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Korea-EU FTA to Facilitate Exports of South Korean Auto Parts to the EU
As the European Parliament has recently approved the free trade pact with South Korea, it is expected that a
free trade pact between South Korea and the EU will bring great economic benefit to both sides.
Although the deal also still needs to be ratified by South Korea’s parliament in order to come into effect, the
South Korea-EU deal is expected to boost bilateral trade by as much as 20 percent in the long term, according to
estimates by the state-run Korea Institute for International Economic Policy (KIEP).
In 2009, two-way trade totaled US$78.8 billion with South Korea gaining a surplus of $14.38 billion, following
their bilateral trade $98.4billion.
Under the deal, the two sides will 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 reportedly have also agreed to abolish
tariffs on most industrial goods within five years of the deal taking effect.
Among the most sensitive issues was the auto trade. If the historic deal is implemented effect, 10-22% of tariffs
by EU will be eliminated within 3 to 5 years, facilitating the presence of Korean automobiles products in the EU
market, thereby increasing the export competitiveness of the South Korean companies.
Thus, it is expected that South Korea can secure a favorable position compared to competitors such as Japan
and the U.S.A., which have not yet signed FTAs with the EU. Especially, when the deal goes into effect,
automotives parts can be free from 4.5 percent of EU tariffs, thereby allowing the auto part exports which stood at
US$31 billion as of 2010 to be increased. Currently South Korea imposes an 8 percent import duty on European
cars, while the EU imposes a 10 percent duty on autos from South Korea.
According to official data released by the Korea Association of Machinery Industry (KOAMI), the nation’s
automobile production for 2011 is projected to grow by 4.8% from a year earlier to 4,400,000 vehicles on the back of
stable increase in both domestic sales and exports.
Despite the outlook of slow economic growth, domestic sales of vehicles during this year are predicted to gain
3.4 percent, driven by the stabilizing pace of the domestic economy and employment.
Even though some negative factors including increasingly weakening competitive-price due to the appreciating
Korean won and expanding overseas production, exports for this year are forecasted to climb 5.5 percent from the
previous year to 2,900,000 vehicles, establishing a new record, bolstered by the continued recovery of the global
auto industry, improved quality and brand value on Korean cars, introduction of export-oriented models and
reinforced competitiveness of Korean cars thanks to the nation-EU FTA.
Exports during the same period in 2011 stood at 253,300 vehicles, up 41.8 percent from the same period of last
year, with the help of the global economic recovery, increased export-oriented models, and the improved quality,
reliability and brand image of Korean cars.
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