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EU – South Korea Free Trade Agreement (FTA)
A Free Trade Agreement (FTA) between the European Union (EU) and South Korea was approved by the European Parliament on February 17, 2011. Provided MEPs adopt the regulation and grant their consent, the deal will come into force in July 2011.
The EU-South Korea FTA will eliminate about 98% of import duties and minimise the impact of other non-tariff barriers. This is the first FTA signed between the EU and an Asian country and is the most comprehensive trade deal signed to date. Trade levels between the two will double within 20 years and will be worth approx. €19 billion to the EU.
Trade between the EU and South Korea was worth around €54 billion in 2009. The EU currently has a trade deficit of € 10.5 billion with South Korea. EU exporters will save €1.6 billion annually by not having to pay import duties.
This FTA will also tackle non-tariff barriers in the pharmaceutical and medical device sectors. It will result in greater transparency and predictability of South Korea’s pricing decisions. It will introduce detailed binding rules on transparency regarding decisions on reimbursement and will introduce the possibility of having such pricing decisions reviewed by a court.
The EU-South Korea FTA will eliminate about 98% of import duties and minimise the impact of other non-tariff barriers. This is the first FTA signed between the EU and an Asian country and is the most comprehensive trade deal signed to date. Trade levels between the two will double within 20 years and will be worth approx. €19 billion to the EU.
Trade between the EU and South Korea was worth around €54 billion in 2009. The EU currently has a trade deficit of € 10.5 billion with South Korea. EU exporters will save €1.6 billion annually by not having to pay import duties.
This FTA will also tackle non-tariff barriers in the pharmaceutical and medical device sectors. It will result in greater transparency and predictability of South Korea’s pricing decisions. It will introduce detailed binding rules on transparency regarding decisions on reimbursement and will introduce the possibility of having such pricing decisions reviewed by a court.
What does it mean for Ireland?
Historically South Korea has been a strong trading partner with Ireland, although trade figures between both countries have been declining since a peak of €2.3 billion in 2000 (€1 billion worth of exports to South Korea and €1.2 billion worth of imports from South Korea).
In 2009, trade between Ireland and South Korea stood at €592 million (€330 million in exports and €262 million in imports). The trade balance has also been shifting, from a situation where Ireland had generated a trade deficit with South Korea of €245 million in 2000 to where a trade surplus of €67 million was generated in 2009. A trade surplus of €116 million is projected in 2010.
| (€000) | 2000 | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 (est) |
| Exports | 1,045,823 | 695,900 | 640,357 | 509,598 | 587,770 | 540,611 | 499,621 | 480,044 | 485,023 | 329,942 | 335,500 |
| Imports | 1,290,646 | 795,548 | 889,072 | 732,628 | 995,055 | 918,376 | 903,584 | 847,909 | 506,721 | 262,231 | 219,508 |
| Trade Balance | -244,823 | -99,648 | -248,715 | -223,030 | -407,285 | -377,765 | -403,963 | -367,865 | -21,698 | 67,711 | 115,992 |
| Source: CSO External Trade | |||||||||||
In reviewing the trade figures and in particular the top 10 products exported to South Korea (see table below) it is apparent that the FTA offers significant benefits to Irish Companies, especially life sciences companies.
| Top 10 Products Exported to South Korea in 2009 | Top 10 Products Exported to South Korea in 2010 (Jan-Oct) | |||
| Office machines & automatic data processing machines | €127,016 | Electrical machinery, apparatus & appliances nes & parts | €59,446 | |
| Electrical machinery, apparatus & appliances nes & parts | €39,423 | Office machines & automatic data processing machines | €50,699 | |
| Medical & pharmaceutical products | €32,864 | Medical & pharmaceutical products | €50,444 | |
| Professional, scientific & controlling apparatus nes | €22,272 | Professional, scientific & controlling apparatus nes | €24,585 | |
| Photographic apparatus; optical goods; watches clocks | €22,040 | Photographic apparatus; optical goods; watches clocks | €20,194 | |
| Special transactions and commodities not classified according to kind | €12,707 | Special transactions and commodities not classified according to kind | €14,150 | |
| Miscellaneous manufactured articles nes | €11,614 | Essential oils, perfume materials; toilet & cleansing preps | €11,425 | |
| Essential oils, perfume materials; toilet & cleansing preps | €11,251 | Miscellaneous manufactured articles nes | €11,376 | |
| Telecommunications & sound equipment | €8,299 | Power generating machinery & equipment | €6,889 | |
| Chemical materials & products nes | €8,171 | Chemical materials & products nes | €6,493 | |
| Source: CSO External Trade | ||||
Latent Potential
In 2008, the South Korean life sciences market had an estimated value of over €8 billion . Expenditure per capita in health was the equivalent to €175. Some analysts expect this figure to increase at a rate of approximately 5% per annum.
In 2007 total expenditure on health accounted for 6.3% of South Korea’s GDP . Government investment in healthcare was €34.7 billion, or 6.8% of GDP. In 2000, this figure was only 4.9% of GDP equivalent to €16.1 billion.
There is significant latent potential in South Korea for exporters of pharmaceutical products and medical device products. The South Korean healthcare market offers attractive growth potential for potential investors. It is noteworthy that this growth is driven by an improvement in the entire Korean Health System, government investment in healthcare and consumer preference for branded products.
With the expected coming into force of the EU-South Korea FTA, exporters in the life sciences industry will benefit from easier market entry, reduced bureaucracy and a more transparent pricing system.
More information:
EU-South Korea FTA documentation
http://trade.ec.europa.eu/doclib/press/index.cfm?id=443&serie=273&langId=en
http://www.europarl.europa.eu/en/headlines/content/20110207FCS13232/012/html/EU-South-Korea-free-trade-agreement-green-light
Invest korea:
http://www.investkorea.org
Korea Pharmaceutical Manufacturers Association (KPMA)
http://www.Kpma.or.ko/kpma/eng/greting.asp
Korea Medical Device Industry Association (KMDIA)
http://www.kmdia.or.kr
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