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Assessment of the EU - Rep. of Korea FTA

Assessment of the EU - Rep. of Korea FTA. Dr Stephen Woolcock LSE, CEPS, Maastricht Uni. and Institut der deutschen Wirtschaft Presentation for the European Parliament Hearing; 23 rd June 2010. An EU lead on trade. Forward movement when DDA remains stalled Comprehensive agreement

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Assessment of the EU - Rep. of Korea FTA

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  1. Assessment of the EU - Rep. of Korea FTA Dr Stephen Woolcock LSE, CEPS, Maastricht Uni. and Institut der deutschen Wirtschaft Presentation for the European Parliament Hearing; 23rd June 2010

  2. An EU lead on trade • Forward movement when DDA remains stalled • Comprehensive agreement • Extensive liberalisation of goods and services • Breaks new ground on rules

  3. 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

  4. 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

  5. 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

  6. 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%

  7. 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

  8. 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

  9. 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

  10. 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

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