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INTERVIEW: EU Korea FTA deserves an upgrade

Speaking to Rob Francis in Brussels during a whistle-stop tour of Europe, Christoph Heider, president of the European Chamber of Commerce in Korea, said that updating the EU-Korea free trade agreement is “not a priority” for the current Korean government.

“Almost everyone is happy about the current agreement,” said Heider of the agreement that has been in force since 2011. “The FTA works well, and trade is up.”

Christoph Heider is President of the European Chamber of Commerce Korea.

“The question is, could you be happier? Everyone knows the FTA is 11 years old, and some parts of it were drafted even longer ago.”

Hailed as a new-generation agreement when negotiations were concluded in 2009, today the agreement is showing its age.

Digital trade is not covered in the text, and although the agreement was the first EU trade deal to contain a sustainable development chapter, this element is no longer seen as the gold standard for the EU’s trade agreements.

Heider believes one obstacle in the way of an update is the EU’s new approach to sustainability chapters in trade agreements.

In Heider’s view, Seoul is unlikely to agree to the inclusion of sanctions within the chapter.

The ongoing discussions around the EU-Mercosur deal and opposition in the EU’s national parliaments to trade deals more generally, as he sees it, also do not augur well for such a modernisation.

The FTA only covers direct trade from country-to-country, meaning goods that are traded through hubs such as Singapore are not eligible to benefit from the agreement’s provisions.

This is another reason why Heider would like to see the agreement updated.

“If you made a simulation of the FTA modernisation and assessed the impact on employment and GDP, modernisation would bring additional value,” Heider said.

Wish list for Brussels

The ECCK was in Brussels to share its white paper with key European Commission officials and business organisations.

The visit to the EU capital was part of a tour which also includes visits to the World Trade Organization and the European Free Trade Association in Geneva, and to London.

The chamber’s white paper includes 96 recommendations to the South Korean government covering all aspects of government policy and goes into granular detail.

One such recommendation concerns a mistake in the customs code in the EU FTA which meant that although agricultural tractors are included within the agreement, trucks for road transport which are used to haul containers, also known as “tractors”, are not included.

Digital partnership

Modernisation of the FTA may be far-off, but there is movement in the bilateral relationship.

In November during the EU-South Korea summit, the parties will sign a digital partnership.

“This will be a non-binding statement,” said Heider, who expects it to be similar to the one recently launched between the EU and Japan.

“Even if it doesn’t regulate anything and remains non-binding, it’s good that countries want to have such agreements and show they have common ground.”

Some third countries have criticised the recent autonomous trade measures from the EU executive. What’s the view from Seoul on the EU’s planned carbon border adjustment mechanism?

“South Korean companies are scared their products will be more expensive as a result,” said Heider.

“In South Korea, the energy mix is not as good as it should be, and the carbon price is less than in Europe. This means South Korean companies fear they will have to pay an additional fee at the EU border.”

“Of course, they don’t like the CBAM because it will hurt their exports and makes their energy-intensive products less competitive. They see the EU’s CBAM as a non-tariff barrier.”

So will Seoul challenge the measure at the WTO?

“Let’s wait and see how CBAM is designed,” said Heider.

But it is primarily the issue of standards that keeps him awake at night.

“South Korea has standards that are based on international standards, but that are different,” he explained.

“European certificates are not recognised in Korea, meaning if you want to export to the country you need to test again, and it is difficult to get products in the country.”

“We want to see more adherence to international standards in South Korea, and specifically either the EU or US standards.”

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