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Future Prospects of Korea-Latvia Trade Relations

i th F k f th K EU FTAin the Framework of the Korea-EU FTA

2011 10 18

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2011. 10. 18

Heungchong KIM

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Contents

b k d d hiI. Korea-EU FTA: background and historyII. The SessionsIII. Concession ScheduleIV. Salient Features of the FTA

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V. Korea-Latvia Trade RelationsVI. Implications

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I. Korea-EU FTA: background and history

Korea’s FTA Policy: three periods

1st period(1998~2003) - No “left behind”in pursuing foreign marketopening; FTA with small economies such as Chile; trying to pursuingMulti-track FTA; Chile, Singapore, & EFTA

2nd period(2004~2010) - Strengthening competitiveness of the Korean2 period(2004 2010) Strengthening competitiveness of the KoreanEconomy as well as exploiting foreign market; Multi-track FTA; highquality & comprehensive FTA; Nationally supporting Constituency FTA;Japan, US, EU & ASEAN

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p , ,

3rd period(2011~ ) – Growing interest in FTAs with neighboringcountries and Big developing economies; Japan China Mongolia etccountries and Big developing economies; Japan, China, Mongolia, etcvs. BRICs, Turkey…

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2003, 9. Korea,“Korea’s Policy Roadmap for further FTAs”2004 4 Korea Chile FTA enter into force2004, 4. Korea-Chile FTA enter into force

5. Latvia joined the EUEU,“no interest in FTA with Korea”

12. Korea, KIEP start-up of a feasibility study of the FTA2005, KIEP, analyses on the impact of KORUS & Korea-EU FTAs on

the economy and industriesthe economy and industries7. DDA deadlock11. EU, New cabinet in the EU Commission (Mandelson)12 1 t f i l h K EU FTA l d

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12. 1st professional research on Korea-EU FTA released2006. 2., Announcement of start-up of the KORUS FTA talk

6. KORUS FTA negotiation talks startedg6~8. Korea, several seminars held on Korea-EU FTA7~9. EU & Korea, Preliminary meeting10 EU Global Europe released

310. EU, Global Europe released11~12. Korea, EU FTA Public hearing(11), Industry-dialogue


2007. 4. KORUS FTA talks ended after 8th round4~5. EU Council, Endorsement of the FTA talk with Korea5., start-up of the Korea-EU FTA talks6. US, reflection of US New Trade Policy on the KORUS, &6. US, reflection of US New Trade Policy on the KORUS, &

Signing of the KORUS2008. 5., the 7th round of Korea-EU FTA2009 3 th 8th d f K EU FTA t lk2009. 3., the 8th round of Korea-EU FTA talks

7., “talks ended,” announced by EU & Korea10. initial the Korea-EU FTA

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2010. 10. Signing of the Korea-EU FTA11~12. further talks on KORUS FTA – exchange of letters

2011 7 Korea EU FTA enter into force2011. 7. Korea-EU FTA enter into force10. KORUS, completed legislative process in the US.

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II. The sessions

3rd 4th 5th 6th 7th

Goods (Tariffs)Goods (Tariffs)

NTBs

W & S

electronics

automotive

Pharmaceutical

chemical

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TBT

SPS

Customs/TF

RoO

TDI

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II. The sessions

3rd 4th 5th 6th 7th

Services

Financial

IT

Establishment

IPR

(GI)

GP

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COMPETITION

DS

Transparency

SD

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III. Concession Schedule

Korea in the Korea-EU FTA Agriculture Fishery Manufacturing TotalAgriculture Fishery Manufacturing Total

IE 735 (50.7) 50 (12.3) 8,542 (90.8) 9,327 (82.8)

Within 3 yrs. 21 (1.4) 130 (31.9) 472 (5.0) 623 (5.5)y ( ) ( ) ( ) ( )

Within 5 yrs. 265 (18.3) 91 (22.3) 348 (3.7) 704 (6.3)

Within 7 yrs. 71 (4.9) 21 (5.1) 42 (0.4) 134 (1.2)

Withi 10 174 (12 0) 111 (27 2) 285 (2 5)Within 10 yrs 174 (12.0) 111 (27.2) - 285 (2.5)

Over 10 yrs 128 (8.8) 2 (0.5) - 130 (1.2)

Total (con) 1 394 (96 2) 405 (99 3) 9 404 (100) 11 203 (99 5)

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Total (con) 1,394 (96.2) 405 (99.3) 9,404 (100) 11,203 (99.5)

excluded 55 (3.8) 3 (0.7) - 58 (0.5)

Total 1 449 (100) 408 (100) 9 404 (100) 11 261 (100)Total 1,449 (100) 408 (100) 9,404 (100) 11,261 (100)

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III. Concession Schedule

EU in the Korea-EU FTA

A i l Fi h M f i T lAgriculture Fishery Manufacturing Total

IE 1,982 (96.0) 155 (40.8) 7,167 (96.9) 9,304 (94.5)

Within 3 yrs. 82 (4.0) 118 (31.1) 186 (2.5) 386 (3.9)

