EU, SOUTH KOREA HOLD SEVENTH ROUND OF FTA NEGOTIATIONS

The seventh round of free trade talks between South Korea and the EU commenced early this week in Brussels.

During this round, from 12-15 May, negotiators will aim to address topics such as rules of origin, non-tariff barriers, services, trade and intellectual property protections. So far Brussels has indicated it will revise its proposal on rules of origin next month. Seoul would like the EU to relax the threshold for goods to qualify for duty cuts under the agreement beyond the current 60 percent of domestically added value content.

Issues such as tariff concessions, auto-trade and auto-related technical standards remain contentious. The Europeans view South Korea as taking an overly protective stance, especially on what Brussels sees as non-tariff barriers. In particular, Brussels wants Seoul to ease regulations on EU car manufacturers by applying international instead of domestic regulations.

Seoul has offered to remove tariffs on approximately 72 percent of EU goods within three years, including a full tariff elimination on industrial products. This offer represents an increase from the previous one to remove 68 percent of tariffs. Yet these proposals would still fall short of what South Korea granted the United States under an FTA negotiated last year; offers which negotiators from the EU hope to equal. For its part, the EU has offered to remove import tariffs on 80 percent of South Korean goods within three years of a deal entering into force, and to eliminate all tariffs within seven years.

The EU and South Korea are major trading partners, with bilateral trade worth $89.8 billion in 2007. The twenty-seven nation trading bloc represents South Korea's leading foreign investor and second largest export destination after China. Unofficial studies suggest a FTA would boost trade and investment flows.

In the six negotiating rounds since May 2007, the two sides have managed to agree on important issues such as antitrust and merger aspects of competition policy, domestic regulatory issues and transparency, and dispute resolution mechanisms.

ICTSD reporting; "EU to Propose New Rules of Origin for S. Korea," YONHAP NEWS, 14 May 2008; "S. Korea, EU Open 7th Round of Free Trade Talks," ASIA PULSE, 13 May 2008; "7th FTA Talks With EU Start in Belgium Today," KOREA TIMES, 11 May 2008; "S Korea, EU to hold Free Trade Talks Next Week," DOW JONES NEWSWIRES, 9 May 2008.

With the major issues resolved in the free trade agreement (FTA) negotiations between Thailand and India, the two sides anticipate signing an accord within the next two to three months.

Indian Commerce Minister Kamal Nath set out this timeframe in an interview with the Bangkok Post newspaper this week. Moreover, he said that a Thai-Indian FTA would involve concessions deeper than those being negotiated under a prospective accord between New Delhi and the 10 member Association of Southeast Asian Nations (Asean), to which Thailand belongs.

In the negotiations with Thailand, India has agreed to phase out tariffs on more than four thousand products. A 'sensitive list' comprising five hundred products will receive partial tariff cuts. Some five hundred products on a 'negative list' will face no tariff reductions, to protect domestic industry.

The FTA negotiations build upon a 2003 'framework agreement' between Thailand and India that called for liberalising trade by 2010. That agreement included an 'early harvest' scheme to phase out tariffs on 82 items ranging from air conditioners to wrist watches.

Since then, bilateral trade has increased significantly. Thai exports to India rose from $870 million in 2005 to $1.75 billion in 2006. Nath estimates that a FTA would further increase bilateral trade between the countries, which in 2006 reached $4.7 billion.

Nevertheless, the negotiations have been slow, held back in part by a Thai coup in 2006, concerns that Thai exporters have benefited disproportionately from the recent liberalisation, and the fact that Thailand is not among India's top 20 trading partners.

Yet for India, as Nath stated, Thailand offers "an important investment destination both for its domestic needs and as a gateway to other Asean countries." Indian firms, such as Tata Motors, Tata Consultancy, Tata Steel and Satyam Computers, are already active in Thailand. In particular, Indian companies aim to boost manufacturing for high tech equipment in the Southeast Asian country.

Similarly, Thai business has begun to engage with India in crucial areas. India has allowed investment by Thai companies in many areas of the economy, including some that were previously restricted to national companies such as mining, services, and telecommunications. Nonetheless, investment restrictions will remain in place in a few sectors, notably retail, defence products and finance.

ICTSD reporting; "Thai-Indian FTA almost ready to sign," BANGKOK POST, 10 May 2008; "India sees Thai free trade talks faltering," BANGKOK POST, 25 November 2007; "Coup Puts Indo-Thai Free Trade Deal in Doldrums," INTER PRESS SERVICE NEWS AGENCY, 27 September 2006.