The first of a two part analysis on Europe’s relations with South Korea.
This in depth interview by Pascal Goodman is on a vital Free Trade Agreement currently being negotiated in Seoul. As economic power shifts east, South Korea has boomed, with top brands such as Samsung, Hyundai and Kia all looking for new opportunities in Europe. For Europe, this marks a new area of foreign policy and could lead to major business deals being signed. Due to the commercial and political sensitivities involved, we have agreed not to name the EU official being interviewed.
Pascal Goodman: How has the provisional implementation of the Free Trade Agreement gone so far, after its ratification on 1st July 2011?
It is now basically left to each side party of the agreement to take the necessary steps for the implementation. This includes taking the appropriate legislative and administrative steps, updating rules of origin products with EU and Korean customs officials, etc. All considering, huge steps have been taken in the right direction and what needed to be done has been done.
In terms of impact, there has been a notable surge in imports of agricultural products from the EU. From a communication point of view, awareness has risen in Korea mostly through the media and marketing.
In order to respect the Free Trade Agreement, rules of origin have to be respected. This means exporters need to obtain the appropriate level of approval before exporting to the EU. In particular, a product has to be sufficiently transformed so as to be considered to have originated in Korea and then re-exported to the EU. A minimum percentage of the added value of the product needs to be made in Korea to guarantee its originating status vis à vis EU customs. This therefore requires exporters to be extremely thorough with their products and the process before export.
To date, not all exporters have initiated the necessary review on rules of origin but the advantage is that they can make retroactive claims. However, many of the biggest Korean companies (chaebol) e.g. Samsung, LG, Hyundai have done everything required and have dedicated whole legal teams to sorting this aspect out in the previous months.
We are currently at the phase of things being put into place and this may last anywhere from six months to a year from its date of ratification. In brief, everything is in place and EU and Korean negotiators alike are learning.
PG: How are the restrictions being applied to EU products? What is the current status of these restrictions?
It is a recurring theme amongst trade negotiators and diplomats that ‘no negotiation is ever easy’ and this is particularly true of free trade agreements. This free trade agreement was by no means an easy one with Korean negotiators being particularly tough, yet intelligent. The end result however is a ‘win-win’ package and the concessions balanced out evenly. The EU can withstand more competition from a market such as Korea and it was in the mutual interest of both parties to reach the most far-reaching agreement. This was achieved and the negotiations were fruitful.
PG: During the negotiations in Brussels and in particular in the European Parliament, the issues of labour standards and trade union affiliation were addressed. Any trade negotiation with Asia being sensitive politically on this issue, have there been any further concerns raised as of now?
There is no legal means of blocking labour standards in the FTA. There is, however, a mechanism of consultation of civil society being put into place on both sides, though this is not yet an issue.
PG: How does this FTA set a precedent for the next decade of EU trade policy, considering it is the first ever to be ratified under the Lisbon Treaty institutions?
Many free trade agreements are currently ongoing. This one is the benchmark, the example we want to replicate. And it has already started to influence other negotiations. This doesn’t mean we will be able to replicate everything exactly as specificities vary according to the countries being dealt with, but it is certainly the template.
PG: How come Korea was chosen as the first country in this trade policy rather than, say, Japan?
It just happened to be that Korea were there and willing to negotiate better deals for its exports. There is also the foresight of EU officials, who worked so hard to make the model work. Even though the Global Europe agenda has been reviewed, it is still essential for the EU to negotiate global agreements to remain competitive.
PG: What of non-tariff barriers (NTBs) and technical barriers to trade (TBTs)?
However for products such as electronics or automobiles, they will need to be equivalence of technical standards or mutual regulations of certaintest certificates.
PG: What words would you want to conclude on?
The implementation phase is now. Laws regulating the FTA’s implementation are being adopted on both sides and the EU Delegation in Seoul is helping companies adopt it. Most NTBs stem from differences of view on standards and they have to face new challenges. An increased cooperation and collaboration is what is needed and it is happening now. It is during the implementation phase that one is able to see ‘partners’ and ‘enemies’. The EU is the second biggest trade partner with Korea, after China, and remains in terms of trade, the biggest trading bloc in the world. It is to the advantage of both partners to ensure an efficient and diligent implementation of the FTA.