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FTA drives S. Korea’s car exports to EU

Yonhap News, Korea

FTA drives S. Korea’s car exports to EU

6 December 2011

SEOUL (Yonhap) — South Korea’s car exports to the European Union (EU) surged 40.1 percent on-year in the first 10 months of 2011, fueled by the bilateral free trade pact, a local industry association said Tuesday.

The Korea Automobile Manufacturers Association (KAMA) said the country’s five carmakers shipped 347,207 vehicles to EU member countries as of late October, compared to 247,909 units sold in the same period last year.

KAMA said that the sharp rise in exports only partially reflects benefits of the bilateral free trade agreement (FTA) that went into effect in July.

"The FTA has caused tariff rates to be lowered to 8.3 percent for cars with an engine capacity of less than 1.5 liters, with numbers for vehicles with larger engines lowered to 7 percent at present," a KAMA executive said.

Once all tariffs come down in three to five years, South Korea’s competitiveness in the vast EU market will go up further which will in turn boost exports, he said.

The increase is significant because Europe has been struggling with economic woes that have hurt automobile sales.

The association pointed out that the gains mark a turnaround from the steady decline in exports to Europe in recent years that was caused by high tariff rates of 10 percent and moves by local carmakers to set up manufacturing plants within the EU.

South Korea’s car exports to the EU contracted 1.3 percent on-year in 2010 and dropped 26.1 percent in 2009 vis-a-vis the previous year.

In the January-October period, overall exports of locally-made cars by such companies as Hyundai Motor Co. and Kia Motors Corp. rose 13.2 percent on-year to more than 2.54 million vehicles.

"The pace of increase for the EU outstrips export gains reported for Asia, North America and Latin America," KAMA said.

Exports to Asia rose 32.9 percent this year, with numbers for Latin America and North America gaining 15.3 percent and 11.4 percent, respectively, according to the association.