[Viewpoint]Striking while the iron is hot

“If we don’t hurry up, we will lose the golden market at the Eastern end of the Eurasian continent.”
The European Union headquarters in Brussels is feeling impatient as it prepares to sit face-to-face with Korea at a negotiation table. Under the so-called “Lamy doctrine,” the EU has so far focused more on attracting Eastern European nations into the union than making free trade agreements with non-European countries. And yet, as Korea dramatically concluded a free trade agreement with the United States in early April, the EU is aggressively approaching Seoul, even more so than China or Japan.
It is natural that Europe is feeling nervous. Korea is the eighth largest trade partner of the EU, trading over $70 billion last year. To Korea, the EU is the second largest trade partner, even larger than the United States (which is fourth), and has invested $40 billion in Korea.
As the Korus FTA takes effect, and Japan and China get more aggressive, Europe will pay a tremendous price in lost trade in the service and automobile industries. When the tariff is removed for cars imported from the United States, European luxury cars, which are already in competition with Japanese brands, will have to wage another hard fight. When the foreign legal consultant act, promoted by the government, is passed, European companies will only be able to watch American law firms entirely take over the Korean legal market.
Under these circumstances, Europe has abandoned its adherence to the Lamy doctrine and adopted a new “global Europe” strategy, starting negotiations with Korea, the first time with an East Asian country. At present, the timing of the negotiation, not whether it will succeed, matters more to the European Union. If Europe does not hurry up, it will lose the Korean market to competitors like the United States and Japan.
From now on, negotiations with the European Union will aim at reaching a free trade agreement similar to that between Korea and the United States, plus or minus 5 percent. Depending on the sector, some industries will be opened 5 percent less while others will be opened 5 percent more. The bigger issue is the “plus 5 percent” market opening. The industries affected will include legal consulting, finance and insurance and the government procurement industry.
Since the EU has a completely open government procurement market, it will especially demand Korea do the same based on the principle of reciprocity. Fortunately, the free trade agreement with the European Union will not involve the sensitive agricultural market, but we must not underestimate the power of the giant British law firms that completely devastated local German law firms.
Based on the confidence and know-how we earned from the negotiation with the United States, Seoul needs to gain as much as possible from an EU eager to close a deal.
Unlike Wendy Cutler of the U.S., Ignacio Garcia Bercero, the head of the East Asian bureau of the European Commission, has to form agreements not only with Korea but also according to the Article 133 special committee representing the 27 member countries. Seoul needs to strategically make the best out of the complex relations governing the 27 EU member countries. However, the government should also pay special attention to making a good case domestically. If Seoul begins negotiations with Europe before the aftermath of the Korus FTA settles down, some Korean citizens might feel vague anxiety.
Therefore, the government should publicize the economic benefits to be reaped from cooperating with Europe as well as the expected damages and the government’s plans for compensation.
What is also urgent is to pass a law that guarantees ongoing support for those classes that will possibly suffer damage from free trade agreements. A free trade agreement with the EU will not only reinforce Korea’s established stance in the existing Western European market but also allow us to get an early entrance to the newly emerging Eastern European market.
If a free trade agreement between Korea and Europe eases investment obstacles, Korea, with about $9.4 billion already invested in Europe, can prepare to leap into the world’s largest European market with manufacturing bases in Eastern Europe, such as Hungary or the Czech Republic.

*The writer is a professor of international trade at the Graduate School of International Studies at Sogang University. Translation by the JoongAng Daily staff.

by Ahn Se-young