EU and South Korea sign record free-trade deal

BRUSSELS - The European Union and South Korea Wednesday signed in Brussels a record free-trade agreement which is expected to boost business by 30 billion euros ($41 billion) a year.

The EU is keen to boost its influence in Asia, and sees trade liberalisation as one of the key ways to do so. The South Korea deal is the first in a series of free trade agreements the EU is now negotiating across the continent.

Trade officials from the two sides signed the agreement in the presence of South Korean President Lee Myung Bak and the heads of the EU’s political and executive bodies, Herman Van Rompuy and Jose Manuel Barroso, on the margins of a summit in Brussels.

EU officials describe the agreement, which is expected to cut some 3 billion euros’ worth of tariffs and lift administrative barriers on goods ranging from cars to whisky, as the most ambitious the bloc has ever negotiated.

Details of the deal were finalised a year ago. However, Italy then threatened to block its signature, fearing that clauses relating to the auto industry would harm national carmaker Fiat.

Rome dropped its veto in September in return for a six-month delay in the treaty’s implementation. It is now due to come into provisional effect July 1. Tariffs on some goods, such as small cars, will continue for up to five years thereafter.

The agreement will come into full effect once it has been ratified by Korea, EU member states and the European parliament.

The approval of the deal has galvanized trade talks with a number of other Asian states. On Tuesday, Japanese officials said that they hoped to start free-trade talks with the EU in the spring, partly in reaction to the Korean agreement.

The same day, Malaysian diplomats said that they, too, had agreed to open free-trade negotiations with the EU.