June 30, 2011On eve of Korea-EU FTA, not all are ready
The free trade agreement between Korea and the European Union will mark a new era for the Asian country’s international trade. But when the clock strikes midnight tonight marking its implementation, experts fear not everyone will be prepared.
The readiness of Korean and European small- and mid-sized exporters is in question. Exporters on either side sending products worth more than 6,000 euros ($8,590) are required to seek an “Approved Exporter” certification from their respective customs service while conglomerates are ready, SMEs have said they don’t have the resources to fully prepare necessary certifications, seek legal council, or conclude market studies.
“The approved exporter certification process in both Korea and the EU needs more attention, along with marketing activities and a local distribution network,” said Myoung Jin-ho, an FTA Relations researcher at the Korea International Trade Association.
Companies accounting for 70 percent of exports to the EU have received the certification, according to an official from the Seoul branch of the Korea Customs Service.
But for those prepared, business opportunities will be rife.
The EU is a massive market. The trade agreement gives Korean corporations access to 500 million consumers, which makes it the biggest market in the world. EU nationals had a total gross domestic product of $16.4 trillion last year.
The July 1 ratification date will be a provisional ratification, meaning that 99 percent of the agreement will go into effect immediately. After the pact is signed by all 27 EU member nations, it will go into full effect. The deal will cut tariffs by 99 percent on Korean exports to the EU over the next three years, while tariffs on EU imports to Korea will be slashed 96 percent.
According to a joint study by state-owned research institutes the Korea Institute for International Economic Policy and Korea Development Institute, the pact will increase Korea’s GDP by 5.6 percent in the next decade, and create 253,000 new jobs in the service and manufacturing sectors. Korean consumers will have wider and cheaper access to European products.
The FTA has been years in the making with the two sides embarking on negotiations in May 2007. The previous month, Korea announced it had concluded negotiations on an FTA with the United States.
After eight rounds of negotiations in Brussels and Seoul, a final agreement was reached in July 2009. Then in October of last year, the two sides officially signed off on the pact, which called for provisional ratification on July 1, 2011.
As of tomorrow, Korea will have six ratified free trade pacts, with two more awaiting parliamentary approval.
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