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192125
Thu, 06/30/2011 - 19:01
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https://oananews.org//node/192125
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Free trade pact with EU to shake up S. Korean economy
SEOUL (Yonhap) - The free trade pact with the European Union (EU) that went into effect Friday will open a new chapter for the South Korean economy as the export-driven economy taps deeper into the world's single largest economic bloc, experts said.
In May, South Korea's National Assembly approved the Korea-EU free trade agreement (FTA) signed in October last year. The European Parliament ratified the deal in February.
Overall, the deal is expected to boost bilateral trade between South Korea and the EU by as much as 20 percent in the long term, according to earlier estimates by the state-run Korea Institute for International Economic Policy (KIEP).
The KIEP said the free trade accord with the world's largest economic bloc would help boost South Korea's exports by US$11 billion and its economic growth by 5.6 percent while creating up to 253,000 jobs over the long haul.
"The deal will help boost our exports, especially sales of autos, electronic goods and textiles, to the European market," said Kim Hyung-joo, a researcher at LG Economic Research Institute. "It also means a wider and more affordable range of goods for South Korean consumers."
Trade between the 27-member economic bloc and South Korea totaled $92.2 billion last year, rising around 17 percent from 2009.
South Korean exports, which contribute more than 70 percent to the nation's economy, will be one of the major winners, according to experts.
Under the deal, Seoul and Brussels 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 have also agreed to abolish tariffs on most industrial goods within five years of the deal taking effect.
The FTA also permits duty drawback, which allows the tariffs levied on parts used by a manufacturer to make a product such as a car to be refunded when the final product is exported.
But the deal includes a provision that caps refundable tariffs should there be "dramatic changes in foreign outsourcing" within five years of the accord taking effect.
On the issue of country of origin rules, both sides agreed on the level of allowable foreign contents at 45 percent. In the cases of auto parts and some other products, the level is set at 50 percent.
Ahn Sun-kwon, an analyst at the Korea Economic Research Institute, said the free trade deal would help South Korea's auto and electronics companies expand their shares in the vast European market.
For example, Samsung Electronics Co., the world's largest maker of computer memory chips, will enjoy enormous gains when the EU cuts its main tariffs on electronic goods that are currently set as high as 14 percent.
Hyundai Motor Co., the world's fifth-largest automaker that sells one-third of its vehicles to the European market, will also benefit when the EU phases out a 10 percent tariff within five years.
Hyundai Motor is targeting sales of 500,000 units in the European market in 2013, a 40 percent increase from some 350,000 units sold last year.
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 more than 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 previously imposed an 8 percent import duty on European cars, while the EU levied a 10 percent duty on autos from South Korea.
Also, South Korea agreed to lift tariffs for some machinery, textiles and 38 other items after seven years.
The free trade deal with the EU, in addition, can assist South Korea to secure firm footing in the EU market, according to Kim Do-hoon, an analyst at the state-run Korea Institute for Industrial Economics and Trade. "South Korea's image as an 'advanced trading country' will be boosted as well," he said.
Other analysts predicted the deal would help South Korea attract more foreign investments and make business practices and management more transparent.
The FTA would also create new opportunities and markets for Korean goods, services and workers, while benefiting Korean consumers with more competitive pricing and better quality of goods and services in the Korean market.
However, some economists and opponents argue the deal would devastate the livelihoods of South Korean farmers and the poor, and worsen the economic polarization between the haves and have-nots.
Hit by an influx of cheaper EU agricultural goods, about 4 million farmers in South Korea, already a net importer of food, will be the biggest victims, they said.
According to state-run institutes such as the Korea Rural Economic Institute, under the free trade deal, the country's agriculture sector is expected to suffer a loss of as much as 2.3 trillion won over the long haul.
In May, South Korea's National Assembly approved the Korea-EU free trade agreement (FTA) signed in October last year. The European Parliament ratified the deal in February.
Overall, the deal is expected to boost bilateral trade between South Korea and the EU by as much as 20 percent in the long term, according to earlier estimates by the state-run Korea Institute for International Economic Policy (KIEP).
The KIEP said the free trade accord with the world's largest economic bloc would help boost South Korea's exports by US$11 billion and its economic growth by 5.6 percent while creating up to 253,000 jobs over the long haul.
"The deal will help boost our exports, especially sales of autos, electronic goods and textiles, to the European market," said Kim Hyung-joo, a researcher at LG Economic Research Institute. "It also means a wider and more affordable range of goods for South Korean consumers."
Trade between the 27-member economic bloc and South Korea totaled $92.2 billion last year, rising around 17 percent from 2009.
South Korean exports, which contribute more than 70 percent to the nation's economy, will be one of the major winners, according to experts.
Under the deal, Seoul and Brussels 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 have also agreed to abolish tariffs on most industrial goods within five years of the deal taking effect.
The FTA also permits duty drawback, which allows the tariffs levied on parts used by a manufacturer to make a product such as a car to be refunded when the final product is exported.
But the deal includes a provision that caps refundable tariffs should there be "dramatic changes in foreign outsourcing" within five years of the accord taking effect.
On the issue of country of origin rules, both sides agreed on the level of allowable foreign contents at 45 percent. In the cases of auto parts and some other products, the level is set at 50 percent.
Ahn Sun-kwon, an analyst at the Korea Economic Research Institute, said the free trade deal would help South Korea's auto and electronics companies expand their shares in the vast European market.
For example, Samsung Electronics Co., the world's largest maker of computer memory chips, will enjoy enormous gains when the EU cuts its main tariffs on electronic goods that are currently set as high as 14 percent.
Hyundai Motor Co., the world's fifth-largest automaker that sells one-third of its vehicles to the European market, will also benefit when the EU phases out a 10 percent tariff within five years.
Hyundai Motor is targeting sales of 500,000 units in the European market in 2013, a 40 percent increase from some 350,000 units sold last year.
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 more than 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 previously imposed an 8 percent import duty on European cars, while the EU levied a 10 percent duty on autos from South Korea.
Also, South Korea agreed to lift tariffs for some machinery, textiles and 38 other items after seven years.
The free trade deal with the EU, in addition, can assist South Korea to secure firm footing in the EU market, according to Kim Do-hoon, an analyst at the state-run Korea Institute for Industrial Economics and Trade. "South Korea's image as an 'advanced trading country' will be boosted as well," he said.
Other analysts predicted the deal would help South Korea attract more foreign investments and make business practices and management more transparent.
The FTA would also create new opportunities and markets for Korean goods, services and workers, while benefiting Korean consumers with more competitive pricing and better quality of goods and services in the Korean market.
However, some economists and opponents argue the deal would devastate the livelihoods of South Korean farmers and the poor, and worsen the economic polarization between the haves and have-nots.
Hit by an influx of cheaper EU agricultural goods, about 4 million farmers in South Korea, already a net importer of food, will be the biggest victims, they said.
According to state-run institutes such as the Korea Rural Economic Institute, under the free trade deal, the country's agriculture sector is expected to suffer a loss of as much as 2.3 trillion won over the long haul.
