logo logo

EU’s response key to success of FTA

Korea Herald

EU’s response key to success of FTA

By Yoo Soh-jung

6 April 2009

A successful conclusion to the free-trade agreement talks between Korea and the European Union will hinge on the EU’s understanding of Korea’s need for the duty drawback measure, Seoul’s chief FTA negotiator said yesterday.

"A deal would be difficult if the EU does not permit us to apply the duty drawback scheme," Lee Hye-min told reporters at the Trade Ministry in Seoul. "Without it, our economic gains from an FTA with the EU would be compromised."

The duty drawback system, approved by the World Trade Organization, allows a government to return import tariffs to its local companies that use imported materials to make products for exports.

The EU has not accepted the duty drawback measure under its existing FTAs with Mexico and Chile. But experts here say those deals are incomparable to the Korea-EU accord, which concerns a large volume of manufactured goods. They stress that agricultural goods represent a bigger portion for Brussels’ trade pacts with Mexico and Chile.

Lee said Brussels needs the time to persuade all its 27-member economies of the importance of the duty drawback scheme for Seoul. The European auto industry is one of the most critical sectors toward the scheme.

Lee said he expects the EU to reach a decision by May.

Trade Minister Kim Jong-hoon and his EU counterpart Catherine Ashton failed to finalize the trade deal in London on April 2. Both sides have been seeking a political push to seal the deal, which is tentatively done.

Following the minister-level meeting, Kim had told reporters in London that the duty drawback is a "conflict of principle" rather than a "matter of compromise."

As of 2008, Asia’s fourth-largest economy posted a $23 billion trade surplus with the EU. Bilateral trade between Korea and the EU reached $98.4 billion last year.

Korea shipped $54 billion worth of goods, while it received $40 billion of goods from the EU.