Move on FTA with EuropeFollowing the conclusion of the Korea-United States free trade agreement, the government now plans to negotiate an FTA with the European Union. Hoping to finish within two years, negotiations will likely begin early next month. It means that we face one more turning point in the road to becoming an advanced country. The economic advantages of an agreement are not that big when looking at individual countries in Europe. However, when thinking of the European Union as a single unit consisting of 27 countries with a population of 487 million, the FTA can have a huge impact on our economy.
The European Union, with combined imports and exports amounting to $3.2 trillion last year, is the world’s biggest market. Its GDP stands at $14.3 trillion, larger than the United States ($12.9 trillion). Its trading volume with Korea totaled $78.6 billion last year, second only to China. Direct investment from the European Union has reached $40.5 billion, the highest, outpacing the United States and Japan. Those figures tell us how important the Korea-European Union free trade agreement will be to our economy.
Korea will surely reap huge benefits from an FTA with the EU in terms of trade and investment. The European Union imposes an average tariff of 4.2 percent (10 percent on autos) on Korean products, higher than the 3 percent mark in the United States. This means that we will enjoy bigger benefits from an agreement with EU than we did with the United States. The increase in exports will likely be particularly visible in autos, textiles, TV components, computer peripherals and tires. In fact, a survey by the Korea Trade-Investment Promotion Agency reveals that around 64 percent of the EU’s local buyers have said that if the Korea-EU FTA is reached, they are willing to look to Korea for their clients. And 67 percent of Korea’s small- and mid-sized firms said they are in favor of the FTA. The Korea Institute for International Economic Policy expects that if the FTA is reached, Korea will see the GDP increase around 2 to 3 percent. Jobs will also be created.
It is a great feat that Korea has taken the initiative with the recent conclusion of the Korus FTA, beating neighboring countries. We have learned how to conduct a large-scale negotiation with a superpower. Japan and China seem highly embarrassed by our rapid moves in free trade. Now is the time for us to succeed in the Korea-EU FTA, leaving competing countries far behind. Opportunities do not come easily and wait for us. We strongly urge the government to step up the efforts in reaching a Korea-EU FTA.