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FIRST ELEMENTS OF ANALYSIS OF THE KOREA/EU FTA

Paris, December 13th

Appraisal FTA Goals

July 1st implementation


FTA Effects Main beneficial sectors

APPRAISAL
Exchanges amount between Korea & EU in 2010 Exchanges Total : 92.2 billion $ Exports : 53.5 billion $ Imports : 38.7 billion $

Exchanges amount in 2011 (10 month Jan/Oct) Total : 86.5 billion $ (+15%/2010) Exports : 47.5 billion $ (+8%/2010) Imports : 39 billion $ (+24%/2010)

FTA GOALS
Double bilateral trade within 10 years France wants to triple its exchanges by 2020

Korea wants to reach 3% of EU market by 2014

JULY 1ST IMPLEMENTATION


From July 1st, 76% of customs duties fell on the exchanges between the EU and Korea In the medium term, the FTA will reduce the annual cost of Korean exports to Europe by 1.5 billion dollars and 2 billion dollars for European exports to Korea Results are not exactly as expected: Total exchanges (July/Oct 2011) : 32,8 billion $ (+7%) Exports (July/Oct 2011) : 16.9 billion $ (-5%)* Imports (July/Oct 2011) : 15.9 billion $ (+23%)
* Figures must be taken with caution because the FTA does not apply yet to vessels and planes which represent 25% of our exchanges in 2011 so far

FTA EFFECTS ?
Positive effects but must stay carefull

Too early to draw definitive conclusion


How to measure which part trully comes from FTA? Dynamic exchanges EU/Korea However exchanges with rest of the world even more dynamic Threat of the global economic slow down

OPTIMISTIC ELEMENTS
MAKE OPPORTUNITIES OF WEAKNESSES !
Many potential partners are not aware of the FTA and the drop of tariffs it offers We have to emphasize communication on the FTA existence Very positive opportunity to dynamism our exchanges by providing information to SMEs EU buyers can discover new Korean providers and the price competitive they have to offer them

OPTIMISTIC ELEMENTS
Increase competitiveness of Korean manufacturers in Europe especially in comparison with Japanese & Taiwanese companies European manufacturers are more competitive in Korea in comparison with their Japanese & Taiwanese competitors FTA strengthen partnership between EU & Korean companies based on common standards Korean exporters committed quickly to become accredited exporters

DIFFICULTIES TO OVERCOME
Many of our contact are not keen of integrating lower tariffs or tariff exemption in their final price offers Usually, economic slow down makes them very careful and caution

Prefer on the short term restore their margin


After economic slow down, can think of lowering final price from tariffs drop

DIFFICULTIES TO OVERCOME
Due to economic slow down, exchanges between EU and Korea are not as dynamic as they used to be Even though results are positive, exchanges grew 7% when external exchanges surged 21% for Korea

French exporters were less reactive and we noticed some delay in the submission for becoming approved exporters (this delay is closing now)
Risk of emergence of non-tariffs barriers

IS FTA REALLY RELEVANT ?


In specific cases, some companies told us that the tariff drop is not really what matters For some buyers sourcing in Korea the main criteria is quality When price is not the main criteria, FTA is less crucial

In IT sector, or technical textile the case occured


In some other sector, products are objects of social differentiation

In that case, the manufacturer has not interest to lower his price (luxury industry, top of the range cars etc)

TANGIBLE EFFECTS
Implementation in July mark a recovery after a slow down in June Increase of exchanges in a global slow down No clear sign of a price decrease

KOREAN BENEFICIAL SECTORS


Machine tool sector will benefit this year from an overall saving of 590 million $ KAMA announced that Korean car exports to EU surged by 40% in 2011 Oil products : +179% (from 140 to 390 million $) Steel : +24%

EU BENEFICIAL SECTORS
Agricultural sector will benefit from an overall saving of 500 million $ Luxury goods benefit from the FTA. Imports reach 1.2 billion in 10 months (+44%) Cosmetics & Fashion : +76% perfule, +56% bags, +48% shoes

Car industry : +96% (top of the range car)


Agrofood industry : +215% Pork, +44% cheese, +30% wine

2 ELEMENTS NOT TO FORGET


Exporters must obtain the status of accredited exporters Respect the rule of direct transport The FTA is applied only under the direct transport rule (Art. 13). It is necessary that the goods are in a single shipment. In case of transfer, it must be done under the supervision of customs of 3rd parties.

Thank you !