Last Friday saw the ratification of the of the much-disputed free trade agreement between the European Union (EU) and South Korea, described by the EU’s ambassador in Seoul, Tomasz Kozlowski, at the time as a “win-win” agreement and a model for other trade agreements that the EU is negotiating, including that with Japan. However, carmakers in Europe, including Ford, remain concerned that, despite amendments to the deal prior to its signing last October, it will result in a one-sided flow of trade in vehicles between the two regions.
Speaking at the SMMT International Automotive summit in London, UK last week, Ford’s Stephen Odell, Chairman and CEO, Ford of Europe, reiterated that the agreement gave improved market access for Korean manufacturers in Europe while export opportunities for European-based manufacturers are likely to remain strictly limited in South Korea.
“I remain worried that it will not allow us adequate access to the South Korean market, and will lock-in the one-sided flow of trade in vehicles between the European Union and Korea,” he said. “In fact, we’re already hearing some disconcerting rumours from Korea concerning the strengthening, rather than the weakening, on non-tariff trade barriers. This at a time when one of the country’s leading manufacturers is stating it expects its sales to increase by 40% in Europe over the next few years.
Odelle went on to say that, based on this, he thought the opening of discussions around the EU-Japan free trade agreement should not go ahead until the issue of non-tariff barriers to trade is fully addressed by the Japanese.
The EU is South Korea’s second largest trading partner after China, taking almost 20% of its exports. The Hyundai-Kia Automotive Group is already said to be realigning its logistics processes to respond to increased demand. Kia, for example, currently imports 42% of the cars it sells in Europe from South Korea.
In a statement Kia said unsurprisingly that, as a company that had grown and benefited from trade over the years, it welcomed the dismantling of tariff barriers between the EU and Korea. Contrary to the anxieties expressed by Odell, the carmaker also said it anticipated that the agreement would serve to promote balanced economic growth in both regions.
“We are confident that the EU-Korea FTA will benefit the EU economy through creation of new jobs, expanded investment throughout the region and increased purchases from local suppliers, while also allowing Kia to invest more in technology and services that will ultimately provide European consumers with more choices, more competitive products and better service.”
Korean automotive parts providers are also expected to raise their market share in the EU to more than 10% this year from 8.5% in 2010, according to the Korea Trade-Investment Promotion Agency.
The ratification is in a provisional stage, meaning that 99% of the agreement has gone into effect, and will go into full effect once all 27 member states of the EU have signed the pact.
South Korea already has ratified bilateral free trade agreements with Chile, India, Peru and Singapore, as well as with the ASEAN countries and EFTA (Liechtenstein, Iceland, Norway, and Switzerland).
Discussions on the ratification of the Korea-US agreement (KORUS) are continuing