European exporters to benefit from FTA between EU and South Korea

The EU-South Korea Free Trade Agreement (FTA), the EU’s first trade deal with an Asian country, will apply as of 1 July 2011. It is unprecedented in terms of the scope and speed of tariff liberalisation and breaks new ground in tackling significant non-tariff barriers across all sectors, including automotive, pharmaceutical and consumer electronics. South Korea and the EU will eliminate 98.7% of duties in trade value within 5 years from the entry into force of the FTA. By the end of the transitional periods, import tariffs will be eliminated on all industrial products, and most agricultural products, with a few exceptions, such as rice.

“This Free Trade Agreement is the most ambitious trade deal ever concluded by the EU and should become a game-changer for our trade relations with Asia”, said EU Trade Commissioner Karel De Gucht. “We will slash import duties so European exporters will save €850 million in duties in the first year alone.This figure should double once all duties will be eliminated.”

One study estimates that the deal will more than double the bilateral EU-South Korea trade in the next 20 years compared to a scenario without the FTA; another study projects that EU exports will go up by €19 billion thanks to the FTA.

The FTA will also create new market access in services and investment and will make major advances in areas such as intellectual property, procurement, competition policy and trade and sustainable development.

The negotiations for the EU-South Korea FTA started in April 2007 and took 8 rounds of negotiation until the agreement was ready for initialling on 15 October 2009. The Agreement was signed by EU Trade Commissioner Karel De Gucht, the Belgian Minister of Foreign Affairs Steven Vanackere representing the Presidency of the Council of the European Union and the Korean Minister for Trade Kim Jong-hoon on 6 October 2010 and backed by the European Parliament on 17 February 2011. It provisionally enters into force on 1st July 2011. This means that the FTA will apply immediately; pending full entry into force once all Member States have ratified the agreement according to their own laws and procedures.

EU-South Korea goods trade was worth around €66 billion in 2010. The EU currently runs a deficit with South Korea in goods trade, although trends suggest that the Korean market offers significant growth potential.

For products like chemicals, pharmaceuticals, auto parts, industrial machinery, shoes, medical equipment, non-ferrous metals, iron and steel, leather and fur, wood, ceramics, and glass, the EU enjoys a solid trade surplus. Similarly, for agricultural products South Korea is one of the more valuable export markets globally for EU farmers, with annual sales of over €1 billion.