Car complaints trigger Korea-EU talks
By Park Si-soo
Korean trade authorities are engaged with their European Union counterparts, who are mulling the possibility of reintroducing duties on Korean cars shipped to Europe following a French complaint.
Since the Korea-EU free trade agreement (FTA) went into effect last July, the EU has lowered its previous 10 percent tariff on imported passenger cars with engines below 1,500cc by 1.7 percentage points and by 3 percentage points for vehicles with bigger engines.
Last week, France made a request to the European Commission, the EU’s executive body, that Korean-made vehicles be on a surveillance list, which could trigger a safeguard measure against imports from Korea in a worst-case scenario. The commission is set to announce early next month whether to accept France's claim.
Officials in Seoul, however, say that the possibility of the EU activating a safeguard clause seems low, considering the huge political and economic ramifications it could bring.
Since the free trade pact started, French carmakers have increasingly lost domestic market share to Korean rivals like Hyundai and Kia.
``The request by France to take prior surveillance measures is obviously an attempt at reintroducing the full level of duties on Korean cars. There are a lot of issues to be debated between us and the EU and we are actively engaging in talks,” said a spokesman for the Ministry of Foreign Affairs and Trade.
``It’s too early to tell how the talks will develop, but I don’t think the EU will allow the use of safeguard against Korean cars. The EU will make a formal response to France’s request by early next month.’’
EU representatives in Seoul declined to discuss the issue in detail, other than saying, ``we are carefully reviewing it.”
Last month, French industry minister Arnaud Montebourg slammed what he called “acts of unfair competition” by carmakers from Korea under the FTA. Hyundai’s sales grew 12 percent last year in Europe while Kia’s sales jumped 11 percent.
After the FTA came into effect in July, 2011, vehicle exports to Europe rose 67 percent to 335,320 through the month of March, according to the Korea Customs Office.
In June, a group of European carmakers claimed the FTA solely contributed to a sharp rise in Korean car sales in Europe.
The Korea Automobile Manufacturers Association (KAMA) refuted this, saying the allegation was “misleading” on the positive effects of the trade deal 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 carmakers among others.
Among French firms struggling with the FTA fallout are PSA Peugeot Citroen and Renault.
Analysts say France recently presented a rescue plan for the country’s struggling auto industry, whose plight was highlighted by Peugeot’s results Wednesday showing a first half net loss of 819 million euros ($989 million).
The deepening financial crisis in the eurozone 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.