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  • 10th Anniversary of Korea-EU FTA, Korean Exports of Cars, Batteries and Chemicals Benefited
    2021-06-30 hit 409

    10th Anniversary of Korea-EU FTA, Korean Exports of Cars, Batteries and Chemicals Benefited 

    -KITA Analyzed achievements of the Korea-EU FTA... import dependence on Japan declined for materials, parts, equipments -

     

    On July 1st, exactly 10 years ago, the free trade agreement between South Korea and the European Union came into effect, making Korea the first Asian country to implement an FTA with the EU. It is analyzed that South Korea has greatly enjoyed the effect of preoccupying the EU market over the last ten years compared to Japan and other Asian competitors.


    According to a report titled, 'The 10th Anniversary of the Korea-EU FTA: Achievements and Implications' issued by the Institute for International Trade of the Korea International Trade Association (Chairman: Christopher Koo),  South Korea has benefited from the Korea-EU FTA in automobile, battery and chemical product exports.

     

    South Korea’s exports of automobiles to the EU amounted to 8.4 billion US dollars in 2019, more than doubled from 3.3 billion dollars in 2010. Exports of internal combustion engine vehicles have declined since 2017 as local production has expanded. However, electric vehicles are driving overall automobile exports. Outbound shipments of electric cars to the EU came to 4.6 billion dollars in 2020, soaring from just 200 million dollars reported in 2017. Exports of lithium-ion batteries, a key component of electric vehicles, are also on a steady rise under favorable conditions compared to other competing countries as tariffs were eliminated upon the implementation of the FTA.

     

    South Korea's exports of chemical products to the EU reached 7.1 billion dollars in 2020, increasing 19.2 percent annually from 1.2 billion dollars in 2010. The increase in exports of cathode materials, one of the battery materials, was significant. In the case of agricultural and fishery products, imports from the EU are still much larger, but in 2020, outbound shipments amounted to 450 million dollars, an increase of 125 percent from the period before the FTA took effect. It appeared that Korean tuna, mushrooms, kimchi and seasoned laver, and beverages mainly benefited from tariff elimination.

     

    The Korea-EU FTA has contributed to the diversification of import sources for materials, parts and equipment. In 2010, imported materials from Japan took up 32.6 percent of South Korea's total material imports while EU materials accounted for 10.1 percent. Ten years later, South Korea saw its dependence on Japan fall to 20.8 percent in 2020 whereas the imports from the EU rose to 13.6 percent after the FTA took effect

     

    The report stated, “After the Korea-EU FTA went into effect, premium consumer goods from the EU actively entered the Korean market, providing an opportunity for Korean companies to enhance their non-price competitiveness in technology, quality, and design,” and added, “As automobile imports from the EU have increased, the number of new domestic models has gone up, and the share of large-sized cars with 2000cc or larger has recently expanded compared to the period before the effectuation of FTA.” The report also pointed out, “When it comes to home appliance market, where China dominates the mid-to-low end market, Korean companies have made a timely transition to premium by competing with European brands.”

     

    Hong Jung-wan, a senior researcher at the Korea International Trade Association, said, “Recently, the EU is restructuring its supply chain to raise environmental and human rights standards and reduce dependence on China and it may provide new opportunities for Korean companies,” and stressed, “As Japan, Singapore, and Vietnam have  concluded FTAs with the EU, there will be fierce competition. Therefore, Korean companies need to make more strategic use of the Korea-EU FTA as tariffs have been completely eliminated over the last 10 years.”

     

    Meanwhile, the Korea International Trade Association will hold an online conference at 4pm on July 1st to commemorate the 10th anniversary of the entry into force of the Korea-EU FTA, and assess the achievements of the past 10 years and share future prospects.  Je Hyun-jun, head of the Trade Support Center of the Korea International Trade Association, and Markus Beyrer, Director General of Business Europe, will participate as speakers. The following panel discussion will be attended by Lee Hye-min, former Ambassador to France, as well as business people and experts from both countries to share comprehensive opinions on the Korea-EU FTA.

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