EU, Korea failed to finalize trade pact in London

JoongAng Ilbo, Korea

EU, Korea failed to finalize trade pact in London

Duty drawbacks are major sticking point, but both sides will keep trying for a deal

4 April 2009

Yonhap/LONDON - South Korea and the European Union failed on Thursday to finalize a free trade deal, South Korean officials here said, adding they would seek a way to conclude the deal. South Korean Trade Minister Kim Jong-hoon and his EU counterpart Catherine Ashton met here to narrow differences on some remaining sticky issues, including a so-called duty drawback scheme and rules of origin, but failed to wrap up the agreement.

Both sides announced late last month that they had reached a tentative free trade accord and said they would seek to finalize the deal yesterday.

“Ministers focused their discussions on the remaining issues and made further progress,” both sides said in a joint statement. “Ministers also had substantive discussions to evaluate all possible options for a compromise on the issue of duty drawback. Despite these efforts, the gaps on this issue could not be narrowed.”

The two sides said they would seek clearance to finalize the negotiations in the near future. Seoul is seeking a provision in the agreement that would allow import tariffs to be returned to companies that use imported materials to make products for export. But Brussels opposes the provision, saying it would favor Korean exporters. The EU does not allow duty drawbacks under its existing free trade accords with Mexico and Chile.

“Except the duty drawback issue, both sides virtually reached agreement on other remaining issues,” Kim told reporters after the four-hour meeting with Ashton. “On the matter of the duty drawback, it’s kind of a conflict of principle that both sides cling to, rather than a matter of compromise,” he said.

Kim said both sides ironed out differences concerning a provision dealing with the origin of a product’s materials, but stopped short of further comment. Earlier, both sides reportedly agreed a product is considered manufactured by a trading partner if at least 45 percent of the finished item is made there.

The trade minister said both sides will meet again soon to finalize the deal. Yonhap

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