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EU carmakers attack Korea trade proposal

Financial Times

EU carmakers attack Korea trade proposal

By Joshua Chaffin in Brussels

3 November 2008

European carmakers have attacked a proposed trade agreement with South Korea, claiming that it is lopsided and sacrifices their interests for the benefit of Europe’s services industries.

“We would open the European market and we would get absolutely nothing in return,” said Ivan Hodac, secretary-general of ACEA, the European car manufacturers association.

Carmakers are raising their complaints ahead of negotiations this month between Catherine Ashton, the newly appointed European Union trade commissioner, and her South Korean counterpart, Kim Jong-Hoon, as the two sides try to finalise a pact before the end of the year.

The bilateral negotiations reflect Europe’s strategy of seeking agreements with individual trading partners after Doha round discussions aimed at reaching a global deal stalled this year.

Trade between the EU and South Korea totalled nearly $90bn (€71bn, £57bn) last year. A Korean trade deal would be the EU’s first in Asia and could advance similar discussions with India and the Association of South East Asian Nations.

However, European carmakers have been persistent critics of the Korean negotiations, arguing that the proposed terms would benefit Europe’s consulting, legal, accounting and other services industries while leaving carmakers vulnerable, and set a bad precedent for future trade deals.

One of their chief complaints is that South Korea’s refusal to accept international technical standards for its car market amounts to a non-tariff barrier to entry because it is too costly to comply with domestic standards.

Another stumbling block is a South Korean proposal to reduce the so-called “rules of origin” - the proportion of a finished product that must be made in a particular country - from 60 per cent to 40 per cent.

European carmakers complain that such a move would leave them competing against Korean cars that are primarily composed of low-cost Chinese parts but have not been subject to existing tariffs on Chinese imports.

A spokesperson for Baroness Ashton said the EU remained in close contact with the car industry and was intent on clearing barriers to its exports.

Lady Ashton said: “While much of the focus to date has been on the car industry, an ambitious [trade agreement] with South Korea would substantially boost trade across a range of sectors, including services, chemicals, machinery and processed foods.

“We are in regular contact with the car industry and an [agreement] offers the best means of tackling the non-trade barriers, which greatly impede the export of European cars to Korea.”

South Korea last year agreed a trade deal with Washington, although the US Congress has yet to ratify it amid concerns about job losses.

The push for a final agreement comes at a time when the economic slowdown has intensified concerns about Europe’s beleaguered car industry.

Member states last week agreed to ease new restrictions on car emissions after an intense lobbying effort by carmakers.

EU member states are also considering a €40bn ($51bn, £32bn) loan request by the industry.