EU unlikely to request FTA renegotiation on car tariffs

Fears are rising that Korea could make concessions in the automotive sector to the European Union in their bilateral free trade deal as Seoul did with Washington.

Government and automobile industry experts said Monday, however, that car sales in Korea will be little affected regardless of how the renegotiation with the EU turns out because the EU car market is essentially different from that of the U.S.

○ Tariffs unlikely to be touched

The experts said the EU might not request renegotiation of the tariff abolition plans made in the free trade agreement officially signed with Korea in October. Both sides agreed to lift all tariffs on cars with an engine capacity exceeding 1.5 liters within three years after the deal takes effect, and remove those on cars with engines under 1.5 liters within five years.

If the EU postpones the removal of tariffs on Korean cars, Korea will do the same for EU cars based on the rules of trade reciprocity. Experts say the EU should lift tariffs as initially agreed on since EU cars sell well in Korea.

European carmakers are also relatively confident in their own markets. American cars do not sell well in Europe while European cars do in the U.S. market based on the strong competitiveness of EU vehicles.

○ Renegotiation of non-tariff sector

In the non-tariff sector, the EU could request the easing of car fuel efficiency and environmental regulations and transparency in the tax revision process. The U.S. had made the same demands to Korea in their latest negotiations, to which Seoul accepted.

If the EU requests the same, it will be considered a symbolic fairness gesture and fueled by fears over possible disadvantages, car industry experts said.

Korea agreed to lower fuel standards 19 percent for U.S. carmakers that sell less than 4,500 units in Korea per year. Even if the same standard is applied in Korea-EU negotiations, the beneficiaries will include a few luxury car brands that sell fewer units in Korea and auto companies new to the Korean market.

On the transparency of tax revision, the EU could ask Korea to disclose the procedure of car tax revisions so that EU cars are not at a disadvantage. Importers of EU car brands say, however, that these regulations will have minimal impact on Korea.

Bang Shil, sales director for Volkswagen Korea, said, “The EU is unlikely to benefit much from this request. This can be considered a symbolic gesture since the U.S. did the same.”

tesomiom@donga.com hyejin@donga.com