Korea Signs Historic Free Trade Deal With EU

Korea signed a historic free trade agreement with the European Union Wednesday, creating a network with the world’s single biggest economic bloc.

The EU’s GDP last year was an estimated 16.4 trillion U.S. dollars, higher than that of the U.S. at 14.3 trillion dollars.

The EU imposes high tariffs on major Korean exports, including 10 percent on cars, 14 percent on visual equipment such as TVs, and 12 to 17 percent on shoes and textiles. So Seoul said the deal’s implementation from July next year is expected to greatly help Korean companies enter the EU market by eliminating the tariffs.

The Korea Institute for International Economic Policy and the Korea Labor Institute said the agreement will increase Korean exports to the EU by 2.53 billion dollars and EU imports by 2.17 billion dollars per year over the next 15 years. The deal will also create up to 253,000 jobs.

Korean agriculture, however, is expected to suffer an annual deficit of 31 million dollars over the same period.

Korea gained the upper hand in its economic competition with the U.S., Japan and China by becoming the first among the four to conclude a free trade deal with the EU.

In addition, Seoul said the deal laid the groundwork for Korea’s emergence as the free trade hub of East Asia linking Europe, East Asia and the U.S. Korea`s free trade agreements with Chile, Singapore, the European Free Trade Association comprised of Iceland, Norway, Switzerland and Liechtenstein, the Association of Southeast Asian Nations, and India have taken effect, and another with the U.S. is awaiting parliamentary approval.

In addition to economic effects, the deal with the EU is expected to create political and diplomatic benefits.

President Lee Myung-bak agreed with EU President Herman Van Rompuy and European Commission President Jose Manuel Barroso to establish a strategic partnership under the accord following the signing of a basic agreement in May.

At a joint news conference, President Lee said, “The two sides have laid the foundation for taking bilateral relations to the next level,” adding, “The relationship between Korea and the EU will develop into a future-oriented one, overcoming geographic distance.”

His spokeswoman Kim Hee-jung said, “The Korea-EU FTA was signed based on the shared values of free democracy, market economy and human rights,” adding, “Building on the value alliance, bilateral relations are evolving into an economic alliance.”

yongari@donga.com