Accessing the largest marketThree months after the European Parliament ratified the Korea-EU FTA in February, the National Assembly made the same decision on Wednesday, four years after both sides started discussions. The pact will provisionally go into effect in July.
The EU’s gross domestic product, with 27 member countries, hit $16.4 trillion in 2009, taking up 30 percent of the world’s GDP. It’s also the largest single market, surpassing America’s GDP of $14.3 trillion. Our total trade with the EU reached $92.2 billion last year, following No. 1 China, with our exports to the EU amounting to $53.5 billion last year, following China ($116.8 billion).
The EU is our strategic destination for exports, which exceeds our imports by $14.8 billion. The EU is an area where its average tariff (5.3 percent) is higher than that of the U.S. (3.5 percent). Compared with our earlier FTAs, the new one will likely bring a stronger impact. The EU decided to eliminate tariffs on 99 percent of our manufactured goods within three years and abolish all tariffs within five years. Meanwhile, Korea will eliminate tariffs on 96 percent of the EU’s exports within three years and abolish tariffs on some sensitive items in seven years.
By striking the deal earlier than Japan and China, we can expect a substantial market dominance effect. The Korea International Trade Association expects the share of Korea’s total trade stemming from the FTAs will increase from 15 percent to 25 percent, surpassing those of Japan (17 percent) and China (19 percent). That means U.S. companies competing with their EU counterparts in Korea as well as U.S. businesses competing with their Korean rivals in Europe could lose their competitiveness.
Some analysts predict the U.S. Congress will hasten the ratification of the Korea-U.S. FTA. In fact, the U.S. government has expressed its plan to negotiate for a deal on sanitary conditions for the Korean beef market once the Korea-U.S. FTA goes into effect. In a visit to Seoul last week, Charles Rangel, a Democratic representative of New York, said the U.S. House will consider ratifying the pact without waiting for Korea’s approval when they wrap up internal procedures. It will likely have a positive effect on the ongoing Korea-Australia FTA negotiations, too.
The National Assembly should make sure that the new FTA goes into effect smoothly by passing nine related bills. The government and big businesses should also ensure that small companies can enjoy the benefits of the historic pact as well.