Assessment of the EU - Rep. of Korea FTA

Dr Stephen WoolcockLSE, CEPS, Maastricht Uni. and Institut der deutschen Wirtschaft

Presentation for the European Parliament Hearing; 23rd June 2010

An EU lead on trade

Forward movement when DDA remains stalled

Comprehensive agreement Extensive liberalisation of goods and

services Breaks new ground on rules

Compatibility with WTO

Consistent with broadly accepted interpretation of GATT Art XXIV and GATS Art V

Rules also compatible with WTO principles Some areas WTO-plus (e.g IPR esp. GIs) FTAs can reduce incentive for multilateral

negotiations

Welfare effects

research suggests < 1% of GDP for Korea < 0.1% of GDP for EU

order of magnitude Korea gains more because it’s a

smaller economy with higher protection

Trade effects (EU export growth)

more EU sectors gain from trade than lose significant share of gains for services machinery, pharmaceuticals, chemicals and

agri-foods also stand to gain overall export gains for EU of around Euro

33bn benefits depend on effective reduction and

containment of Korean NTBs/regulatory barriers

Trade affects Korean export growth

overall export gains Euro 23 bn studies show concentration in automotive

exports to a lesser extent in textiles and electronics

but Korean FDI in EU contributing to a significant reduction in Korean exports not accounted for in the quantitative studies

duty drawback equivalent to an export subsidy for Korea auto sector of around 1-1.5%

Provisions on NTBs and rules

TBT provisions break new ground sector arrangements; equivalence; Korean acceptance of

int. standards; moderators Intellectual property rights

effective enforcement of international conventions; but TRIPs plus on GI with registers for wines and spirits and agri-foods

Competition: WTO plus; cooperation in enforcement and subsidies

Procurement: GPA plus on coverage

Dispute settlement faster remedies than available under the WTO

Sustainable development

provisions on labour standards breaks new ground for EU FTAs promote the application of core labour

standards Korea has not yet ratified key core labour

standards cooperation in promotion of multilateral

environment agreements

Timing issues potential gains from early application short term gains for sectors including

automotive first mover advantages, especially for the

service sector / mechanical engineering general competitive gains on market access

KORUS not ratified Korea not yet concluded agreements with China,

Japan and ASEAN early application would provide EU with a lead

set precedent for other agreements

Summary

balance seems favourable to the EU all trade agreements entail adjustment costs these are modest compared to other

adjustment pressures could be eased through provision of

adjustment assistance export growth for EU will depend on

effective implementation of provisions on NTBs and rules