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European Union designs protection for auto sector against South Korea trade deal.

CONCERNS within the European auto industry about the trade deal initialed last October by the European Union (EU) and South Korea have been addressed today (Wednesday) at the European Parliament. Meeting in Brussels, its international trade committee gave its approval to draft legislation, allowing the swift reintroduction of trade barriers, should the deal create a surge in Korean car exports to Europe.

These would be triggered by a bureaucratic procedure called a 'special safeguard mechanism', which would involve the EU executive the European Commission investigating claims of a boom in imports, and then raising import tariffs (or suspending agreed reductions in duties) if it found the claims were true.

A committee report written by Spanish conservative MEP Pablo Zalba Bidegain stressed: "Such decisions should be taken only after examining verifiable indicative factors, such as stocks, prices, or return on capital employed in the industry concerned."

The committee voted for these probes to be fast, in EU terms: a maximum of 200 days. This is faster than the original proposal (made by the Commission) which would allow up to nine months of investigation. And--importantly--the auto industry itself would be able to initiate such a probe, through an association representing at least 25% of the sector--a threshold easily cleared by the European Automobile Manufacturers Association (ACEA). Indeed, ACEA has expressed serious reservations about the deal, notably a 'duty drawback' provision allowing South Korean manufacturers to reclaim duties paid on imported car parts and components from low-cost neighbouring countries such as China, while benefiting from the scrapping of EU customs duties for assembled vehicles.

Other bodies that could initiate an investigation would include the Commission, any of the 27 EU member states, the European Parliament and the EU-Korean Domestic Advisory Group--a bilateral body.

And because there is real concern that Europe's fragile auto industry might suffer at the hands of Korean competition, the committee said that the Commission "should continuously monitor the evolution of trade statistics and share its findings ..." MEPs voted to introduce a special monitoring system in the car manufacturing industry and related sectors. "These are considered to be among those that could be exposed to increased competition after the FTA [free trade agreement] enters into force," said the report.

Another novel aspect of this system is that the Commission could authorise protective trade measures to be taken by one or more EU member state, rather than the EU as a whole. This could speed up decisions because countries with weak auto sectors might welcome an influx of cheap high quality Korean cars, while those with stronger manufacturing industries could oppose them. Such a decision would be highly unusual in the EU, which as a customs union, generally imposes such trade restrictions in unison.

The EU Council of Ministers has yet to ask the parliament to ratify the trade deal, although this is scheduled to happen this autumn.
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Author:Nuthall, Keith
Publication:International News
Date:Jun 1, 2011
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