Trade Boosted by Five Years of EU-Korea FTA
Five years ago July 1, the Free Trade Agreement (FTA) between the European Union and South Korea was put into place, helping to turn an EU trade deficit into a trade surplus.
EU exports to South Korea have increased by 55 percent since the trade deal between the two partners entered into force in 2011, and European companies have saved $3.1 billion in eliminated or discounted customs duties. Bilateral trade in goods between the EU and South Korea has been growing constantly since 2011, and reached a record level of $100 billion in 2015.
These are some of the findings of a recently-released European Commission report to mark the five-year anniversary of the trade deal with South Korea.
“The numbers speak for themselves,” said Cecilia Malmström, EU Commissioner for Trade. “The evidence of our agreement with Korea should help convince the unconvinced that Europe benefits greatly from more free trade. When our companies can export more easily, or when money saved from scrapped customs duties can be reinvested in company development, it spurs European growth.”
South Korea is now one of the EU’s top ten export markets. In addition to more traditional exports of machinery, transport equipment, and chemical products, the agreement has opened new export opportunities for many small European businesses in such diverse sectors as food and drink, pottery, packaging, sports equipment, and bookbinding technology.
Exports of EU products that previously faced particularly high duty rates—such as certain agricultural products—now benefit from discounted tariffs, and their exports have increased by over 70 percent. Other sectors experienced an even more significant improvement. For instance, the EU’s car sales in South Korea tripled over the five-year period. In addition, EU companies managed to add 11 percent to the value of services provided in South Korea and expand bilateral investments by 35 percent.
The European Commission continues to monitor the situation as regards potentially sensitive sectors, such as textiles, cars, and electronic products, and keeps a close eye on the impact of trade on sustainable development. In this context, the EU and Korea also cooperate on environmental issues and labor rights.
The agreement also includes guarantees with regard to competition policy, the transparency of regulatory regimes, and the protection of intellectual property rights. The agreement allows EU authorities to continue improving trading conditions for European companies by raising potential problems in several implementing committees created under the FTA.
The European Commission has agreed with South Korea to explore possible amendments to the existing deal to make it correspond even better to expectations of stakeholders on both sides, for example to enable European companies to export through their logistics hubs in Asia and at the same time benefit from the FTA.
More than 35 percent of European companies exporting to Korea fail to ask for the privileged treatment to which they are entitled. This shows that EU member states have a role to play in informing companies about the benefits of the EU trade deals already in force.