Korea, EU Strike Tentative Free Trade Pact

South Korea and the European Union (EU) have reached a tentative free trade agreement and will seek to finalize the deal early next month, chief negotiators from both sides said Tuesday.

South Korea, Asia's fourth-largest economy, and the EU, the world's single-largest economic bloc, began the talks in May 2007, with differences over industrial tariffs and auto trade initially hampering progress. Advances were made, however, on those and other issues during the seventh round of negotiations in May last year.

"At the delegate-level, both sides have reached a provisional free trade accord. Whether to conclude the negotiations will be decided at a ministerial-level meeting on April 2," Lee Hye-min, Seoul's chief negotiator for the talks, was quoted as saying by Yonhap News Agency after concluding the two-day meeting, the eight round of such negotiations.

Lee's EU counterpart, Ignacio Garcia Bercero, also described the tentative deal as the "most ambitious" the EU has ever negotiated with an external partner.

Lee said South Korean Trade Minister Kim Jong-hoon and his EU counterpart Catherine Ashton will finalize the deal in London on April 2 to narrow differences on outstanding issues such as import duty refunds and rules of origin.

During a high-level meeting earlier this month, Seoul and Brussels reached a tentative agreement on eliminating or phasing out tariffs on 96 percent of EU goods and 99 percent of South Korean goods within three years. They have also agreed to abolish tariffs on all industrial goods within five years after the deal takes effect.

One of the most sensitive issues has been auto trade. After much wrangling, the two sides agreed to eliminate tariffs on cars with an engine displacement of over 2.5 liters within three years. Tariffs for smaller cars will be lifted after five years.

South Korea currently imposes an 8-percent import duty on European cars, while the EU imposes a 10-percent duty on autos from South Korea.

The two sides have also neared an agreement on allowing goods made at an inter-Korean industrial complex in North Korea to receive duty-free status in the European market, a sensitive issue.

At next month's trade minister-level meeting, both sides will seek to reach an agreement on the so-called duty drawback scheme under which import duties that have been paid will be returned once goods are eventually exported.