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Signing of EU-South Korea trade deal sparks protest from European car makers.

THE EUROPEAN Automobile Manufacturers Association (EMEA) has condemned a European Union (EU)-South Korea free trade agreement, initialed today (15-10), for giving Korean automakers an unfair advantage in EU markets.

At the heart of ACEA's concern is 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 assmbled vehicles.

ACEA's director of communications Sigrid de Vries told wardsauto this afternoon: " In principle were in favour of liberalisation. It's a good thing. But in the current conditions this creates unfair competition that could be very damaging. "

She claimed the duty drawback would allow South Korean manugfacturers to enjoy a Euro 300-to-500 per vehicle advantage over manufacturers of similar models in Europe. This was underpinned by the fact that the deal allowed the proportion of non-South Korean components within South Korean autos to rise from 40% to 50% and 55% in some circumstances. " Half of the cars will be Chinese, " noted de Vries.

Given the proximity of China to South Korea, such sourcing makes good sense--but even though the agreement allows European automakers their own duty drawback rights, these would not help them. " It doesn't make a lot of sense getting a lot of the cars made in China, assembling them in Europe and exporting them again and certainly not to Korea, " said the ACEA communications director: " This is unequal. "

The EU executive, the European Commission, which negotiated the agreement, dismissed ACEA's concerns, with an official telling wardsauto in Brussels this afternoon: " They are trying to paint this as a new advantage that we are giving South Korean manufacturers, but duty drawback exists in the global trading system unless two partners reach a special agreement getting rid of it. The US uses it a lot. " He agreed that European manufacturers did source a lot of parts within the EU, but noted " that's because they are competitive parts manufacturers. "

The official also stressed two safeguards within the deal--namely one allowing the reestablishment of tariffs should there be a boom in exports of South Korean autos to Europe, and also if there is a sharp increase in the use of foreign parts by South Korean manufacturers.

The trade in autos between the EU and South Korea remains skewered, with last year around 30,000 vehicles (a high proportion being high end models) being exported from Europe to Korea, while around 445,000 vehicles were exported from South Korea to the EU. ACEA takes a negative stance on this, claiming the deal will enable the Koreans to push ahead. However, the European Commission told wardsauto that while European sales were rising, South Korean exports were falling (albeit with more Korean companies manufacturing models within Europe). The official said: " There's massive potential now in the Sourth Korean market. "

De Vries also feared that despite some pledges within the agreement to avoid non-tariff barriers, there " are no guarantees that Korea will not introduce new regulations on safety or the environment which will create barriers to access for exporting European cars. " But this complaint was dismissed by the Commission, with the official saying: " What's to stop anyone introducting new safety rules? You deal with it. We're in a modern globalised economy. " De Vries said the industry would wait and see: " The proof is in the pudding, " she noted. It depended on how the agreement would be implemented, she said: " how its conditions will be enforced", adding: " There are so many ways of going around it. "

On duty drawback, ACEA said explictly incorporating these rights in the deal would encourage other European trading partners to demand them in future bilateral agreements. However, the Commission official stressed they are allowed under World Trade Organization rules.
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Author:Nuthall, Keith
Publication:International News
Geographic Code:9CHIN
Date:Oct 1, 2009
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