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Korea-EU FTA: A Comparison with the KORUS FTA

Korea Institute for International Economic Policy

2011. 08. 24

Heungchong KIM

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Contents

I. Korea-EU & KORUS FTAs: background and

history

II. The Sessions

III. Concession Schedules

IV. A Comparison

V. Negotiation Strategies

VI. Comments

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I. Korea-EU & KORUS FTAs: background and history

� Korea’s FTA Policy: three periods

� 1st period(1998~2003) - No “left behind”in pursuing foreign market

opening; FTA with small economies such as Chile; trying to pursuing

Multi-track FTA; Chile, Singapore, & EFTA

� 2nd period(2004~2009 or 2010) - Strengthening competitiveness of the

Korean Economy as well as exploiting foreign market; Multi-track FTA;

high quality & comprehensive FTA; Nationally supporting Constituency

FTA; Japan, US, EU & ASEAN

� 3rd period(2011 ~ ? ) – Growing interest in FTAs with neighboring

countries and Big developing economies; Japan, China, Mongolia, etc

vs. BRICs, Turkey…

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� 2003, 9. Korea,“Korea’s Policy Roadmap for further FTAs”

� 2004, 4. Korea-Chile FTA enter into force

EU,“no interest in FTA with Korea”

12. Korea, KIEP start-up of a feasibility study of the FTA

� 2005, KIEP, analyses on the impact of KORUS & Korea-EU FTAs on

the economy and industries

7. DDA deadlock

11. EU, New cabinet in the EU Commission (Mandelson)

6 rounds of US-Korea Trade Ministerial Meeting held

12. 1st professional research on Korea-EU FTA released

� 2006. 2., Announcement of start-up of the KORUS FTA talk

6. KORUS FTA negotiation talks started

6~8. Korea, several seminars held on Korea-EU FTA

7~9. EU & Korea, Preliminary meeting

10. EU, Global Europe released

11~12. Korea, EU FTA Public hearing(11), Industry-dialogue

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� 2007. 4. KORUS FTA talks ended after 8th round

4~5. EU Council, Endorsement of FTA talk with Korea

5., start-up of the Korea-EU FTA talks

6. US, reflection of US New Trade Policy on the KORUS, &

Signing of the KORUS

� 2008. 5., the 7th round of Korea-EU FTA

� 2009. 3., the 8th round of Korea-EU FTA talks

7., “talks ended,” announced by EU & Korea

10. initial the Korea-EU FTA

� 2010. 10. Signing of the Korea-EU FTA

11~12. further talks on KORUS FTA – exchange of letters

2011. 7. Korea-EU FTA enter into force

9~12 KORUS expected to enter into force

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II. The sessions

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II. The sessions

3rd 4th 5th 6th 7th

Goods(Tariffs)

� � � �

NTBs � � � � �

W & S � � �

electronics � � � � �

automotive � � �

Pharma � � � � �

chemical � � �

TBT � � �

SPS � � �

Customs/TF � � � �

RoO � � � � �

TDI � � �

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II. The sessions

3rd 4th 5th 6th 7th

Services � � � � �

Financial � � �

IT � � � � �

Establishment � � � �

IPR � � � � �

(GI)� � �

GP � � � �

COMPETITION � � �

DS � �

Transparency � � �

SD � � �

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� Korea in the Korea-EU FTA

Agriculture Fishery Manufacturing Total

IE 735 (50.7) 50 (12.3) 8,542 (90.8) 9,327 (82.8)

Within 3 yrs. 21 (1.4) 130 (31.9) 472 (5.0) 623 (5.5)

Within 5 yrs. 265 (18.3) 91 (22.3) 348 (3.7) 704 (6.3)

Within 7 yrs. 71 (4.9) 21 (5.1) 42 (0.4) 134 (1.2)

Within 10 yrs 174 (12.0) 111 (27.2) - 285 (2.5)

Over 10 yrs 128 (8.8) 2 (0.5) - 130 (1.2)

Total (con) 1,394 (96.2) 405 (99.3) 9,404 (100) 11,203 (99.5)

excluded 55 (3.8) 3 (0.7) - 58 (0.5)

Total 1,449 (100) 408 (100) 9,404 (100) 11,261 (100)

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� EU in the Korea-EU FTA


IE 1,982 (96.0) 155 (40.8) 7,167 (96.9) 9,304 (94.5)

Within 3 yrs. 82 (4.0) 118 (31.1) 186 (2.5) 386 (3.9)

Within 5 yrs. - 107 (28.2) 45 (0.6) 152 (1.5)

Total 2,064 (100) 380 (100) 7,398 (100) 9,842 (100)

excluded - - - -

Total 2,064 (100) 380 (100) 7,398 (100) 9,842 (100)

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� Korea in the KORUS FTA


IE 578 (37.8) 52 (18.6) 8,431 (89.2) 9,061 (80.5)

Within 3 yrs. 39 (2.5) 92 (32.9) 634 (6.7) 765 (6.8)

Within 5 yrs. 317 (20.7) 132 (47.1) 60 (0.6) 509 (4.5)

Within 7 yrs. 64 (4.2) - - 64 (0.6)

Within 10 yrs 333 (21.8) - 325 (3.4) 658 (5.8)

Over 10 yrs 184 (12.0) 4 (1.4) - 188 (1.7)

Total (con) 1,515 (99.0) 280 (100) 9,450 (100) 11,245 (99.9)

excluded 16 (1.0) - - 16 (0.1)

Total 1,531 (100) 280 (100) 9,450 (100) 11,261 (100)

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� US in the KORUS FTA


IE 1,065 (58.7) 106 (85.5) 7,457 (87.0) 8,628 (82.1)

