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SOUTH KOREA AND EUROPEAN UNION CONTINUE NEGOTATIONS FOR FREE TRADE AGREEMENT


Recent reports state that a free trade agreement between South Korea and the European Union is nearing completion. South Korea aims to increase exports of automobiles, textiles, electronics, movies and music to the EU, as well as broaden access for South Korean professionals to the region. The EU hopes to increase exports of automobiles and gain better access to South Korea's service sector.


Recent reports state that a free trade agreement between South Korea and the European Union is nearing completion. South Korea aims to increase exports of automobiles, textiles, electronics, movies and music to the EU, as well as broaden access for South Korean professionals to the region. The EU hopes to increase exports of automobiles and gain better access to South Korea’s service sector.

South Korea has been aggressively pursuing bilateral trade agreements in recent years. It already has free trade agreements with Chile, Singapore and ASEAN (excluding Thailand). It is currently negotiating deals with the U.S., New Zealand and Japan, and plan to start discussions with China, India and a slew of Latin American countries. It is hoped that these free trade agreements will help South Korea spur its export-oriented economy and ease pressure from China and Japan, their main competitors in the region.

Talks about the South Korea-EU FTA began in May 2007 to discuss how to link up Asia’s fourth largest economy to the world’s biggest trading bloc. A South Korea-EU FTA appeared to be a reasonable goal, especially considering that the two parties had over $90 billion worth of trade in 2007. In addition, the EU is South Korea’s second largest trading partner after China and also the country’s leading investor. Moreover, several reports state the FTA will bring even more benefits for South Korea. According to a report by the Korea Trade-Investment Agency (KOTRA), exports of automobiles and electronic goods and products to European countries will significantly increase. In addition, a report from the Korea Institute for International Economic Policy (KIEP) estimated that the FTA will increase South Korea’s GDP by 24 trillion won ($25.2 billion) in the long run and will open up over 597,000 jobs.

Officials originally wanted to conclude the agreement within a year. But the FTA met opposition and obstacles from both sides. Some of the main areas of conflict include the agricultural sector and the automobile industry. South Korean farmers are particularly opposed to the proposed FTA. Heo Young-koo, deputy chief of the Korean Confederation of Trade Unions, an umbrella labor group, argued that the FTA will allow big foreign companies to dominate the domestic market and drive small farms out of business. In addition, Shin Jae-keun, a senior researcher at the Korea Rural Economic Institute, said that the EU has the greater competitive edge in the prices of pork, dairy products and fruit.

In the automobile industry, issues arise from a variety of areas. The most recent divisive issue involves how the EU wants to replace all of South Korea’s existing regulations on European imported cars with international standards. Another issue involves the limitation that European cars cannot be imported into South Korea if domestic car sales are decreasing. European automakers have been consistently wary about the FTA, arguing that the benefits are lopsided towards South Korean automakers.

Despite the several setbacks that the negotiations have suffered, officials are still optimistic about reaching a comprehensive trade agreement. Officials involved in the latest round of talks said that while there are “inevitably complex and complicated” issues that remain, they hope to conclude the agreement in the first quarter of 2009.

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


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