Trade deal with Korea goes against the interest of major European industries and their workforce

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Member States must demand a fair, balanced deal – Current proposal should not be ratified

The  European Commission has, initialled a free trade agreement (FTA) with South Korea that consents to unfair  competition  and goes against the interest of major manufacturing   industries in Europe, including the automotive sector, and their millions of employees.

“We  call  on  the  EU  Member States not to ratify the current text. The
concerns  that  many  of  them  expressed before, and that were echoed by
members of the European Parliament, a number of European Commissioners as
well  as trade unions and businesses, have not been addressed”, commented
Ivan   Hodac,  Secretary  General  of  the  automobile  industry’s  trade
association   ACEA.  “The  Korean  negotiators  have  not  only  obtained
unrestricted  access to a market of over 500 million people, the European
Commission  has in addition allowed South Korea to subsidise exports from
its  key  industries  to  the EU. This constitutes unfair competition and
will lead to economic distortion”, said Hodac.

One  major  source  of  concern  remains  the  granting to South Korea of
so-called  Duty  Drawback,  allowing  Korean manufacturers to reclaim the
duties paid on imports from low-cost neighbouring countries such as China
even after the elimination of EU customs duties. “The arrangement on Duty
Drawback provides a precedent to other trading partners of the EU, old as
well  as  new  ones,  to  ask  for  the  same  benefits.  This will cause
additional  pressure  on  Europe’s  economy”,  added  Hodac. The proposed
‘safeguard  clause’  does not put a safety net in place as it only enters
into force after five years from the start of the FTA and, in its current
form,  will  be very difficult to implement. The draft text, furthermore,
does  not provide any guarantee that Korea will refrain from imposing new
non-tariff  barriers  such  as  regulation  in  the  fields of safety and
environment  that  will  restrict or even prevent altogether EU access to
the  Korean  market. The unfair conditions of the FTA come in addition to
the  low  exchange  rate  of  the Korean won which, according to currency
traders, is influenced by government intervention.
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The  automotive  industry supports the EU in seeking trade liberalisation
in  a  fair  and  balanced  way.  The current agreement with South Korea,
however,  is  not  in  the  interest of Europe’s citizens. In the US, the
Obama  administration  is  currently  reviewing the signing of their free
trade  agreement with Korea, because of a number of strong concerns. “The
EU  governments  have  the  power  and  obligation  to  secure  the  fair
conditions  that  are  lacking  in the agreement with Europe. South Korea
wants  this  deal  very much and a better outcome is very well possible”,
said Hodac.