Korean Parliament Approves FTA with EU, Putting Pressure on US
Korea's parliament on Wednesday approved a free trade agreement with the EU, as opposition lawmakers boycotted the vote, paving the way for it to enter into force in July.
The controversial accord is estimated to cover $70 billion in annual two-way trade; it will remove 98 percent of import barriers between the two trading powers over the next 5 years.
Signed in October last year (See Bridges Weekly, 13 October 2010) and approved by the European Parliament in February, the FTA has been facing major delays in the Korean Parliament due to concerns that Korean farmers and dairy producers would be undercut by European imports.
After six months of debate, a key parliamentary committee ratified the FTA last week. But the opposition Democratic Party blocked a vote, demanding additional safeguards for the agricultural industry. Despite an eleventh-hour agreement between the ruling Grand National Party and the DP to introduce new protections for farmers and the retail sector, the opposition party ultimately boycotted the vote.
The last-minute reforms fatten monetary compensation for farmers in the event of price declines, and are set to be in place for a decade. During that time, farmers will also be exempt from value added taxes on their production equipment and feed. Protective legislation for traditional supermarkets was also strengthened, with a provision that no "super supermarket" - giant food retail conglomerates such as the UK's Tesco - could open within a 500-meter radius of traditional markets for three years; the expanded to a 1-kilometer radius for a minimum of five years.
Officials also promised to initiate negotiations for greater protection of domestic industry within the FTA texts before it could enter into effect on 1 July.
The wrangling over the EU FTA overlapped with a visit by US Commerce Secretary Gary Locke to Seoul to promote the US's own FTA with Korea, which is currently stalled in the US political system.
Locke told the Wall Street Journal last week that passage of the EU-Korea FTA with would put the US Congress under pressure to follow suit.
"The EU-Korea agreement takes effect on July 1 and so many of the same products that Americans want to sell to Korea will now come in at cheaper prices from Europe, which puts American companies at a disadvantage," said Mr. Locke. "The longer we wait, the longer that disparity."
ICTSD reporting; "Assembly to discuss ratifying FTA with EU this week", KOREA HERALD, 2 May 2011; "Korea's National Assembly to Pass Korea-EU FTA Bill on Thursday", ARIRANG, 3 May 2011; "US-South Korea Free-Trade Pact Trails EU Agreement", WALL STREET JOURNAL, 28 April 2011, "Contentious vote on Korea-EU FTA set for today", KOREA JOONGANG DAILY, 4 May 2011; "Korea-EU FTA ratified," KOREA TIMES, 4 May 2011.