Within 5 yrs. - 107 (28.2) 45 (0.6) 152 (1.5)

Total 2,064 (100) 380 (100) 7,398 (100) 9,842 (100)

8excluded - - - -

Total 2,064 (100) 380 (100) 7,398 (100) 9,842 (100)

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IV. Salient Features of the Korea-EU FTA

Korea-EU FTA KORUS FTA• 7 years to completely abolish tariffs onimported manufacturing goods;imported manufacturing goods;

• Asymmetry between the EU who abolish tariffs within 5 years and Korea within 7 years;

• 10 years to completely abolish tariffs on imported manufacturing goods;

b h dyears;

• Early abolition of tariffs (within 3 years) by the EU on 97.3% (of tariff lines)and 96.9% (by the total value of the imports); KORUS

• Near symmetry between the US and Korea

• Early abolition of tariffs (within 3 years) by the US: 92 1% (of tariff lines) and

Goodsplus

• EU tariff schedule: immediate elimination of tariffs (automobile parts, textiles, h t i f i t i diti

by the US: 92.1% (of tariff lines) and 94.6% (by the total value of the imports);

• US tariff schedule; immediate elimination of tariffs (passenger vehicles below 3000cc,

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photocopiers, refrigerators, air conditioners, etc.), within 3Years (medium/large passenger vehicles, tires,microwave ovens etc ) within 5 years

(p g ,color TVs, LCD monitors, etc.), within 3years (DTVs, passenger vehicles above 3000cc, golf products, etc.), within 5 years (tires, speakers, etc.), andmicrowave ovens, etc.) , within 5 years

(small sized passenger vehicles, lorries, color TVs, cameras, etc.), and complete elimination after 5 years

within 10 years (microwave ovens, laundry machines, lorries, etc.)

9Sources: Kim(2008) & DG for External Policies, European Parliament (2010)


Korea-EU FTA KORUS FTASD C i t d d

NTBs

• SDoC introduced

• REACH etc..

•TE fail to introduce

• Favor in safety criteria for US

•TE fail to introduce

TBT/SPS• Regionalization introduced

• Made in EU notMade in EU not

IPR• Longer protection period of Pharmaceuticals; GI in Agricultural products as well as wine & spirit

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Korea-EU FTA KORUS FTAM t h d i d th• Matches and in some cases exceeds the

degree of opening in parity with the KORUS (such as in financial and legal services)

• Certain areas agreed to additional

• Financial services, law firms, telecommunications, media, accounting and auditing, general consulting, etc.

Services• Certain areas agreed to additional opening like international satellite lines reserved forbroadcast services and sewage disposal services

• Education and medical services not open

• Negative listing (also in the Chile-Korea and Singapore-Korea FTA)

• Positive listing of sectors • Provision on ISD in investment chapter

• Market opening to main agricultural products including meats, except rice

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Agriculturalproductsincludingmeats

• Market opening to main agricultural products including meats, except rice

• schedule (Korea): tariff abolition within 10 years for refrigerated pork meats and 5

• Schedule (Korea): a variety of exceptions granted in terms of tariffs, quotas, seasonal duties, and special safeguards for controversial productsmeats 10 years for refrigerated pork meats, and 5

years for deep-frozen pork, etc.controversial products

• abolition of long-term tariffs over 15 years for beef and deep-frozen pork

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Korea-EU FTA KORUS FTA

Rules of

• Up to 45% of the components can outsourced from outside of the country to be used for making final manufactured goods such as automobiles; • Kaesung complex located just above the

de militarized zone in North Korea isorigin• Kaesung designated outside the scope for the FTA, but as in KORUS there will be a study of this issue.

de-militarized zone in North Korea is designated as outside of the country

Dutydrawback

• Permitted, after 5 years applicable on up to 5 % of the duties. • Permitted

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MFN Yes Yes

Ratcheth i N Ymechanis

m*No Yes

* The ratchet mechanism prevents a party to an FTA unilaterally reducing the level of market liberalization below that applied in the FTA.

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below that applied in the FTA.

V. Korea-Latvia Trade Relations

Korea’s trade with the CEECs

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• source : www kita net• source : www.kita.net


Korea’s exports to CEECs by country

Country 2007 2008 2009 2010 2011.1~8Ratio to the

EU

Czech 966 829 771 1 165 1 014 1 9Czech 966 829 771 1,165 1,014 1.9

Hungary 1,896 1,513 1,704 2,385 1,038 3.4

Poland 3,509 4,117 4,147 4,381 2,650 7.4

Sl ki 2 707 3 462 3 137 4 424 2 688 6 5Slovakia 2,707 3,462 3,137 4,424 2,688 6.5

