Eu to Propose New Rules of Origin for S. Korea

BRUSSELS, May 14 Asia Pulse - South Korea's chief negotiator for free trade talks with the European Union (EU) said Tuesday Brussels next month would propose its revised offer on rules of origin, one of the thorniest issues in the negotiations.

Since concluding a free trade agreement (FTA) with the United States last year, South Korea has held six rounds of negotiations with the EU in a bid to gain greater footing in the 27-nation economic bloc, South Korea's second-largest trading partner after China.

The negotiations, however, have made little headway as both sides have been reluctant to accept each other's demands on tariff reduction, rules of origin, and auto trade and auto-related technical standards, one of the most divisive issues between the two sides.

"The EU said it would send us a new proposal on rules of origin, which it says would be possible next month," Lee Hye-min, South Korea's chief negotiator in the talks, told reporters after ending the second day of the four-day negotiations that run through Thursday.

Lee said the change in the EU's stance on the rules of origin is meaningful. "A turnaround approach on the EU's position would help the free trade negotiations go smoothly," he said.

South Korea has demanded the EU ease its rules of origin, under which a product is considered as manufactured by a trading partner only if at least 60 per cent of the finished item is made in that country.

Bilateral trade came to US$89.8 billion in 2007, with some unofficial studies suggesting an FTA would boost that figure by as much as 40 per cent in the long run. The EU is also the largest foreign investor in South Korea, with outstanding investment reaching $44.8 billion at the end of 2007.

Auto tariff and auto-related technical standards, among other issues, are also major hurdles to a bilateral FTA. Brussels wants Seoul to cut regulations on European carmakers by applying international standards instead of domestic rules.

The EU demands that South Korea cut tariffs on cars and other products to the same extent that it did in its trade deal with the U.S.

Seoul says it would remove all tariffs on industrial goods within three years with some exceptions, and eliminate tariffs on roughly 72 per cent of EU goods as measured by value in three years, compared with 68 per cent in a previous offer.

But the EU expressed disappointment with South Korea's offer, saying it falls short of the accord Seoul signed with Washington in June.

The EU is demanding that South Korea cut tariffs on cars and other products to the same extent that it did in the trade deal with the United States.

South Korea is seeking to sign FTAs with as many countries as possible in an effort to strengthen its export-oriented economy. Currently, South Korea has FTAs with Chile, Singapore and the European Free Trade Association, as well as a partial pact with the Association of Southeast Asian Nations. Seoul is also seeking similar trade deals with Canada, India and Mexico.

(Yonhap)

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