5 EU-Republic of Korea Free Trade
Agreement
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| EU-Republic of Korea Free Trade Agreement
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| Legal base | See para 5.1
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| Department | Business, Innovation and Skills
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| Basis of consideration | EM of 24 March 2010
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| Previous Committee Report | None, but see footnote 6
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| To be discussed in Council | April 2010
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| Committee's assessment | Politically important
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| Committee's decision | Cleared
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Background
5.1 In April 2007, the Council authorised the Commission to
open negotiations with the Republic of Korea, with a view to concluding
a Free Trade Agreement (FTA). According to the Commission, those
negotiations finished last summer, and the agreement which was
initialled on 15 October 2009, will now need to be signed by the
Commission on behalf of the EU, by the Member States, and by the
Republic of Korea. The Commission says that it aims to propose
the signature of the Agreement to the Council in April 2010, but,
although the text is in the public domain, there is as yet no
official document. The Government expects a consolidated version
of the text to accompany the Commission's proposal for a Council
Decision to authorise signature, and it has in the meantime submitted
an Explanatory Memorandum, in order to enable scrutiny to take
place before the Easter adjournment and the dissolution of Parliament
prior to the General Election.
The current document
5.2 The Government says that the FTA delivers on the negotiating
directives approved by the Council in 2007, and has been negotiated
in parallel with a Framework Agreement[6]
which aims to enhance cooperation between the EU and the Republic
of Korea in a range of areas, including economic development,
sustainable development, education, culture, justice and security,
with the two Agreements together establishing a fully coherent
modern framework for bilateral relations between the two parties
covering economic, trade and political cooperation.
5.3 The Government adds that this Free Trade
Agreement is a flagship FTA under the Global Europe Strategy launched
by former Commissioner Mandelson in 2006, and is the most ambitious
agreement yet negotiated by the EU, breaking new ground, for example
in sustainable development commitments, and that it sets the bar
high for FTAs with other negotiating partners at a similar level
of development. As regards specific aspects of the Agreement,
it says that:
- the liberalisation of Korean
tariffs on industrial goods will save EU exporters about €1.2
billion in duties annually, half of which will happen as soon
as the Agreement enters into force;
- almost half of Korean tariffs on agricultural
goods will be liberalised, saving EU exporters a further €380
million;
- the safeguard measures will provide effective
protection to EU and Korean industry without undermining the benefits
which an ambitious FTA will bring to business;
- the commitments relating to technical barriers
to trade should make the trading environment in Korea more
predictable, helping to avoid uncertainty and increase business
confidence, a further reassurance for business being that the
dispute settlement process in the FTA will provide an alternative
to the World Trade Organisation (WTO) Dispute Settlement Understanding,
even in relation to the most difficult problems;
- the sanitary and phytosanitary standards
reaffirm the intention to meet WTO standards in this area, and
will give UK exporters extra assurance that they will not suffer
from any rules which Korea might enforce going beyond those standards;
- the provisions on trade in services go
beyond the as yet unratified US-Korea FTA, so providing a level
playing field for EU and US suppliers in the Korea market;
- commitments on payments and capital movements
ensure the free movement of private payments between EU and Korean
citizens, and the free movement of management finance and commercial
transactions;
- the provisions on government procurement are
fully compliant with the obligations of the EU and Korea under
the WTO General Procurement Agreement;
- the Agreement contains clear commitments to EU
and international standards on intellectual property, which
will help to provide clarity for innovative and creative businesses
trading in Korea, with some elements falling under EU competence
and others within that of Member States;
- the provisions on competition recognise
the importance of free and undistorted competition to trade relations,
and ensure that competition laws in the EU and Korea will be applied
in a way which prevents the benefits of trade liberalisation from
being eliminated by anti-competitive business conduct or transactions;
- the chapter on transparency is compliant
with the WTO Agreement, and highlights the need for a clear, efficient
and predictable regulatory environment, especially for small businesses;
- the sustainable development chapter is
ambitious compared with other such agreements, and includes a
well laid out mechanism for considering civil society views, sets
up an independent committee of experts to oversee the relevant
impacts on the Agreement, and highlights the fast dismantlement
of tariffs for environmentally friendly goods, with almost all
such goods having duty free access within three years of the Agreement's
entering into force.
The Government's view
5.4 In his Explanatory Memorandum of 24 March
2010, the Minister for Trade, Investment and Small Business at
the Department for Business, Innovation and Skillsis (Lord Davies
of Abersoch) says that the UK, along with a range of business
stakeholders (including the Confederation of British Industry),
strongly supports the swift implementation of this Agreement,
which could deliver benefits of around £500 million to the
UK economy, as well as boosting growth and creating jobs. He adds
that a further incentive for early implementation would be to
have the Agreement in force before the US-Korea FTA, so as to
give EU companies first mover advantage. He also points out that
the Agreement will deepen the economic and commercial ties between
the EU and Korea, a country with which it already enjoys good
relations, and which is an important player within the G20 (where
it will assume the Presidency in 2010).
5.5 As regards specific aspects of the Agreement,
he comments that:
- a headline achievement for
the UK is the removal of tariffs on key export products, such
as pharmaceuticals, electronics, cars and car parts, and whisky
(total exports of these products to Korea in 2008 amounting to
£808 million);
- although the dismantling of
tariffs will increase competitive pressures on the EU automotive
industry, these reductions will be phased in slowly, with critical
safeguards in place, and exporters in the UK automotive sector
could benefit significantly from Korean acceptance of EU standards
across almost all areas;
- tariff reductions on agricultural goods (such
as poultry and pork products) will save UK exporters considerable
costs, whilst those on Scotch whisky will reduce from 20% to zero
over three years;
- the UK will also benefit from across-the-board
Korean commitments on services, particularly financial and other
business services (where trade in 2008 was worth £540 million);
- UK exporters will face reduced administrative
burdens.
Conclusion
5.6 We are grateful to the Government for
drawing this Agreement to our attention, and, in the absence of
an official text, for highlighting its main elements. As with
the wider Framework Agreement between the EU and Korea on which
we reported on 15 December 2009, this is clearly an important
measure which we think it right to draw to the attention of the
House. Having said that, we see no reason at this stage to hold
it under scrutiny, and we are therefore clearing it.
6 (31167) 15710/09: see HC 5-iv (2009-10), chapter
12 (15 December 2009). Back
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