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Don’t proceed with haste on the Korea-EU FTA

The Hankyoreh, Korea


Don’t proceed with haste on the Korea-EU FTA

3 April 2009

South Korea and the European Union (EU) failed to finalize their negotiations on a free trade deal. The failure comes as both sides were unable to narrow the gap on the so-called ’duty drawback issue,’ although they ironed out differences in almost all other remaining areas. The ministers should open up debate on the points of this issue made by South Korea and EU and use this time to consult with their constituencies, including experts and stakeholders, in order to deliberate the pros and cons of the tentative agreements they were able to make

The duty drawback issue is not something that we can compromise on as many local companies are exporting manufactured products containing imported materials. Duty drawback is a scheme under which exporters can recover import tariffs paid on the raw materials they use. If they cannot benefit from the system, local exporters’ competitiveness and profitability will be severely undermined.

The duty drawback scheme has been in place since the 1970s to bolster exports. The system has remained intact even within the free trade deal negotiated with the U.S. Since we depend heavily on offshore trade, it is inevitable for us to keep the program in place. It’s preferable to give up having an FTA with the EU than compromise on the duty drawback scheme.

Reportedly, both sides have found common ground on almost all of the other areas, however, detailed agreements have yet to be disclosed. The FTA with the EU has been negotiated behind closed doors. There have been no reports on the outcomes to parliament, nor have there been efforts to gather opinions from farmers who will bear the brunt of the downside effects of a free trade deal. While it is belated, it is imperative that the government disclose details to their constituency now as an effort towards minimizing any economic damage.

In free trade deals with advanced nations we often see more damage than benefits. The same applies with an FTA with the EU, the world’s largest trading block. It would be detrimental to our economy to rush ahead and open markets without thoroughly considering the possible damage and benefits.