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15th Aug 2022

MEPs back first EU trade deal under Lisbon Treaty rules

  • Seoul, South Korea's capital. EU exporters are set to gain better market access under the deal (Photo: downbeat)

MEPs have given their final approval to a landmark free-trade agreement with South Korea, despite repeated threats over the past year to wield newly-gained Lisbon Treaty powers to sink the controversial deal.

In the end, a resounding majority of MEPs in Strasbourg on Thursday (17 February) backed the bilateral agreement which aims to eliminate roughly 98 percent of import duties and other trade barriers in manufactured goods, agricultural products and services over the next five years.

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The European Commission estimates the FTA will create new trade in goods and services worth €19.1 billion for the EU and save EU exporters €1.6 billion a year, but for South Korea, the deal is more about geopolitics than cutting trading costs, says a leading expert in the field.

"China is increasingly using its economic clout to put pressure on South Korea and Japan. We are seeing a re-instatement of the Middle Kingdom," Hosuk Lee-Makiyama, a director with the European Centre for International Political Economy, told EUobserver.

"The FTA for South Korea is mainly about diversifying away from China. The geopolitics are far more important over there and it has come as a surprise to the EU," added the Brussels-based think-tanker.

Euro deputies on Thursday also approved a special safeguard clause, thrashed out with EU member states last December, designed to shield the European car industry from an excessive increase in cheaper imports from South Korea.

Under the clause, both industry and the European Parliament can call on the European Commission to launch an investigation into whether EU producers face "serious injury" from a surge in imports, potentially leading to a return of higher import duties.

Originally initialled in October 2009 by former EU trade commissioner Catherine Ashton, the deal is considered the jewel in the EU's crown of bilateral FTAs, increasingly sought as the Doha round of multilateral trade talks hit the buffers in recent years.

A year ago however, speculation was rife within trade circles that the South Korean FTA could be the first to fall under the bloc's new Lisbon Treaty rules, which handed MEPs powers to formally approve or reject international trade deals for the first time.

Negotiated under the EU's old Nice Treaty rules, many MEPs were frustrated by their inability to shape the far-reaching agreement. Alarmist cries from the European car sector and a tough economic recession added to the wave of anti-deal rhetoric emanating from a considerable number of officials.

The Italian government also threatened to scupper the deal until the very end, winning a delayed entry into force of 1 July 2011.

Some Green MEPs continued to voice concerns over weak social and environmental standards after the vote on Thursday. "Among the more odious provisions of the agreement, the EU succeeded in pushing Korea to massage its rules on car CO2 emissions to allow European car makers to export more big gas-guzzling cars to Korea," said French MEP Yannick Jadot, a vice-chairman of parliament's trade committee.

One issue which raised earlier concerns, the question of North Korea's Kaesong Industrial Region, was largely kicked into touch for the moment.

Opened in December 2004, the special administrative industrial region located ten kilometres north of the Korean demilitarised zone is a home to over 100 South Korean factors as part of a rapprochement project pushed by the Hyundai family of car manufacturing fame.

A number of MEPs had raised concerns that inclusion of the Kaesong Industrial Region in the FTA would open the door for North Korean exports into the EU, currently banned due Pyongyang's continued repression of citizens. The country's dictator, Kim Jong-Il, reportedly scaled down his 69th birthday celebrations this week amid widespread food shortages.

Under the FTA, a committee of EU and South Korean experts will decide whether individual products from Kaesong should be granted access to the EU market.

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