Bulgaria 191 152 72 131 108 0.3

Estonia 96 112 42 63 64 0.1

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Latvia 93 139 77 91 194 0.2

Lithuania 101 113 80 115 92 0.2

Romania 855 721 387 456 318 1.1

Slovenia 426 933 403 586 786 1.2

EU 55,983 58,374 46,610 53,507 39,024 100

• source : www.kita.net


Korea’s imports from CEECs by country

Country 2007 2008 2009 2010 2011.1~8Ratio to the

EU

Czech 369 395 337 329 326 1 0Czech 369 395 337 329 326 1.0

Hungary 258 361 304 401 288 0.9

Poland 301 307 234 274 226 0.7

Sl ki 71 81 64 100 87 0 2Slovakia 71 81 64 100 87 0.2

Bulgaria 37 64 40 117 78 0.2

Estonia 67 25 21 49 30 0.1

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Latvia 61 20 13 14 15 0.1 Lithuania 10 13 12 20 16 0.04

Romania 79 207 155 240 207 0.5

Slovenia 35 47 52 97 63 0.2

EU 36,824 39,981 32,232 38,721 31,576 100

• source : www.kita.net


Unit: USD millions200

Korea’s Trade Performances with Latvia

160 export

import

80

120

40

80

160

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Trade volume between the two has increased a lot,…. but, Korea’s export has increased more rapidly than Latvia’s, which brought about substantial trade imbalance between the two….trade imbalance between the two….


Breaking down into trade by commodity shows that there hasg y ybeen a lot of volatility in the annual records of major trading goods.It implies that stable trade relations between the two has not beenachievedachieved.

2010 2011(1~08)Month

2010 2011(1 08)

Value Inc. Rate Value Inc. Rate

1 1 35.6 1 56.5

2 2 40.9 3 59.7

In the new framework of theKorea-EU FTA, which entered intoforce in 1 July 2011 both have

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3 3 37.9 5 80.6

4 4 8.2 7 78.1

5 5 3.5 9 89.1

6 5 -11.2 11 101.6

force in 1 July 2011, both haveshown frog-leaping increases oftrade performance.

7 7 2.9 13 70.9

8 8 1.7 15 88.6

9 9 -2.9 - -

10 11 -0.7 - -

11 13 5.9 - -

12 14 8.1 - -


Korea’s top ten Exports to LatviaRank Commodity Commodity 2011(1~08)

Unit: US $1,000

yCode

y ( )

Value

1 890120 Tankers 107,234

2 401110 Of a kind used on motor cars (including station wagons and racing cars) 13 3672 401110 Of a kind used on motor cars (including station wagons and racing cars) 13,367

3 851712 Telephones for cellular networks or for other wireless networks 9,565

4 401120 Of a kind used on buses or lorries 5,185

5 840290 Parts 4,610

6 845811 Horizontal lathes, numerically controlled 4,020

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7 853620 Automatic circuit breakers, for a voltage not exceeding 1,000V 3,484

8 850434 Having a power handling capacity exceeding 500kVA 3,155

9 852580 T l i i di it l d id d 2 7649 852580 Television cameras, digital cameras and video camera recorders 2,764

10 870899 Other 2,097

Total 193,945,


Korea’s top ten Imports from LatviaRank Commodity

C dCommodity 2011(1~08)

Unit: US $1,000

Code Value

1 440910 Coniferous wood, continuously shaped along any of its edges or faces 7,440

2 440710 Coniferous 2,441,

3 270300 Peat (including peat litter), whether or not agglomerated. 1,488

4 441299 Other 1,081

5 040410 Whey and modified whey, whether or not concentrated or containing added sugar or other sweetening matter

646

6 441231 With at least one outer ply of tropical wood specified in Subheading N t 1 t thi Ch t

252

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Note 1 to this Chapter

7 321410 Glaziers` putty, grafting putty, resin cements, caulking compounds and other mastics painters` fillings

226

8 847989 Other 1758 847989 Other 175

9 701919 Glass fibres (including glass wool) and articles thereof (for example, yarn, woven fabrics), Other

125

10 701959 Glass fibres (including glass wool) and articles thereof (for example, 12010 701959 Glass fibres (including glass wool) and articles thereof (for example, yarn, woven fabrics), Other

120

Total 15,244

V. Implications

The future of Korea-Latvia economic relations look optimistic, asboth will have a lot of opportunities to make use of the FTA byincreasing their exports to the other party.

The prospects of Latvia’s export to Korea are particularly bright, asthe Korea-EU FTA lifted substantial parts of Korea’s tariffs appliedp ppto its imports from Latvia in an instant elimination scheme, orwithin three, five, or seven year’s.

847989(8, 16%, 0 yrs), 321410(6.5, 8%, 0 yrs), 270300(1%,

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( , , y ), ( , , y ), ( ,0 yrs)701919(8%, 3 yrs), 701959(8%, 3 yrs)440710(5% 3-5 yrs) 440910(8% 5 yrs) 441299(8 11% 5440710(5%, 3-5 yrs), 440910(8%, 5 yrs), 441299(8, 11%, 5to 7 yrs), 441231(8%, 5 to 7 yrs)040410(49.5%, TRQ)

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V. Implications

Trade cannot explain the whole aspects of economic relations ofthe two. Both need to elaborate new era of the economic relationsby focusing on investment promoting actions,….

….. and cultivating multi-dimensional contacts by activating socio-cultural exchange schemes.g

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Thank youThank you

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