Bridges Weekly Trade News Digest • Volume 13 • Number 20 • 3rd June 2009
EU-South Korea Trade Talks Stumble on ‘Duty Drawback’
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Leaders of the European Union and South Korea fell short of finalising a free trade agreement at the parties’ Fourth Summit Meeting on 23 May in Seoul, primarily due to concern among EU member states about the deal’s ramifications for its stressed auto industry.
Discussion on that front has centred on a ‘duty drawback’ provision that would grant Korean manufacturers reimbursement for duties they pay on cheap imported auto components when the cars produced from those products are exported to the EU. The EU has not allowed duty drawback provisions in its past free trade agreements.
Highly influential European auto manufacturers have expressed concern about the provision. The EU auto industry directly employs 2.3 million workers and generates jobs for 10 million workers in related sectors.
EU negotiators worry that the duty drawback question will prompt Korean officials to put the European agreement on hold while they discuss a separate bilateral free trade deal with the US this month. Seoul had hoped to finalise its EU deal before the end of the Czech EU Presidency on 30 June. But in light of the auto industry conflict, the free trade agreement will likely not be signed before the end of the year.
Despite failing to complete the free trade agreement, the EU and South Korea made progress discussing their shared vision for climate change policy. The two countries have agreed in principle to long-term cooperation to stabilise greenhouse gas emissions by the year 2050 at a level considered safe by the Intergovernmental Panel on Climate Change.
At Saturday’s meeting, the major trading partners agreed that the successor agreement to the Kyoto Protocol, which expires in 2012, should include binding commitments from all Annex I countries, which include the EU and many of its 27 member states, but not South Korea. The parties also agreed that developing countries should mitigate carbon emissions as feasible in light of local circumstances.
The EU and South Korea also agreed that the 30 rich countries that are members of the Organisation for Economic Cooperation and Development, or OECD, should reduce emissions insofar as their national circumstances allow them to. South Korea and a majority of EU member states are OECD countries.
These discussions come in the run-up to 15th Conference of the Parties to the UN Framework Convention on Climate Change (UNFCCC), which will be meeting in Copenhagen at the end of the year. At that summit, the parties will attempt to negotiate a climate policy agreement to enter into force when the Kyoto Protocol expires in 2012.
But analysts expect that the EU and South Korea will butt heads in Copenhagen over how to implement the climate change goals. Seoul will likely seek more commitments from developed countries, while Brussels is expected to seek more binding commitments from developing countries like Korea.
This discussion is only one of a number of recent climate change initiatives led by Seoul. “Korea is now making bold investments in developing new sources of clean energy in order to remain globally competitive,” South Korean President Lee Myung-bak said on 1 June. South Korea unveiled its ‘Green New Deal’ in mid-May, pledging to invest several trillion won in green technology projects over the next three to four years.
ICTSD reporting; “A green partnership for the future,” KOREAN CULTURE AND INFORMATION SERVICE, 1 June 2009; “South Korea’s Lee calls for green, free-trade Asia,”REUTERS, 31 May 2009. “S.Korea To Tackle EU On Trade Pact, Climate Talks,” REUTERS, 25 May 2009; “SKorea, EU call for early conclusion of trade pact,” ASSOCIATED PRESS, 24 May 2009; “EU and South Korea trade agreement delayed,” DEUTSCHE WELLE, 23 May 2009; “Joint press statement on the EU-Korea summit in Seoul,” 23 May 2009; “South Korea-EU trade deal eyed for 2nd half of ‘09,” REUTERS, 23 May 2009.
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