Europe aims for S Korean trade pact

Europe aims for S Korean trade pact

By Tony Barber in Brussels

Published: May 18 2008 18:20 | Last updated: May 18 2008 18:20

The European Union is setting its sights on a trade deal with South Korea that would bring it closer to its long-term goal of strengthening the EU’s political and economic presence in Asia.

After their seventh round of talks since May 2007, EU and South Korean negotiators said in Brussels last week that they would try to conclude a trade pact by the end of this year.

If successful, the deal would be the EU’s first such agreement with an Asian country and would boost its efforts to reach similar arrangements with India and the Association of South East Asian Nations (Asean).

The EU is the largest foreign investor in South Korea and, after China, is the second largest destination for South Korean exports. Trade between the two sides amounted to €61bn ($95bn, £49bn) in 2006.

The EU and Seoul began their talks soon after the latter struck a trade deal with Washington that, in theory, gave US businesses a competitive edge over their European rivals.

Bilateral agreements of this kind have become a focus of EU and US strategy as the prospects for a World Trade Organisation deal on liberalising global trade have grown more distant.

European negotiators have a strong incentive to reach a quick deal with Seoul because if the Lisbon treaty on EU institutional reform comes into effect as planned next January, the 27-nation bloc’s trade policies may be significantly affected.

Under the treaty, the European parliament will be able to approve or reject trade deals, giving elected politicians power in an arena hitherto reserved largely for European Commission trade specialists.

From an EU perspective, the main obstacle to an agreement with South Korea is an assortment of barriers to access to the latter’s car market. EU negotiators said last week: “The gap in the respective positions remains. However, both sides recognise the need to come to a common understanding.”

The two sides have made more progress on “rules of origin” – the question of whether a product should qualify for lower import duties if much of its content is made outside a state that is party to the trade deal.

Seoul has been pressing the EU to relax its rule that at least 60 per cent of the value of a finished item should come from South Korea itself. The EU said last week that it would offer South Korea a compromise.

The EU’s talks with India, meanwhile, have yet to overcome disputes over services, intellectual property rights and government procurement.

Discussions with Asean have been affected by events in Burma. But EU negotiators say they hope to strike a trade deal by the end of 2009.