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EU agrees to South Korea free trade deal

Bernama | September 17, 2010

EU Agrees To South Korea Free Trade Deal

BRUSSELS, Sept 17 (Bernama) — The European Union’s presidency said the 27-nation bloc has agreed to sign a free trade deal with South Korea after overcoming objections from Italy, which feared the pact would hurt its ailing auto industry, according to Yonhap news agency on Thursday.

The deal, the first such pact between the EU and South Korea will be signed at an EU-South Korea summit on Oct 6 and come into force on July 1, 2011, said Belgian Foreign Minister Steven Vanackere, whose country holds the union’s rotating presidency.

The EU is South Korea’s second-largest export destination, and South Korea is the bloc’s eighth largest trade partner, according to figures from the European Commission. EU trade with South Korea exceeded euros 65 billion in 2008.

Van Ackere called the deal "a very big step in opening markets in Asia" to European businesses and said this will create prosperity and jobs across in Korea but also in Europe.

The deal was initialled September last year, but fears that it could hurt Europe’s auto industry by opening the door to more and cheaper South Korean cars delayed the signing. Italy, home to automaker Fiat, long opposed the deal.

South Korea exported 303,205 vehicles to the EU in 2009, according to the Korea Automobile Manufacturers Association. EU automakers, meanwhile, exported 40,097 vehicles to South Korea.

The European Commission estimates the deal will see the elimination of euro 1.6 billion worth of industrial and agricultural duties for European exporters to South Korea.

The EU will cut some euro 1.1 billion of duties for Korean importers.

The two sides took a little over two years to strike the deal amid strong opposition from Europe’s automakers angry over the continent’s huge deficit in vehicle trade with South Korea, home to Hyundai Motor and Kia Motors.

In a statement, the EU called the agreement its "most ambitious trade agreement ever" that will likely lead to a doubling of trade with South Korea.

"The FTA is our first deal with an Asian partner," the statement said, adding that it is a signal that the EU is open for business.

South Korea currently has free trade pacts with India, the Association of Southeast Asian Nations (Asean), Singapore and the European Free Trade Association (EFTA), which includes Switzerland, Norway, Iceland and Liechtenstein.

A free trade pact between Korea and the United States was signed in 2007 but awaits ratification in both countries. Last month, South Korea also concluded free trade negotiations with Peru.

 source: Bernama