South Korea, EU eye conclusion of free trade talks

SEOUL, South Korea (AP): The European Union is on the verge of wrapping up free trade talks with South Korea - possibly as early as this week - even as an already completed U.S. free trade pact with Seoul languishes in political limbo.

Like the old tale of the tortoise and the hare, the slower-starting EU may end up outpacing the United States in first cementing closer trade ties with South Korea, Asia's fourth-largest economy.

The U.S. and South Korea agreed to a free trade pact in 2007, but it has not come into effect because legislatures in both countries have yet to ratify it. And the Democratic-controlled Congress has shown signs of opposition to the proposed agreement because of concerns it doesn't adequately address South Korea's large automobile trade surplus.

"There is a much higher chance for the Korea-EU FTA to be implemented" first, said Cheong In-kyo, an expert on free trade agreements at Inha University, citing U.S. Congressional resistance.

The EU and South Korea, which started trade talks a month after the U.S.-South Korea deal was reached, will hold their eighth round of negotiations aimed at slashing tariffs and other barriers Monday and Tuesday in Seoul. It could be the last session before an agreement, South Korean officials said.

The South Korean-EU talks have also had problems overcoming differences regarding autos, but the overall effort to free up trade has seen little of the drama surrounding that between Seoul and Washington.

Besides the frequent street protests that occasionally blocked off a main downtown thoroughfare in Seoul and saw riot police use water cannon to disperse demonstrators during the negotiations, the U.S. deal has also resulted in fisticuffs in South Korea's National Assembly, where it has been hotly debated.

Still, the ruling party of South Korean President Lee Myung-bak has the votes to pass the agreement when it pleases and appears to be waiting for the right timing, closely watching moves in the U.S.

To be sure, South Korean activists have protested the talks with the 27-member EU, though the demonstrations have been nothing like those targeting the U.S., a key security ally that inspires strong emotions - both positive and negative - in South Korea.

Bilateral trade between South Korea and the EU reached $98.4 billion in 2008. The EU is South Korea's second-largest trading partner after China, while the EU is the largest foreign investor in South Korea.

The U.S., meanwhile, is South Korea's fourth-largest trading partner.

Kim Hee-sang, an official at Seoul's Ministry of Foreign Affairs and Trade, said last week that South Korea and the EU "are very close" to concluding negotiations, and that the two sides may have their respective trade ministers "politically approve" a deal on the sidelines of the G-20 summit, scheduled for April 2 in London.

Any free trade agreement would need to be approved by South Korea's National Assembly as well as by EU governments to take effect.

Regarding the contentious auto trade, negotiators are working on an idea that would eliminate tariffs on small cars in five years and on mid-sized and large cars in three years, Kim said.

South Koreans bought 32,756 vehicles from EU member states last year, according to the Korea Automobile Importers & Distributors Association, accounting for 53.1 percent of the imported vehicle market. That was ahead of Japan at 35.5 percent, while the U.S. lagged at 11.3 percent.

South Korea, meanwhile, exported 408,934 vehicles to the 27-member EU in 2008, according to figures provided by the Korea Automobile Manufacturers Association.

In February, the European Automobile Manufacturers' Association called on EU states to reject the proposed deal.

"The unfair nature of the agreement is not acceptable in light of the current economic crisis," the group said, adding it would preserve the "disequilibrium" in auto trade by failing to address non-tariff barriers such as South Korean auto standards.

South Korean officials are careful not to appear to be using the prospect of an agreement with the EU to pressure Congress to move faster on the U.S. deal, but clearly see some potential impact.

Lee Hye-min, Seoul's chief negotiator for the EU talks, said in a radio interview last week that reaching a deal with Brussels could have a "positive effect on ratification" of the agreement with Washington, from the perspective of "competitive relations between U.S. and EU businesses."

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