EU carmakers try to change FTA
Most Koreans think the nation’s free trade agreement (FTA) with the European Union is water under the bridge _ negotiations over as it went into effect last July and there is no room for revision.
By contrast, some European companies appear to think differently, under the belief that the free trade deal benefits Korean competitors more, particularly in such segments as automobiles.
European automakers reportedly met last week in Brussels to discuss the FTA with Korea with the aim of reviewing the pact and trying to make adjustments.
``The meetings led to some positive developments on nontariff barriers in the automotive sector,’’ EU spokeswoman Helene Banner was quoted as saying by the Wall Street Journal.
They seem to think that the FTA is unbalanced, overly favoring Korean players at the expense of their share and bottom line at a time when the market there struggles in the aftermath of the financial crisis.
Korean carmakers saw shipments of their vehicles to European nations jump by 67 percent from July through March but those from Europe to Korea edged up just 7 percent during the period.
The FTA has played a big role in the drastically improved performances of Korea-made cars because the tariffs are supposed be abolished by 2016 from the previous norm of 10 percent.
Currently, the European Union levies tariffs of just 7 percent on Korean cars with an engine capacity of more than 1.5 liters and the figure will be cut further to 4 percent in July.
Along the same lines, Korea will also eliminate all tariffs for European cars in four years from 8 percent before the effectuation of the FTA but that hasn’t particularly helped European automakers’ business.
The country’s business bellwether Hyundai Motor Group has reaped the biggest benefits fromthe FTA as its two flagship subsidiaries Hyundai Motor and Kia Motors have fared well.
During the first quarter of this year, Hyundai’s sales rose by 12.5 percent in Europea from the corresponding period in 2011 while those of Kia rocketed by 24.6 percent.
Representatives of European carmakers want to revise the FTA so that the bilateral deal will include the so-called snap-back option, as is the case with the FTA between Korea and the United States.
Under the provision, any party is allowed to take fixed retaliatory measures like imposing tariffs in the case the trade volume of certain items becomes overly lopsided.
Yet Korea’s trade minister rebuffed such requests as ones which cannot be accepted.
``We have yet to receive any formal demand from the European Union and we don’t think it will do that at a time when the FTA with us began less than a year ago,’’ Trade Minister Director General Choi Dong-gyou said.
``It is a complaint of some automakers, not the official stance of the EU. As there is no problem in the FTA between the two parties, we wouldn’t accept any requests for its renegotiation.’’
When contacted, Hyundai Motor Group refused to make any comments on the thorny issue, contending that it cannot be dealt with by private companies.
Traditionally, Hyundai Motor and Kia Motors have dominated the local market, which has caused complaints from foreign brands that the Seoul administration has maintained non-tariff barriers.
Yet, things have changed of late as German automakers including BMW and Mercedes-Benz have chalked up notable success in the past several years in Asia’s fourth-largest economy.
The 20-plus foreign brands here currently combine to account for around 10 percent and the proportion is expected to increase down the road.