EUROFER Expresses Concern over EU-South Korea Free Trade Agreement

EUROFER is expressing concern over the possible distortive effects of the negotiated market access conditions due to the European Union – South Korea Free Trade Agreement (FTA) on the European automotive market – the major customer base of the European steel industry.

“Unfortunately, the first free trade agreement negotiated under the Global Europe Trade Strategy has not led to a balanced outcome safeguarding the integrity of the whole steel supply value chain. The result is sectoral winners and losers with potential negative effects for steelmaking in Europe”, says Gordon Moffat, EUROFER’s director general.

EUROFER refers in particular to the combined effects of certain essential provisions of the FTA which will set a framework for surging Korean car exports to the EU with little reciprocity in reality:

•    Elimination of EU import tariffs on cars (from 10 percent to 0 percent over five years) which must be seen in the light of the huge European car net import imbalance (about 400 000 vehicles from Korea compared to about 30 000 from the EU to South Korea in 2009),

•    Increased level of permissible foreign car content to receive duty-free EU market access, which would allow Korean manufacturers to decrease their costs with parts from neighboring low-cost countries such as China,

•    Continuation of duty draw back especially after the EU import tariff elimination, allowing South Korean automotive manufacturers to continue to reclaim import duties on imported vehicle parts from those neighboring countries (such as China), giving additional financial support to Korean exports.

“The safeguard clauses foreseen in the agreement are probably unworkable and unlikely ever to be applied and cannot make up for the loss of competitiveness our European automotive customer base will suffer if the proposed text is approved”, says Moffat.