By Lee Hyo-sik
Korea has paved the way to emerge as a global free trade agreement (FTA) hub by establishing close trade and investment relations with the European Union (EU).
The trade deal is expected to provide a significant boost to Asia's fourth-largest economy to jumpstart its growth momentum and upgrade its international status, the Ministry of Strategy and Finance said Thursday.
On Thursday, Trade Minister Kim Jong-hoon and his EU counterpart Catherine Ashton initialed the bilateral FTA in Belgium. They plan to officially sign the trade pact within the first half of 2010 after completing the translation of the text into 23 languages spoken within the 27-member European trade bloc. The two sides concluded negotiations in July.
The EU is Korea's second-largest trading partner after China and its largest foreign investor. Korea is the European Union's eighth-largest trade partner, with bilateral trade reaching $98.4 billion in 2008. The pact will give Korea priority access to the world's largest economic zone, while the EU will gain a strong foothold in the rapidly growing Asian region.
"The Korea-EU FTA will significantly boost our efforts to become a truly global free trade hub, following our signing of the accords with the United States, India and ASEAN. It will offer local businesses greater access to the world's largest market and upgrade Korea's standing abroad, while revitalizing our growth momentum," the ministry said in a report.
The trade agreement will also improve consumer choice here by lowering the prices of imported and domestically-produced goods and services, while improving the overall quality of life, it said.
"It will deliver a strong message to the U.S., which has been reluctant to ratify the trade agreement with us."
On the economic front, the Korea-EU FTA will lower tariffs on Korea-made goods in Europe and help the Asian economy attract more investment from European investors.
"Automakers and other manufacturing sectors here will greatly benefit from the accord thanks to lower tariff rates, selling their products at cheaper prices and expanding market share in Europe. On the other hand, the domestic agricultural sector will likely sustain losses, but the extent of the damage will be limited to dairy farmers," the ministry said.
In the telecom, finance and other services sectors, the trade pact will create a more market-oriented environment here, enabling local businesses to learn advanced management techniques and skills from their EU counterparts.
"The opening of the local services industry will strengthen the competitiveness of service providers. At the same time, more well-paying jobs will be created in the manufacturing and services areas through capital accumulation and improvement in productivity as a result of increased investment from the EU."
Korean consumers will be able to purchase EU products at much cheaper prices through the abolishment or the reduction of tariffs, the ministry said, adding that an 8-percent tariff on European cars will be abolished within five years. Import duties imposed on whisky, cosmetics and dairy products will be phased out within three to 10 years.
In a bid to aid the agricultural and other industrial sectors expected to suffer damage from the signing of the Korea-EU FTA, the government will introduce a range of support measures to enhance the competitiveness of farmers, fishermen and the small-scale self-employed.
"We will provide low-interest rate loans and consulting services to those who will be negatively affected by the trade agreement. We will also prepare a host of steps to strengthen the competitiveness of the vulnerable industries. After consulting with private experts and interested parties, we will announce a comprehensive package of measures after the official signing early next year," a ministry official said.