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The EU and South Korea are to hold ministerial-level talks in June in an attempt to finalise a free trade agreement, which both sides say is all but completed. Just two major issues remain: rules of origin and the duty-drawbacks Korea insists must be allowed under the treaty. The term refers to local firms being refunded the import duties they have paid on components from third parties to manufacture finished export products. The EU does not accept the practice in its free trade agreements.
European carmakers are particularly opposed to duty-drawbacks given Korea’s huge trade surplus in auto trade. They also want tighter rules of origin to ensure that a greater part of a vehicle is made up of Korean inputs rather than cheaper imported products from countries such as China. Automobile trade is also the main factor keeping the US Congress from considering the FTA the two countries signed in June 2007.
Two-way trade between South Korea and the EU stood at more than US$90 billion in 2008. Studies conducted prior to the launch of the negotiations showed that an ambitious FTA could increase bilateral trade by 30-40 percent.
Free trade talks between the 10-member Association of Southeast Asian Nations and the EU have been temporarily halted after two years of talks.
Indonesia’s Trade Minister Mari Pangestu said the two sides had decided to ‘take a pause’ due to disagreement over the treaty’s scope. “Obviously, Europe wants to have a much more comprehensive coverage of issues like the environment and labour, which are sensitive for ASEAN countries,” she said.
For the EU, however, the real impediments are Myanmar’s abuse of human rights and the slow pace of democratic reforms there. So far, ASEAN countries have not appeared keen to conclude individual agreements with the EU, as proposed by the United Kingdom.
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