Sectoral Breakdown of the FTA
Breakdown of the Korea-EU FTA
Several studies have been made estimating the effects of the free trade agreement (FTA) for both the EU and Korea. Naturally, these estimates have a degree of uncertainty, but all estimates firmly show that the FTA will significantly increase trade between all EU countries and Korea.
The FTA is therefore very important for traditional Danish export to the Korean market, but also crucial for new Danish export sectors as the agreement reduces tariffs and barriers on a broad range of goods and services.
From the first day of entry into force, tariffs on half of all categories of goods were removed, and after 3 years, 95.8% of all tariffs on most other categories of goods will be removed. Within 7-10 years of entry into force, tariffs on all categories will be eliminated save a few exceptions.
See the Tariff Elimination Schedule for specification here:
| Sector | Expected increase in EU exports to Korea (Baseline 1: no Doha agreement) |
Tariff Elimination Schedule | Comments |
|---|---|---|---|
| Agricultural products | 163% | Immediate to 7 years: Full liberalization of mainly all EU agricultural exports to Korea | Traditionally, both a major European and Danish export sector to Korea. European agricultural and processed food products enjoy a good reputation and impression among Korean consumers. Thus, removal of the very high Korean tariffs on agricultural products might help realise significant potential for European and Danish exporters. |
| Dairy products | 1114% | Long term commitment schedule is adopted | Long-term phase-out period applies to dairy products, and TRQs will be established for whole/skim milk powder, cheese and milk serum on the basis of past import records. |
| Meat and animal products | 331% | 5 years: certain pork. 10 years: frozen pork belly | Traditional Danish export. EU is expected to significantly increase its exports of agricultural products - especially meat and dairy products. |
| Food products | 170% | Immediate to 10 years (see specification in tariff schedule for Korea) | European agricultural and processed food products enjoy a good reputation and impression among Korean consumers. |
| Leather and clothing | 148% | Immediate to 3 years | |
| Chemicals | 89% | Immediate: Other fine chemistry materials (1~8%) 3 years: Other fine chemical products (5~8%) | The chemical sector is the second largest beneficiary and will see relief of EUR 175 million due to the removal of tariffs and duties in the Korean chemicals market. Increased competition and intra-industry trade is expected in both EU and Korea. |
| Electronic equipment | 65% | 3 years: Pump (8%), Wireless Telecommunication Device Components (8%). 5 years: Other pumps (8%) | Full liberalization within 5 years. Machinery and electronic equipment exports currently account for one-third of overall EU exports to Korea and are expected to grow by more than 65%. EU producers will enjoy better market access in Korea. |
| Machinery | 84% | Immediate: Optical Machinery (8%), Chemical Machinery (8%), Electric Bulbs (8%), Textile Machinery (5~8%), Food Packing Machinery (8%). 5 years: Printing Machinery (8%), Metal Cutting Machinery (8%), Other Machinery (16%) | Machinery and appliances represent the largest sector where gains will be close to EUR 45 million annually. E.g. metal goods, machinery and spare parts for machinery make up for half of Danish exports to Korea. |
| Other manufactured products | 51% | Immediate: Optical Machinery (8%), Chemical Machinery (8%), Electric Bulbs (8%), Textile Machinery (5~8%), Food Packing Machinery (8%). 5 years: Printing Machinery (8%), Metal Cutting Machinery (8%), Other Machinery (16%) | |
| Sea Transport | 10% | Immediate: Ships 3 years: Engines for ships and parts thereof (8%), Parts of ships (8%) |
|
| Services | 24% | Immediate market access | Covers service areas like transport, finance, legal services, environmental services and construction. EU exports of services to Korea are expected to increase more than 30% for almost all service areas. Construction: Korea will abolish the existing subcontracting requirement for construction services. Law services: European law firms will be able to establish offices in Korea to advise foreign investors or Korean clients on non-Korean law. |
| Business Services | 31% | Immediate market access | Environmental services: Korea will take considerable measures on the treatment of non-industrial waste waters. Shipping services: Danish firms will have full market access and the right of establishment in Korea. New business opportunities are expected in maritime services. |
| Pharmaceutical products | - | 3 years: Pharmaceuticals (65%), Cosmetics (8%). 5 years: Electronics for medical purposes (8%) | General provisions on promoting the development of and facilitating access to Korean pharmaceutical products and medical devices. Danish pharmaceutical exports and exporters of medical devices will benefit from increased transparency in price setting. |
| Environmental goods | - | 5 years: Turbines (8%) |
Table 1: Sectoral breakdown. Souce: European Commission report on the Korea-EU FRA (2010), Ministry of Finance and Strategy, Korea (2009) *The figures in the parentheses refer to the base rates of customs duty as of January 1, 2006.
Other provisions of the FTA
The FTA addresses barriers in four particular sectors, which the EU has identified as being key obstacles to access the Korean market. Non-tariff barriers (NTBs) are barriers to trade that arise in many different shapes, but often create higher burdens than regular tariffs and custom duties.
The four sectors are chemicals, consumer electronics, automotive industry, and pharmacy. In general, the FTA ensures that the NTBs in these sectors are strongly loosened and converging to international standards.
| Sector | Non-Tariff Barriers (NTBs) |
| Consumer electronics | Currently, exporters of consumer electronics and household appliances are obliged to comply with burdensome and expensive testing and certification procedures in order to market products in Korea. The FTA ensures a less burdensome Korean certification procedure and the recognition of European certificate test results. |
|---|---|
| Automotive industry | NTBs in this sector are perceived as the most significant barriers to export to Korea. The FTA ensures that Korea converge to international standards in this sector. |
| Pharmaceutical products and medical devices | As of present, there are concerns about the lack of transparency in the Korean health authorities' price setting. The FTA ensures increased transparency in pricing decisions. |
| Chemicals | The FTA fully corresponds to the integrity of the EU regulatory framework in the chemical sector. Among other things, this ensures transparency regarding content of laws and regulation. |