U.S. assesses EU-Korea FTA
South Korea and the European Union last week signed a free trade agreement that contains many similarities to an agreement signed between South Korea and the United States, according the Office of the U.S. Trade Representative.
The U.S.-Korea FTA (KORUS) has not been enacted because it still needs congressional approval.
On Monday, the USTR released a preliminary comparison of the EU-Korea FTA and KORUS.
“The recently initialed EU-Korea FTA has similarities to, and differences from, the KORUS FTA,' said USTR spokeswoman Carol Guthrie. 'We look forward to engaging with Korea and the EU to fully understand the agreement and its implications for the United States. USTR will carefully consider this agreement as it continues its review of the KORUS FTA.”
While the two agreements are comparable in many respects, the USTR said there are key differences in the automotive trade and regulatory aspects of the two agreements.
'With respect to tariff commitments, the overall tariff package for industrial goods under the Korea-EU FTA appears to be comparable in ambition and comprehensiveness to the KORUS tariff schedule, with 92 percent of Korean tariffs eliminated in three years (the KORUS FTA eliminates 94.5 percent),' the USTR said in its analysis.
The main differences come in tariff reductions for cars traded between the regions. The EU and Korea will eliminate tariffs on cars in three or five years, the analysis said. Under KORUS, Korea’s 8 percent auto tariff will be eliminated immediately, while the United States would eliminate its 2.5 percent tariff on small cars immediately and on large cars over three years.
The US-Korea FTA also contains a specific enforcement mechanism that includes the ability to “snap back” tariffs on Korean cars if Korea takes measures that impair the agreement’s expected benefits, a feature lacking in the EU-Korea FTA.
For trucks, under the KORUS FTA, Korea will eliminate its 10 percent tariff immediately, and the United States will phase out its 25 percent tariff over 10 years. In the EU-Korea FTA, Korea will eliminate tariffs on most trucks immediately. The EU will eliminate its 22 percent truck tariffs over three to five years, depending on the specific category of truck.
There are also differences in automotive safety standards. In KORUS, the United States obtained an exemption to allow each U.S. automakers to sell up to 6,500 vehicles a year in Korea built to U.S. safety standards. Instead of this exemption, the EU-Korea FTA contains provisions committing Korea to harmonize some of its standards to European standards over time. The USTR said it will further review this issue and consult with stakeholders to fully understand the commercial implications of this difference.
Another area where the two FTAs diverge is in regulatory transparency.
'The KORUS FTA appears to contain more detailed and extensive provisions on regulatory transparency and stakeholder input into the process of developing standards and other regulatory measures, to address concerns that non-transparent procedures result in measures that act as non-tariff barriers to goods,' the USTR said. 'The KORUS FTA contains specific provisions to ensure that remanufactured goods ' a key component of the U.S. manufacturing industry ' qualify as originating goods.'
The EU is South Korea's third largest trading partner and the United States is its fourth largest.
U.S. assesses EU-Korea FTA
