European Commission 1/4 EU-SOUTH KOREA FREE TRADE AGREEMENT 10 KEY BENEFITS FOR THE EUROPEAN UNION OCTOBER 2010 1. Tariff elimination for EU's exports of industrial and agricultural goods The EU-South Korea Free Trade Agreement (FTA) will relieve EU exporters of industrial and agricultural goods to South Korea from paying tariffs. Once the agreement is up and running, exporters will save € 1.6 billion annually from not paying import duties. Even on day 1, exporters will already save €850 million. For instance, EU machinery exporters will save €450 million duties each year, and chemical exporters will be relieved of over €150 million duties. The EU textiles and clothing sector will see most of the €60 million duties eliminated on day one of the FTA. The EU has a strong agricultural presence in the Korean market with major exports in pork (worth €240 million), whisky (€176 million) and dairy products (€99 million). Today only 2% of EU agricultural exports enter South Korea duty free and the agricultural import tariffs are very high. The Korean tariffs on these goods will be eliminated thanks to the FTA. Import duties on wine, for instance, will be eliminated on day one and those on whisky at year 3. EU agricultural exporters will save at least €380 million annually. Overall, this is the most ambitious tariff elimination achieved in any of the EU's bilateral trade agreements. In fact the gains from duty savings will be even higher as trade between the EU and South Korea is expected to expand due to the FTA. According to a study1, the FTA will create new trade in goods and services worth €19.1 billion for the EU compared to €12.8 billion for South Korea. The figure in fact underestimates the benefits for the EU since it does not consider the gains due to the elimination of non-tariff barriers (NTBs). According to a more recent study from May 20102 the FTA is expected to more than double EU-South Korea bilateral trade in the next 20 years compared to a scenario without the FTA. 2. Improved market access for EU's services suppliers The FTA will open several billion euros worth of new opportunities for EU companies in the services sectors. The FTA will not only offer commitments on services on a par with those offered by South Korea in the draft FTA with the US, but also go beyond those in sectors of specific EU interest. In practical terms, the FTA will: - allow EU satellite broadcasters to operate directly cross-border into South Korea, thus avoiding the obligation to liaise with a Korean operator. 1 "Economic Impact of a Potential Free Trade Agreement between the EU and South Korea" by Copenhagen Economics and Prof. J.F Francois: http://trade.ec.europa.eu/doclib/docs/2007/march/tradoc_134017.pdf 2 "The Economic Impact of the Free Trade Agreement (FTA) between the European Union and Korea" by consortium CEPII/ATLASS: http://trade.ec.europa.eu/doclib/docs/2010/may/tradoc_146174.pdf http://trade.ec.europa.eu/doclib/press/index.cfm?id=443