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Issue Report

Collection of full-length papers and in-depth analysis of economic and management issues.

The Korea-EU FTA: Issues And Strategies

The Korea-EU FTA: Issues And Strategies

KIM Deuk-Kab

Sept. 17, 2007

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ABSTRACT

Prospects for a Korea-European Union free trade agreement are high, with negotiations under way and broad parameters already presented. An agreement would translate into 2-3% additional economic growth for Korea, according to most estimates.

In the first two rounds Korea focused on lowering tariffs while the EU emphasized removal of non-tariff barriers. The most contentious issue is expected to be automobiles, which would greatly benefit Korean automakers. They would see their exports to the EU leap by an estimated 40% under a FTA. Another point of contention is better protection of European intellectual property rights in Korea.

Under a Korea-EU FTA, the electronics, textiles and transportation machinery of Korea would likely benefit the most. Mobile phones and semiconductors - key Korean exports - already are tariff-free in the EU. The EU for its part would likely see increased exports of automobiles, dairy products, alcoholic beverages (e.g. wine and whiskey,) and machinery.

The third and fourth rounds are scheduled for September and October. The EU is seen as more in a hurry to reach an agreement now that the Korea-US FTA (KORUS-FTA) is pending ratification. Korea may utilize several different negotiating strategies to maximize concessions from the EU, including leveraging of intra-EU differences. The EU has not yet connected tariff reduction with non-tariff barriers. However, it is expected to seek comprehensive abolition of non-tariff barriers on automobiles, wine & distilled spirits, and electric/electronic goods

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