More talks needed to conclude S. Korea-EU FTA: official

SEOUL, March 26 (Yonhap) -- South Korea and the European Union (EU) will require
further talks on a so-called duty drawback scheme before finalizing their free
trade accord, Seoul's top trade official said Thursday.
Both sides announced earlier in the week that they reached a provisional free
trade accord after wrapping up negotiations that began in 2007, and would seek to
finalize the deal early next month.
"Duty drawbacks are allowed under the World Trade Organization, and those
countries which are competing with us in the European market also have this
scheme," South Korean Trade Minister Kim Jong-hoon said on a local radio program.
He said more talks are necessary to narrow differences between the two sides on
the issue. Lee is scheduled to meet his EU counterpart Catherine Ashton in London
on April 2 to finalize the deal.
Seoul is seeking a provision in the agreement that would allow it to return
import tariffs to companies that use imported materials to make products for
export. But Brussels opposes the provision saying it would favor South Korean
exporters.
The EU does not allow duty drawbacks under existing free trade accords with
Mexico and Chile.
At next month's minister-level meeting, the two sides are also expected to narrow
differences on rules of origin, with both reportedly agreeing that a product is
considered manufactured by a trading partner only if at least 45 percent of the
finished item is made in that country.
During a high-level meeting earlier this month, Seoul and Brussels reached a
tentative agreement on eliminating or phasing out tariffs on 96 percent of EU
goods and 99 percent of South Korean goods within three years. They have also
agreed to abolish tariffs on all industrial goods within five years after the
deal takes effect.
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 eight percent import duty on European cars,
while the EU imposes a 10 percent duty on autos from South Korea.
The EU was South Korea's second-largest trading partner after China last year,
with two-way trade reaching more than US$90 billion.
If the pact is finalized, it will boost South Korea's exports by $11 billion and
gross domestic product by 3.08 percent, according to a forecast by the Korea
Institute for International Economic Policy.
South Korea, Asia's fourth-largest economy, reached a free trade deal with the
United States in March 2007, shortly before it launched talks with the EU, but
the deal has remained stalled in both legislatures.
sam@yna.co.kr
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