Documents considered by the Committee on 30 March 2010 - European Scrutiny Committee Contents

5   EU-Republic of Korea Free Trade Agreement


EU-Republic of Korea Free Trade Agreement

Legal baseSee para 5.1
DepartmentBusiness, Innovation and Skills
Basis of considerationEM of 24 March 2010
Previous Committee ReportNone, but see footnote 6
To be discussed in CouncilApril 2010
Committee's assessmentPolitically important
Committee's decisionCleared


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.


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

previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2010
Prepared 6 April 2010