EU Member States Sign Ambitious FTA with South Korea

In 2009, The EC concluded an FTA with South Korea- a deal which has now been signed by all EU Member States ahead of pending Parliamentary procedures, ratification by all EU Member States according to their own laws and procedures and subsequent provisional application in July 2011. 

The first interesting observation from the EU-South Korea deal is that the EU’s FTAs are increasingly “americanized” as they resemble templates applied by the US based on NAFTA. In addition, the agreement will make major advances in areas such as intellectual property, government procurement, competition policy and trade and sustainable development.

South Korea was designated a priority FTA partner by the EC in the Global Europe trade policy strategy of 2006, given that South Korea’s economy (the 14th largest in the world) was the EU's fourth most important trading partner behind the US, Japan and China. It is therefore not surprising that the EC-South Korea FTA is the most comprehensive FTA the EU has concluded which is expected to open several billion euros worth of new opportunities for EU companies especially in the services sectors. 

The Agreement eliminates almost all tariffs in goods trade while in services, the FTA will offer the EU commitments on services on a par with those offered by South Korea in the draft FTA with the US. However the EU-South Korea deal also goes beyond commitments South Korea undertook with the US in those sectors of specific EU interest. The United States and the Republic of Korea signed the United States-Korea Free Trade Agreement (KORUS FTA) on June 30, 2007, however the Agreement is still pending Congressional approval. If approved, the Agreement would be the United States' most commercially significant free trade agreement in more than 16 years.

In practical terms, the FTA between South Korea and the EU will eliminate 98.7% of duties in trade value for both industrial and agricultural products within 5 years from the entry into force of the FTA. By the end of the transitional periods, duties will be eliminated on almost all products, with a few exceptions in the agricultural sector.

In comparison with the ACP, EC offer was that as of 1st January 2008, all goods originating from an ACP country or region that negotiated an interim EPA, would enjoy duty free quota free access to EU markets, except for rice and sugar where access to EU markets will be duty free from 2010 and 2015 respectively.

In services, the EC-South Korea FTA will be by far the most ambitious services FTA ever concluded by the EU, which significantly improves South Korea’s current WTO-GATS commitments including its offer in the ongoing DDA negotiations. The agreement additionally covers the liberalization of investment, both in services and most non-services sectors.  In practical terms, EU broadcasters (telephone and TV) will be able to operate directly cross-border into South Korea, thus avoiding the obligation to liaise with a Korean operator. The FTA also allows: 100% indirect ownership in the Korean telecommunication sector; full market access for EU's shipping firms and the right of establishment in South Korea; substantial access to Korean market to all EU financial firms, with ability to freely transfer data from their branches and affiliates to their headquarters;  access for EU providers of international express delivery services to the Korean market and allows European lawyers to open offices in South Korea to advise foreign investors or Korean clients on non-Korean law. 

What is interesting to note in the EU-South Korea services, investment and e-commerce chapter is that, the text is generally similar to the ambitious EC Template presented to Sub Saharan African economies in the context of the EPA negotiations. This is despite the fact that the services trade output of all SSA economies combined cannot be compared to that of South Korea alone.

The full text of the Agreement can be obtained here.