S. Korea, EU seek to finalize free trade deal

SEOUL, April 2 (Yonhap) -- South Korea and the European Union (EU) will seek to finalize their free trade accord later in the day, wrapping up negotiations that began in May 2007, officials said Thursday.

South Korean Trade Minister Kim Jong-hoon and his EU counterpart Catherine Ashton
will meet in London to narrow differences on some sticky issues, including a
so-called duty drawback scheme.
Both sides announced late last month that they had reached a provisional free
trade accord and would seek to finalize the deal this month.
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
exports. But Brussels opposes the provision, saying it would favor South Korean
exporters.
The EU does not allow duty drawbacks under its existing free trade accords with
Mexico and Chile.
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 last 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$98 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.