The European Union on Thursday reached its biggest ever free trade agreement (FTA) with a third country, South Korea, paving the way for a potentially massive rise in exports, according to dpa. The deal, worth up to 19 billion euros (28.3 billion dollars) according to some estimates, was initialled by EU Trade Commissioner Catherine Ashton and Korean Trade Minister Kim Jong-hoon. It seeks to remove most tariffs and non-tariff barriers between the two economies. Requested by European businesses, negotiations took eight rounds of talks and two years to be completed. "This agreement is particularly important in the current economic climate, helping to fight the economic downturn and create new jobs," Ashton said. "The benefits will be enormous," the commissioner added. The deal quickly eliminates 1.6 billion euros in Korean import duties and 1.1 billion euros in EU import duties. This should benefit both businesses and consumers, since it should make products cheaper. The deal also tackles non-tariff barriers to trade on a variety of products and services. For instance, typical EU foods such as Italian Prosciutto di Parma, French Champagne and Greek Feta cheese will receive added protection in South Korea. And many European standards on manufactured products will also be treated as equivalent by Korea, thus eliminating red tape. One of the most controversial aspects of the FTA concerns the automotive sector. EU and Korean car makers currently hold a similar share in each others' market of around 3 per cent. But the EU market is much larger, meaning there are 10 times more Korean cars in Europe than European cars in South Korea. In order to allay European fears that they may be swamped by cheaper Asian cars, the FTA contains a so-called safeguard clause, allowing duties to be re-introduced in case of a sudden surge in imports. Commissioner Ashton said the deal should make a 25,000-euro car about 2,000 euros cheaper. But the FTA also covers a much broader range of businesses, including telecommunications, finance and shipping. The trade in goods between the EU and Korea was estimated at 65 billion euros in 2008. The FTA will now have be ratified by the EU's 27 national governments and by the European Parliament before it can come into force, possibly in 2010. The EU is now hoping to reach similar deals with India and other Asian countries.
