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 order of magnitude
< 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