Go Team Europe!

As far as transatlantic competitions go, last week was a great one for Europe and the UK.   
 
On Monday, Graeme McDowell from Northern Ireland sunk a crucial birdie at the 16th hole of Wales’ Celtic Manor course, which ultimately clinched The Ryder Cup for Europe. To crown it all, the winning European Team was captained by Scotland’s Colin Montgomerie. And Wednesday saw another transatlantic race draw to a close when the EU and South Korea signed their free trade agreement, worth €19bn (almost $26bn) to EU exporters, and £500m (almost $800m) a year to British firms. The EU estimates that this FTA will double the value of EU/South Korea bilateral trade in 20 years, up from the present level of €66bn.

The negotiations for this FTA kicked off in May 2007, about one month before the US Administration signed KORUS, the US’ own FTA with South Korea.  Both FTAs need to be ratified by their respective Parliaments and Congresses, but the European FTA has an implementation target of July 2011, from when virtually all tariffs between the EU and Korea – 98.7% of them – will begin to be removed. That’s a staggering increase from the 2% of duty free market access that EU exporters enjoy now.  KORUS, by comparison, as it stands would eliminate 95% of tariffs, and be worth between $10m-$12m.
 
Even on day one, EU exporters will already save €850m, including €450m on import tariffs on machinery, and €150m in chemicals tariffs. It’s a broad FTA too, covering not just market access for industrial goods, agricultural products and services, but also protection for intellectual property, rules on anti-trust, access to government procurement, and sectoral agreements to guard against non-tariff barriers on autos, pharmaceuticals and electronics.

To take a couple of examples, Korea’s 8% import tariffs on cars will be removed. That’s good for us because the UK exports 70% of the cars it produces, and cars and car parts already make up 5.4% of the UK’s exports to Korea. The 20% tariff on whisky (the UK’s largest agricultural export, and 7.4% of UK exports to Korea) will be removed by the third year. Other big gains for the UK – and Korean consumers – will be legal and financial services, pharmaceuticals, advanced engineering and low carbon industry. We’ll benefit from the imports too. 70% of UK imports from Korea are intermediate goods – which means UK producers will benefit from cheaper imports to be used as inputs for production, and more competitively priced exports.

This  agreement has been important for the UK government as it pursues free trade and open markets to support a private-sector led economic recovery. Prime Minister David Cameron said that the EU-South Korea FTA would lay the ground for further free trade agreements between Europe and other countries.  Meanwhile we continue to pursue the golden prize of an ambitious and balanced multilateral Doha Development Agenda.

And finally, the 8% tariffs on the UK’s Powakaddy golf carts, or hand-made golf clubs from St Andrews, will drop to zero from day one.