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EU-Korea business club unhappy with revised FTA with US

Chosun Ilbo | 7 Dec 2010

EU-Korea business club unhappy with revised FTA with US

In early signs that the renegotiation of Korea’s free trade agreement with the U.S. was the thin end of the wedge, the European Union Chamber of Commerce in Korea said Monday it is reexamining environmental and safety clauses in the automotive segment of the Korea-EU FTA.

They say some clauses may be disadvantageous to European automakers compared to conditions stipulated in the revised Korea-U.S. FTA. After it wraps up the review, the EUCCK may consult with the EU and seek additional demands from the Korean government.

However, 46 percent of American-made cars imported to Korea so far this year were in fact Japanese or German cars manufactured at U.S. plants. That means U.S. automakers are expected to reap fewer benefits than anticipated under the revised FTA.

◆ Environmental Exemptions

"When it comes to environmental regulations, the revision of the Korea-U.S. FTA exempting American carmakers that sold less than 4,500 vehicles in Korea in 2009 standards from Korean fuel efficiency and carbon dioxide emission regulations does not even exist in the Korea-EU FTA," said Park Sang-do, a director of the automotive committee at the EUCCK. "This puts European carmakers at a great disadvantage and needs to be discussed again."

Seoul will also exempt up to 25,000 American-made cars per carmaker from Korean safety inspections, while European cars will see a gradual easing of the same rules over the five years after the Korea-EU FTA goes into effect in July next year. Also, European automakers are required to meet Korean safety rules even if they do not exist in the EU. As a result, the EUCCK says European carmakers face major disadvantages compared to their American competitors and the Korea-EU FTA needs to be revised.

◆ Made in USA

A total of 8,157 vehicles were imported from the U.S. during the first 10 months of this year, but GM, Ford and Chrysler branded cars accounted for only 54 percent or 4,486 units. The remaining 46 percent were Nissan, BMW or Mercedes Benz models that were manufactured at U.S. plants. This means that if the Korea-U.S. FTA goes into effect, half the cars benefiting from scrapped tariffs or exemptions in safety and environmental regulations will be non-American cars.

Tariffs on automobile imports will be cut from 8 percent to 4 percent, and stringent Korean environmental and safety rules will not apply, translating into around a 5 percent discount in prices of American-made cars, experts say. Once the Korea-U.S. FTA goes into effect, the proportion of Japanese and German car made at U.S. plants and imported into Korea will soon reach 60 to 70 percent of total car imports from the U.S.

 source: Chosun Ilbo