ID :
70219
Mon, 07/13/2009 - 20:22
Auther :
Shortlink :
https://oananews.org//node/70219
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(News Focus) Free trade deal with EU set to shake up S. Korean economy
SEOUL, July 13 (Yonhap) -- South Korea and the European Union (EU) took a big
step toward boosting their economic relations on Monday by virtually concluding a
free trade agreement (FTA) that will likely have a great impact on the Korean
economy.
It remains unclear when the deal, which still requires approval from the
legislative bodies of both sides, will take effect, but there are few doubts that
the agreement will lead to a massive and long-term shakeup of the world's
15th-largest economy, analysts said.
"The deal will help boost our exports, especially sales of autos, to the European
market," said Kim Hyung-joo, a researcher at LG Economic Research Institute.
"Additionally, the free trade deal will help shield South Korea from emerging
trade protectionism worldwide," he said.
Overall, the deal is expected to boost bilateral trade between South Korea and
the EU by as much as 20 percent, according to estimates by the state-run Korea
Institute for International Economic Policy (KIEP).
The EU was South Korea's second-largest trading partner after China last year. In
2008, two-way trade totaled US$98.4 billion with South Korea enjoying a surplus
of $18.4 billion.
The KIEP said the free trade accord with the world's single and largest economic
bloc will help boost S. Korea's exports by $11 billion and its economic growth by
more than 3 percent, and create up to 600,000 jobs over the long haul.
South Korean exports, which contribute more than 70 percent to the nation's
economy, will be one of the major winners, according to experts.
Under the deal, Seoul and Brussels eliminate or phase out tariffs on 96 percent
of EU goods and 99 percent of South Korean goods within three years after the
accord takes effect. They have also agreed to abolish tariffs on most industrial
goods within five years after the deal takes effect.
The accord also permits duty drawback which allows the tariffs levied on parts
used by manufacturer to make a product such as car to be refunded when the final
product is exported.
But the deal includes a provision that caps refundable tariffs should there be a
"dramatic changes in foreign outsourcing by Korean manufacturers" within five
years of the accord taking effect.
On the issue of rules of origin, both sides agreed on the level of allowable
foreign contents at 45 percent. In case of auto parts and others, the level is
set at 50 percent.
Ahn Sun-kwon, an analyst at Korea Economic Research Institute, said the free
trade deal would help South Korea's auto and electronics companies to expand
their shares in the European market.
For example, Samsung Electronics Co., the world's largest maker of computer
memory chips, will enjoy big gains when the EU cuts its main tariffs on
electronic goods, which are as high as 14 percent, under the deal.
Hyundai Motor Co., the world's sixth-largest automaker that sells one-third of
its vehicles to the European market, will also benefit when the EU phases out a
10 percent tariff within five years.
One of the most sensitive issues has been auto trade. After much wrangling, the
two sides agreed to eliminate tariffs on cars with an engine displacement of over
1.5 liters within three years. Tariffs for smaller cars with an engine
displacement of less than 1.5 liters would be lifted after five years.
South Korea currently imposes an 8 percent import duty on European cars, while
the EU imposes a 10 percent duty on autos from South Korea.
Also, South Korea agreed to lift tariffs for some machinery, textile and 38 other
items after seven years.
Following a similar free trade deal with the U.S., another deal with the EU would
help South Korea to secure a firm footing in the EU market, according to Kim
Do-hoon, an analyst at the state-run Korea Institute for Industrial Economics and
Trade (KIET). "South Korea's image as an 'advanced trading country' will be
boosted as well," he said.
Analysts also said the deal would help South Korea, which is increasingly losing
growth momentum, attract more foreign investment and make business practices and
management more transparent.
The EU was the biggest investor for South Korea last year with its accumulated
investment totaling $44.82 billion.
The deal would also create new opportunities and markets for Korean goods,
services and workers, while benefiting Korean consumers with more competitive
pricing and quality for goods and services in the Korean market.
However, some economists and opponents argue the deal would devastate the
livelihoods of South Korean farmers and the poor and worsen the economic
polarization between the haves and have-nots.
Hit by an influx of cheaper EU agricultural goods, about four million farmers in
South Korea, already a net importer of food, will be the biggest victims.
