Wednesday

28th Sep 2022

Korean trade deal could fall under Lisbon rules

Speculation is rife within trade circles that the EU's free trade agreement (FTA) with South Korea could be in for a rough time from newly-empowered MEPs who strongly oppose aspects of the deal.

Initialed by the European Commission and the South Korean government last October, but still requiring ratification, the deal has been heralded for its potentially huge savings due to tariff reductions, and held up as the crowning jewel in former trade commissioner Catherine Ashton's list of achievements.

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  • Seoul: MEPs from car producing countries may face pressure to block the deal (Photo: Michael McDonough)

But the deal could still fall victim to its complicated legal heritage, with negotiations carried out under the EU's old Nice rulebook precluding an active role for the European Parliament, while the Lisbon Treaty - in force since 1 December 2009 - hands MEPs an equal say with member states over the deal's final ratification.

"The notion that it will be a smooth process is naive, parliament will not just rubber-stamp the deal," said centre-right MEP Christofer Fjellner, a member of the parliament's trade committee and a supporter of the agreement.

A number of European sectors are deeply unhappy with the bilateral FTA, which took two years to negotiate, most vocally European small car manufacturers that fear greater levels of South Korean imports will hammer their sales.

Amongst other issues, opponents argue the agreement offers too many concessions to Korean companies in the area of duty drawbacks, a mechanism under which Korean companies can claim back EU import duties on car components purchased outside Korea.

Unable to participate in the deal's negotiations, and under pressure from local constituencies, MEPs may now choose to block the deal, a fate that would mimic South Korea's free trade agreement with the United States, signed in 2007 but still languishing in both parliaments.

Oral question

In an oral question to the European commission, to be discussed at the parliament's plenary session next week in Strasbourg, a group of MEPs will call on the EU executive to defend the deal. The debate is likely to shed light on the stance of the European legislature, with observers predicting support or opposition is likely to fall along national rather than political lines.

"This is the first piece of trade legislation the new parliament is handling which makes it interesting," said trade committee member and Italian Liberal MEP, Niccolo Rinaldi, adding that he was "very upset" with parts of the agreement.

Some fear that the parliament's new trade powers mean it will inevitably become the target of increased lobbying, hampering the EU's ability to complete trade agreements.

"It would be very disturbing if the first thing the European Parliament does with its new powers is to take special interests to heart and increasingly act in a protectionist way," said Mr Fjellner.

Strong lobbying of congressmen in the US is blamed as one reason why the American free trade deal with South Korea has hit the buffers.

Officials in the council of ministers, the EU institution that represents member states, are also concerned that parliament will take some time to adjust to its new trade role. "I think the EU trade policy will stop for some time," said one council official who wished to remain anonymous, citing delays of up to two years.

EU initials Korean trade deal as US looks on

After two years of negotiations, the European Commission initialled a landmark free-trade agreement with South Korea on Thursday, a deal that promises to create up to €19 billion in new trade opportunities for EU exporters.

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