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European carmakers race to improve EU-Korea trade deal before imminent final vote.

EUROPEAN car makers will push for additional changes to the controversial European Union (EU)-South Korea free trade agreement when it is placed before the European Parliament for ratification. The spokesperson for the European automobile manufacturers association ACEA Sigrid de Vries told wardsauto it wanted the deal's text revised to help Europe's auto sector. This follows the conditional approval of the agreement last Thursday (16 Sept) by the other half of the EU's legislature--its Council of Ministers, representing EU member states. Its communique said a final agreement must allow the EU to remipose duties 'in the case of sudden surges of imports in sensitive sectors, including small cars.' And it insisted that any special rights granted to American car-makers in the parallel US-South Korea trade negotiations be extended to EU auto-makers. Also, the text, said ministers, must ensure that South Korean CO2 emissions law 'does not impose an unfair burden on EU exporters' such as making tough-to-achieve technical demands. De Vries said she wanted these promises to be written in tough legal language that can be enforced. 'We want these conditions met. They must be tangible, not just hollow words.' ACEA is also still unhappy with the agreement's '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. 'This must be improved,' said de Vries. Tough words--but if the EU council's timetable for ratifying the deal is followed, there will be little time. The council has proclaimed: 'In agreement with [South] Korea, the signature of the FTA [free trade agreement] will take place on 6 October.' For that to happen, the agreement must first be debated by the European Parliament's international trade committee--and its next scheduled meeting is next Tuesday, September 28. Then two votes are needed at the European Parliament's plenary session--one on a 'safeguard' clause allowing the EU to take action to stem a potential surge in imports that could damage European car makers; and another on the whole agreement. And the earliest date for those votes would be October 6. So the timetable may slip. In any case, de Vries said ACEA did not want to scupper the agreement: 'It's clear in principle we are for free trade and trade liberalization: the EU is a great example of liberalization and the auto industry is a gloablized industry, so it is in its interest.' However, she stressed: 'There should be a level playing field so there are no unfair competitive advantages.' Nikki Rooke, of Britain's Society of Motor Manufacturers and Traders (SMMT) said it backed ACEA's position, notably over the 'application of additional safeguard clauses, assurances on South Korean environmental regulations, and the impact of discussions in the United States on a similar trade deal with Korea.'

Some commentators have suggested that Europe will be the big winner however. 'It's a typically mercantilist deal, where, as in most trade deals, the bigger economy has an advantage,' said Fredrik Erixon, director of the European Center for International Politics and Economy, a Brussels pro-market think tank.

However, this is not the view of Italian auto maker Fiat. Its CEO Sergio Marchionne has rejected the EU council's acceptance of the deal. Speaking after last Thursday's AGM in Turin, Italy, he said: 'It is a decision that I do not agree with at all. I have spoken out in opposition to the agreement both here and in America and do not understand the industrial, economic or strategic basis for it. The major problem with the agreement is that the Koreans are not granting access to their market equal to what they are asking for in Europe. We are talking about completely different conditions where we, in effect, are throwing the doors open to a competitor that is not giving us the same opportunity to compete on its home turf. So frankly I don't see any need for this agreement. If it does go ahead, there must be another motivation that isn't based on any benefit for the European auto industry, because there is none.' Assuming all goes well, the deal will come into force next July: tariffs will be phased out on 96% of European and 99% of South Korean goods within three years. All levies on industrial goods will be eliminated within five years. South Korea exported US dollar USD36.5 billion of cars to rest of the world last year while importing only USD5.5 billion.
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Author:Nuthall, Keith; Deschamps, M.J.
Publication:International News
Date:Sep 1, 2010
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