EU, South Korea Sign Free-Trade Pact; Bloc Seeks Malaysia Deal - By Jonathan Stearns and William Sim

<blockquote>'...The German leaders reduced tariffs, expanded free trade, lowered taxes. From 1950 to 1960 alone, the standard of living in West Germany and Berlin doubled.'

- 'The wall cannot withstand freedom.' (Context part I, Part II)</blockquote>


EU, South Korea Sign Free-Trade Pact; Bloc Seeks Malaysia Deal

By Jonathan Stearns and William Sim
October 06, 2010
Source

Oct. 6 (Bloomberg) -- The European Union and South Korea signed a free-trade agreement due to take effect next July, expanding their roughly 70 billion-euro ($97 billion) commercial relationship.

The signature today in Brussels of the accord, which will make 99 percent of EU-South Korea commerce duty-free within five years, comes a day after the 27-nation bloc started talks with Malaysia on a free-trade deal. The EU-Korea accord is the second-biggest such pact ever, eclipsed only by the $1 trillion North American Free Trade Agreement among the U.S., Canada and Mexico that began in 1994.

Companies that may benefit include pharmaceutical producers such as London-based GlaxoSmithKline Plc, chemical makers including BASF SE, based in Ludwigshafen, Germany, and consumer- electronics manufacturers like Amsterdam-based Royal Philips Electronics NV, as well as farm exporters. Shipping and the financial- and legal-services industries also stand to gain.

European carmakers opposed the agreement, saying it will give an unfair edge to companies such as Hyundai Motor Co. and Kia Motors Corp. because of a disparity in auto trade. The EU imported about 450,000 Korean cars into its market of 15 million in 2008 while exporting 33,000 autos to Korea, where 1 million new cars are sold annually.

The accord will eliminate Korean import duties worth 1.6 billion euros annually and European levies of 1.1 billion euros, according to the EU. The pact could increase Korea’s gross domestic product by as much as 5.6 percentage points over 10 years and create as many as 253,000 jobs in Asia’s fourth- largest economy, according to a joint report by the country’s state research institutes.

A U.S.-Korea free-trade agreement from 2007 is on hold while the administration of President Barack Obama seeks to tackle an alleged imbalance in car trade.

--Editors: Jones Hayden, Andrew Clapham

To contact the reporters on this story: Jonathan Stearns in Brussels at jstearns2@bloomberg.net; William Sim in Seoul at wsim2@bloomberg.net.

To contact the editors responsible for this story: James Hertling at jhertling@bloomberg.net; Chris Anstey at canstey@bloomberg.net.