ACEA Urges EU to Re-Write ‘Bad’ South Korean Free Trade Agreement

European carmaker’s association ACEA has written an open letter to the European Commission urging it to reassess the conditions of the forthcoming free trade agreement (FTA) with South Korea. According to the ACEA, the FTA will “have a significant impact on jobs and competitiveness in the EU economy and rushing into signing a bad agreement is wrong.” ACEA reported that the trade commissioner intends to initial the FTA in October.

ACEA data shows that the automotive sector is the largest component in the EU/South Korea trade relationship, representing 14 per cent of the total EU/South Korea trade volume, with 17 per cent of all Korean exports to the EU consisting of cars. The EU27 has consistently had a trade deficit with Korea:  14.8 billion euros in 2007, 19.9 billion euros in 2006, 14.2 billion euros in 2005, 12.7 billion euros in 2004. Of the trade deficit, 40 per cent stems from the disequilibrium in the automotive trade.

Automobiles are the most important export product of the South Korean economy. The South Korean car industry is focused on exports, with a production of 3.5 million cars per year, of which 2.5 million (73 per cent) are exported. The EU is a seen as a key target market for Korean manufacturers, with 700,000 cars in 2007, or 20 per cent of all EU car imports, and an average 10 per cent annual growth between 2000 and 2007. (Due to the economic crisis, ACEA reports that 2007 is a better reference year than 2008)