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EU-Korea Trade Soars Under FTA

04/07/2012    83

European Union (EU) Commissioner for Trade Karel De Gucht has recently underscored the importance of the European Union-Korea Free Trade Agreement (FTA) in terms of boosting trade and reducing duties, one year after its signature.

Alluding to the fact that this is a crucial time for trade policy, as protectionism is on the rise and new trade liberalization is needed to boost flagging economies, De Gucht pointed out that the EU-Korea FTA is “the most advanced and ambitious free trade agreement that Europe has yet achieved, in terms of content and in terms of economic value”, noting that it is therefore of great importance to carefully and accurately assess the results of the accord.

While acknowledging that many of the ground-breaking regulatory provisions at the core of the agreement have yet to be implemented, that information is limited, and that trade figures around the world have fluctuated wildly in recent years as a result of the crisis, De Gucht nevertheless underscored the importance of getting a first sense of how this agreement is functioning so far, as this is of interest for shaping future trade policy.

In order to assess the impact of the FTA, EU trade with Korea was measured over nine months from July 2011 until March 2012, and the figures then compared to an average of the figures from the same months over the previous four years.

Highlighting the fact that “the news is good”, the EU Commissioner said that trade is up, and up significantly, noting that overall, Europe's exports to Korea have already increased by 35%.

Where liberalization has actually happened, the increase is even more impressive, the Commissioner explained, noting that duties were dropped on about a third of EU exports to Korea when the agreement entered into force last July and that sales of those goods have increased by 46%. For many other products – just under half EU exports - tariffs were only partially reduced, De Gucht added, while pointing out that even for those products EU exports are up by 36%. Overall those increases translate into almost EUR2bn (USD2.5bn) in new trade and EUR350m saved in duties.

Alluding to specific products, De Gucht said that the growth is more dramatic in the following areas:

  • Exports of pork, for example, are up by almost 120%, meaning new trade of almost EUR200m;
  • Leather bags and luggage are up by over 90%, worth EUR150m in extra exports;
  • Machinery to make semiconductors is up by over 75% at EUR650m in increased exports;
  • Exports of cars to Korea are up by over 70% - representing EUR670m in new sales.

According to De Gucht, even in economically tough times, trade deals are vital for boosting trade in both directions, and the EU agreement with Korea should be seen as the first in a series.

De Gucht explained that a free trade agreement with Columbia and Peru was signed recently, and that FTA negotiations with Vietnam have also been initiated. The agreement with Central America is due to be signed in Honduras shortly.

The EU Commissioner said that negotiations with Singapore and Canada are due to be finalized in the near future, while others, like India, Malaysia and Mercosur are also expected.

Alluding to a “step change” in the EU’s relations with two of its largest trading partners, De Gucht revealed that the Commission is due to decide in July whether to request permission from member states to open negotiations with Japan. At the end of the year, member states will have to decide whether to launch negotiations for a comprehensive agreement with the United States. Both of these processes are in their infancy, De Gucht stressed, while emphasizing that given the scale of the economic relationship, they have the potential to have an enormous economic impact.

July 3, 2012

Source: Tax News

 

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