EU angers carmakers with S.Korea free-trade deal

The EU signed a free-trade deal with South Korea Thursday, ignoring carmakers' pleas to back down that echoed US caution running all the way up to US President Barack Obama.

The agreement, still to be ratified by the EU's 27 member states and the European Parliament, was given a guarded welcome by Seoul but slammed by the head of the European carmakers trade association (ACEA).

"We call on the EU member states not to ratify the current text," ACEA head Ivan Hodac said in a statement.

"The Korean negotiators have not only obtained unrestricted access to a market of over 500 million people, the European Commission has in addition allowed South Korea to subsidize exports from its key industries to the EU," Hodac said. "This constitutes unfair competition and will lead to economic distortion."

His association claims the EU's trade deficit with South Korea will only increase from its current level of around 15 billion euros ($22 billion) per year under the terms negotiated.

Signed by European Union Trade Commissioner Catherine Ashton and South Korean Trade Minister Kim Jong-hoon, virtually all tariffs will disappear and Brussels said EU exporters would win new business worth 19 billion euros ($28 billion).

Each side has 3 percent of the other's car market, but the EU's market is much bigger, and Ashton said a surge in South Korean imports would trigger a "return to our tariffs."

Of the auto-sector's fears, Ashton said EU negotiators had introduced "safeguards" that "will address the concerns the car industry rightly has."

The EU, the world's biggest single trading bloc, was South Korea's second largest trading partner after China in 2008, with two-way trade totaling more than $90 billion. The EU was also the biggest foreign investor in South Korea last year.

"This was just a very, very good deal for European industry," Ashton said.

Calling it the "first of a new generation of free trade agreements," she said a similar "push" is under- way, primarily with Asian states and Canada.

"The deal is comprehensive and offers well-balanced benefits to both sides," Lee Hye-min, Korea's chief FTA negotiator, told the Korea Herald newspaper.

The commission said the agreement makes "major advances in areas such as intellectual property, procurement, competition policy, and trade and sustainable development."

South Korea is set to liberalize its telecommunications, environmental, legal, financial and shipping sectors.

Negotiations were ended three months ago and the deal was expected to be ratified some time in the middle of 2010.

AFP/Global Times

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