By Pak Si-soo
Korea is taking a wait-and-see attitude over France’s move to activate a “safeguard” clause of the Korea-EU free trade agreement to protect the latter’s auto industries from sudden surges of Korean car imports.
“We are closely monitoring how the situation develops. But there is no countermeasure in consideration at the moment since no concrete action has so far been taken by France,” a spokesman for the Ministry of Foreign Affairs and Trade (MOFAT) told The Korea Times, Thursday.
This comment came one day after the French industry minister slammed what he called “acts of unfair competition” by carmakers from Korea that have rapidly boosted their market share in Europe following the effectuation of Korea-EU FTA last year. Within the framework of this deal, Arnaud Montebourg, the minister, told reporters Wednesday, “We are justified in demanding monitoring measures which may enable us to request a safeguard clause.”
A safeguard clause in the FTA allows either of the two parties to call for a return of some tariffs to protect sensitive industries from a sudden spike in imports.
Under the FTA signed in October 2010, the EU’s 10 percent tariff on imported Korean cars was reduced by only 1.7 percentage points for cars with engines below 1,500cc and 3 percentage points for those over 1,500cc.
After the FTA came into effect in July 2011, through March 2012 vehicle exports to Europe rose 67 percent to 335,320, according to the Korea Customs Office.
The French minister’s complaint came at a time when French carmakers are facing increasing competition from Korean automakers including Hyundai and Kia. Hyundai’s sales grew 12 percent last year in Europe while Kia’s sales jumped 11 percent.
Among French carmakers struggling with the FTA’s fallout are PSA Peugeot Citroen and Renault. Analysts said France recently presented a rescue plan for the country’s struggling auto industry, whose plight was highlighted by Peugeo’s results Wednesday showing a first half net loss of 819 million euros ($989 million).
It was not the first time for the EU to vent frustration over the FTA.
In June, a group of European carmakers claimed the FTA solely contributed to a sharp rise in Korean car sales in Europe. In reaction, the Korea Automobile Manufacturers Association (KAMA) refuted it, saying the allegation was “misleading” on the positive effects of the FTA and provides a “biased and distorted” view.
“The increase was not wholly owing to the Korea-EU FTA,” KAMA said, adding that the export hike is attributable to combined reasons, such as new model releases, improved consumer confidence toward Korean cars, and enhanced marketing activities by the car makers among others.
Several European auto company executives met in Brussels in early May to discuss the trade agreement with Korea and how they should respond to the import increase. They also started lobbying lawmakers to revise the trade pact.
The deepening financial crisis in Europe has left automakers there, including Fiat, Renault, and the European operations of Ford Motor and General Motors mired with excessive production capacity as well as losses or declining profits.
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