According to the KIEP, the country's agriculture sector is expected to suffer 300
billion won worth of damage if the deal takes effect.
sam@yna.co.kr
(END)
step toward boosting their economic relations on Monday by virtually concluding a
free trade agreement (FTA) that will likely have a great impact on the Korean
economy.
It remains unclear when the deal, which still requires approval from the
legislative bodies of both sides, will take effect, but there are few doubts that
the agreement will lead to a massive and long-term shakeup of the world's
15th-largest economy, analysts said.
"The deal will help boost our exports, especially sales of autos, to the European
market," said Kim Hyung-joo, a researcher at LG Economic Research Institute.
"Additionally, the free trade deal will help shield South Korea from emerging
trade protectionism worldwide," he said.
Overall, the deal is expected to boost bilateral trade between South Korea and
the EU by as much as 20 percent, according to estimates by the state-run Korea
Institute for International Economic Policy (KIEP).
The EU was South Korea's second-largest trading partner after China last year. In
2008, two-way trade totaled US$98.4 billion with South Korea enjoying a surplus
of $18.4 billion.
The KIEP said the free trade accord with the world's single and largest economic
bloc will help boost S. Korea's exports by $11 billion and its economic growth by
more than 3 percent, and create up to 600,000 jobs over the long haul.
South Korean exports, which contribute more than 70 percent to the nation's
economy, will be one of the major winners, according to experts.
Under the deal, Seoul and Brussels eliminate or phase out tariffs on 96 percent
of EU goods and 99 percent of South Korean goods within three years after the
accord takes effect. They have also agreed to abolish tariffs on most industrial
goods within five years after the deal takes effect.
The accord also permits duty drawback which allows the tariffs levied on parts
used by manufacturer to make a product such as car to be refunded when the final
product is exported.
But the deal includes a provision that caps refundable tariffs should there be a
"dramatic changes in foreign outsourcing by Korean manufacturers" within five
years of the accord taking effect.
On the issue of rules of origin, both sides agreed on the level of allowable
foreign contents at 45 percent. In case of auto parts and others, the level is
set at 50 percent.
Ahn Sun-kwon, an analyst at Korea Economic Research Institute, said the free
trade deal would help South Korea's auto and electronics companies to expand
their shares in the European market.
For example, Samsung Electronics Co., the world's largest maker of computer
memory chips, will enjoy big gains when the EU cuts its main tariffs on
electronic goods, which are as high as 14 percent, under the deal.
Hyundai Motor Co., the world's sixth-largest automaker that sells one-third of
its vehicles to the European market, will also benefit when the EU phases out a
10 percent tariff within five years.
One of the most sensitive issues has been auto trade. After much wrangling, the
two sides agreed to eliminate tariffs on cars with an engine displacement of over
1.5 liters within three years. Tariffs for smaller cars with an engine
displacement of less than 1.5 liters would be lifted after five years.
South Korea currently imposes an 8 percent import duty on European cars, while
the EU imposes a 10 percent duty on autos from South Korea.
Also, South Korea agreed to lift tariffs for some machinery, textile and 38 other
items after seven years.
Following a similar free trade deal with the U.S., another deal with the EU would
help South Korea to secure a firm footing in the EU market, according to Kim
Do-hoon, an analyst at the state-run Korea Institute for Industrial Economics and
Trade (KIET). "South Korea's image as an 'advanced trading country' will be
boosted as well," he said.
Analysts also said the deal would help South Korea, which is increasingly losing
growth momentum, attract more foreign investment and make business practices and
management more transparent.
The EU was the biggest investor for South Korea last year with its accumulated
investment totaling $44.82 billion.
The deal would also create new opportunities and markets for Korean goods,
services and workers, while benefiting Korean consumers with more competitive
pricing and quality for goods and services in the Korean market.
However, some economists and opponents argue the deal would devastate the
livelihoods of South Korean farmers and the poor and worsen the economic
polarization between the haves and have-nots.
Hit by an influx of cheaper EU agricultural goods, about four million farmers in
South Korea, already a net importer of food, will be the biggest victims.
According to the KIEP, the country's agriculture sector is expected to suffer 300
billion won worth of damage if the deal takes effect.
sam@yna.co.kr
(END)