Within 2 yrs. 10 (0.6) - - 10 (0.1)

Within 3 yrs. - 3 (2.4) 357 (4.2) 360 (3.4)

Within 5 yrs. 401 (22.1) 3 (2.4) 342 (4.0) 746 (7.1)

Within 7 yrs. 92 (5.1) - - 92 (0.9)

Within 10 yrs. 154 (8.5) 12 (9.7) 395 (4.6) 561 (5.3)

Over 10 yrs. 91 (5.0) - 17 (0.2) 108 (1.0)

Total 1,813 (100) 124 (100) 8,568 (100) 10,505 (100)

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� Korea’s concession schedule in both FTAs

HS code1 Descriptions

Percentage of items that differ between KORUS and

Korea-EU FTAs

Percentage of items of Instant

Elimination

01, 02, 04, 05 Animal and animal products 24.0 27.7

03 Fish and crustaceans 50.5 5.1

06–15 Vegetable products 21.2 36.3

16–24 Foodstuffs 25.1 18.5

25–27 Mineral products 6.4 91.6

28–38 Chemicals and allied industries 7.7 88.0

39–40 Plastics and rubber 20.3 75.7

41–43 Raw hides, skins, leather, and furs 12.3 87.3

44–49 Wood and wood products 17.7 61.1

50–63 Textiles 2.5 97.5

64–67 Footwear and headgear 1.9 98.1

68–71 Stone and glass 17.0 81.5

72–83 Metals 8.3 90.4

84–85 Machinery and electrical 11.9 83.9

86–89 Transportation 23.4 75.7

90–97 Miscellaneous 10.8 83.1

•Source: Song, Y.K. (2011)

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A Comparison of Market Access Liberalization: KOREA-EU and KORUS FTAs

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Korea-EU FTA KORUS FTA

Goods

• 7 years to completely abolish tariffs on

imported manufacturing goods;

• Asymmetry between the EU who abolish

tariffs within 5 years and Korea within 7 years;

• Early abolition of tariffs (within 3 years) by the

EU on 97.3% (of tariff lines)and 96.9% (by the

total value of the imports); KORUS plus

• EU tariff schedule: immediate elimination of

tariffs (automobile parts, textiles, photocopiers,

refrigerators, air conditioners, etc.), within 3

Years (medium/large passenger vehicles, tires,

microwave ovens, etc.) , within 5 years (small

sized passenger vehicles, lorries, color TVs,

cameras, etc.), and complete elimination after

5 years

• 10 years to completely abolish tariffs on

imported manufacturing goods;

• Near symmetry between the US and Korea

• Early abolition of tariffs (within 3 years) by

the US: 92.1% (of tariff lines) and 94.6% (by

the total value of the imports);

• US tariff schedule; immediate elimination of

tariffs (passenger vehicles below 3000cc, color

TVs, LCD monitors, etc.), within 3years (DTVs,

passenger vehicles above 3000cc, golf products,

etc.), within 5 years (tires, speakers, etc.), and

within 10 years (microwave ovens, laundry

machines, lorries, etc.)

Sources: Kim(2008) & DG for External Policies, European Parliament (2010)

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NTBs

• SDoC introduced

• REACH etc..

•TE fail to introduce

• Favor in safety criteria for US

TBT/SPS

• Regionalization introduced

• Made in EU not

IPR

• Longer protection period of Phamaceuticals;

GI in Agricultural products as well as wine &

spirit

Continued..

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Services

• Matches and in some cases exceeds the degree

of opening in parity with the KORUS (such as

in financial and legal services)

• Certain areas agreed to additional opening like

international satellite lines reserved for

broadcast services and sewage disposal services

• Positive listing of sectors

• Financial services, law firms, telecommunications,

media, accounting and auditing, general consulting,

etc.

• Education and medical services not open

• Negative listing (also in the Chile-Korea and

Singapore-Korea FTA)

• Provision on ISD in investment chapter

Agricultural

products

including

meats

• Market opening to main agricultural products

including meats, except rice

• schedule (Korea): tariff abolition within 10

years for refrigerated pork meats, and 5 years

for deep-frozen pork, etc.

• Market opening to main agricultural products

including meats, except rice

• Schedule (Korea): a variety of exceptions granted

in terms of tariffs, quotas, seasonal duties, and

special safeguards for controversial products

• abolition of long-term tariffs over 15 years for

beef and deep-frozen pork

Continued..

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Rules of

origin

• Up to 45% of the components can outsourced

from outside of the country to be used for making

final manufactured goods such as automobiles;

• Kaesung designated outside the scope for the

FTA, but as in KORUS there will be a study of

this issue.

• Kaesung complex located just above the de-

militarized zone in North Korea is designated as

outside of the country

Duty

drawback

• Permitted, after 5 years applicable on up to 5 %

of the duties.• Permitted

MFN Yes Yes

Ratchet

mechanism

*

No Yes

* The ratchet mechanism prevents a party to an FTA unilaterally reducing the level of market liberalization

below that applied in the FTA.

Continued..

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IV. Negotiation Strategies

� Aggressive vs. conservative (salami-slicing)

� Why?

- EU: Complexity of Decision-making

- Korea: prior experience with the US

� The EU proposed its first offer list before the second round of talks in July of

2007, while Korea’s latest offer was the second revised one, which presented in

November of 2007 before the fifth round of talks.

� Concession Packages initially proposed

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IV. Negotiation Strategies

� Automobiles and NTBs

� Rules of Origin

� IPR

� Services

� Concentration on Key issues

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V. Comments

� Negotiating a Negotiation

� A Session ended without big deal

� balance of mutual interests

� Focus on its own sensitivities of each industry

� Implementation and enforcement

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Thank you

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