S. Korea, EU fail to forge free trade deal

S. Korea, EU fail to forge free trade deal
(ATTN: ADDS statement from trade ministry in 3rd para)
PARIS, June 26 (Yonhap) -- South Korea and the European Union (EU) failed Friday
to finalize their free trade deal, but they agreed to try to conclude the deal in
the near future, South Korean officials here said.

South Korean Trade Minister Kim Jong-hoon and his EU counterpart Catherine Ashton
met here to narrow differences on some remaining sticky issues, including a
so-called duty drawback scheme and rules of origin, but failed to wrap up the
agreement.
"Both sides discussed the ways to conclude the deal, and they agreed to
accelerate moves to forge the deal based on the outcome of today's meeting,"
South Korea's Trade Ministry said in a statement.
In March, both sides announced that they had reached a tentative free trade
accord after nearly two years of negotiations with key issues of a "political
nature" such as duty drawback remaining unresolved.
The two sides said they would seek clearance to finalize the negotiations in the
near future.
Seoul is seeking a provision in the agreement that would allow import tariffs to
be returned to companies that use imported materials to make products for
exports. But Brussels opposes the provision, saying it would favor South Korean
exporters.
The EU does not allow duty drawbacks under its existing free trade accords with
Mexico and Chile.
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 over
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 currently imposes an eight percent import duty on European cars,
while the EU imposes a 10 percent duty on autos from South Korea.
In March, Seoul and Brussels reached a tentative agreement on eliminating or
phasing out tariffs on 96 percent of EU goods and 99 percent of South Korean
goods within three years. They have also agreed to abolish tariffs on all
industrial goods within five years after the deal takes effect.
The EU was South Korea's second-largest trading partner after China last year,
with two-way trade reaching more than US$98 billion.
If the pact is finalized, it will boost South Korea's exports by $11 billion and
gross domestic product by 3.08 percent, according to a forecast by the Korea
Institute for International Economic Policy.
South Korea, Asia's fourth-largest economy, reached a free trade deal with the
United States in March 2007, shortly before it launched talks with the EU, but
the deal has remained stalled in both legislatures.
sam@yna.co.kr
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