturers’ Association said. “It’s definitely not good for one of the most important industries the E.U. has: automakers”.

While many other industrialized and emerging economies are taking protectionist stances, the ratification of a free trade agreement would most likely help South Korea overwhelmingly more than the European Union.

Historically, South Korean manufacturers export far more automobiles to the European Union. Because of the Koreans’ lines of fuel-efficient cars as well as the weakness of the won, South Korean automobiles were cheaper and more cost efficient.

Talks of a free trade agreement between the EU and South Korea has been brewing since before the global economic downturn, when the economy of each side was strong. Although the free trade agreement talks may be a political ploy to signal strong antiprotectionism policies during a downturn, the actual ratification could take years.

If the ministers reach an accord, it will be the largest trade agreement, by value of potential exports between the two parties, for the EU and South Korea. It would be slightly larger than South Korea’s pact with the United States, making it the largest bilateral trade deal in the world.

Source: www.AsiaEcon.org
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Source: www.asiaecon.org |


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