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  • Celebrating Ten Years of the EU-Korea FTA
    2021-06-30 hit 655

    Celebrating Ten Years of the EU-Korea FTA

    - Export of Korean cars, batteries, and chemical products as major winners

    - Korea’s dependence on Japan for materials, parts, and equipment declined

     

    Ten years ago, on July 1st, Korea became the first Asian country to sign and implement a free trade agreement with the European Union. According to research, Korea was able to make headway into the EU market ahead of competitors like Japan, thanks to the FTA.

     

    Institute for International Trade (IIT) of KITA published a report titled The 10th Anniversary of the EU-Korea AFTA: Achievements and Implications on July 1st. The report states that Made-in-Korea automobiles, batteries, chemical products, and some of the agricultural and fishery products are the largest beneficiaries of the agreement.

     

    Following the removal of the EU’s tariffs, Korea’s export of automobiles to the EU amounted to 8.4 billion US dollars in 2019, which is more than a two-fold increase from 3.3 billion dollars in 2010. Internal combustion engine vehicle export from Korea to the EU has decreased since 2017 as local production increased; however, the export of electric vehicles skyrocketed from 200 million dollars in 2017 to 4.6 billion dollars in 2020, thereby serving as the key driver behind the overall export of automobiles.

     

    Lithium-ion batteries, a core part of electric vehicles, are seeing a steady increase under favorable conditions compared to other competitors as tariffs were lifted upon the FTA implementation. The export of chemical products showed an annual rise of 19.2%, growing from 1.2 billion dollars in 2010 to 7.1 billion dollars in 2020. In particular, it is worth highlighting the spike in cathode export, which is one of the necessary materials for batteries.

     

    In the case of agricultural and fishery products, the import from the EU still outpaces the export. However, compared to pre-FTA levels, Korea saw 450 million dollars worth of export in 2020, a 125% hike. Tuna, mushrooms, Kimchi, seasoned seaweed, and beverages are some of the major beneficiaries of the FTA.

     

    Furthermore, it was revealed that the EU-Korea FTA also led to import diversification of materials, parts, and equipment. In 2010, materials import amounted to 36.2% and 10.1% from Japan and the EU, respectively; however, following the FTA implementation, imports from Japan dropped down to 20.8% while the EU rose to 13.6%.

     

    According to the report, “European premium consumer goods aggressively targeted the Korean market following the EU-Korea FTA, which stimulated non-price competition for Korean companies in technology, design, and quality.” And the report added, “As automobile imports from the EU increased, the number of new domestic models went up as well. And the share of domestic models with engine above 2000cc grew compared to pre-FTA levels.” The report also pointed out, “Made-in-China appliances have dominated the mid-to-low end market, but Korea companies made a timely transition to premium market via competition with European brands.”

     

    Recently, the EU started restructuring its supply chain and setting higher human rights and environmental standards to reduce its dependency on the Chinese market. This can be a door-opening opportunity for the Korean companies,” and stressed, “Japan, Singapore, and Vietnam concluded FTAs with the EU, which will intensify the competition. Therefore, Korean companies must strategically use the FTA to their advantage, especially since the tariffs are completely eliminated following the tenth anniversary of the FTA.”

     

    Meanwhile, KITA hosted the 10th Anniversary Conference on the EU-Korea FTA on July 1st to commemorate the occasion and evaluated the impact and performance of the EU-Korea FTA while sharing the future outlook. Director Hyunjung Je of KITA and Markus Beyrer, Director General of Business Europe, presented on “Future and the Impact of the EU-Korea FTA.” The following panel session was joined by Lee Hyemin, the former Korean Ambassador to France, as well as Korean and French businesspeople and experts.?

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