Reuters | March 07, 2009

EU trade chief certain FTA can clear car hurdle

Seoul will agree immediately to accept EU safety standards.

BRUSSELS — The European Union’s trade chief is confident she can convince member states yesterday to back a free trade pact with Korea, despite fierce opposition from the bloc’s embattled car industry.

EU Trade Commissioner Catherine Ashton wants to initial an agreement with Seoul by the end of the month, but Europe’s carmakers are concerned that cutting import tariffs on Korean cars could severely damage their industry, which is suffering from the worst financial crisis in nearly 80 years.

“I fully understand the car industry’s concerns ... I will make sure this deal is balanced. But I am convinced this deal has a far-reaching benefit for the whole European economy at this difficult time,” Ashton told Reuters in an interview.

Ashton was speaking ahead of crunch talks yesterday with senior trade officials from the bloc of 27 nations, some of which, including Germany, France, Italy and Spain, are sympathetic to the car sector’s problems.

She will need the agreement of a qualified majority of countries to write a provisional agreement with Korea - which started talks with Brussels in 2007 shortly after striking a trade pact with the United States.

“We are not going to rush things, but we need to keep up the pace of negotiations. We are at a crucial point, close to closing the deal. Negotiations are not finished but I am confident we can complete it very soon,” Ashton said.

For Brussels, a deal to lower barriers to trade and investment with Korea would be its first such pact in Asia. The EU is the Asian country’s second largest export market after China, and Korea is the EU’s fourth-largest non-European trade partner.

“Korea’s cars and electronics industry benefits Korea. But our carmakers will also benefit along with our services, pharmaceutical, IT and agriculture industries among others,” Ashton said. Europe’s auto industry maintains that the proposed deal is unbalanced and will not grant Europe access to the lucrative Korean market.

“There is a market for European cars in Korea and this deal will allow them to benefit from a valuable market at a critical time for the EU car industry,” Ashton said.

She said under the agreement Korea would drop a number of the standards which have until now prevented EU carmakers from entering its market.

Seoul will immediately agree to accept EU safety standards and will allow a transition period to 2014 for European cars to meet Korea’s strict environmental standards, she said.

Ashton said auto imports from Japan, rather than the EU, would suffer from Korean imports to the EU. The EU’s auto industry - employing 2.3 million people directly and a further 10 million in related sectors - and some governments are unhappy with Ashton’s plan to allow Korean car manufacturers to take advantage of a system, under which Korean carmakers could import cheap components from China and have all import duties paid on those parts reimbursed if they are in cars destined for the EU market.

Ashton said she did not think Seoul would be willing to renegotiate this issue, but encouraged the EU’s consideration.