Eleven years after the EU and South Korea signed a free trade agreement, South Korean Trade Minister Yeo Han-Koo is seeking to modernise it by including investment protection and new technologies.
The trade minister, who came to Brussels for a round of high-level meetings, gave an overall positive assessment of the agreement, signed in October 2010.
“It was one of the first free trade agreements for the European Union in Asia. And I believe that set the scene for very robust and sustainable development.”
Yeo supported his positive assessment with figures:
“When we compare trade and investment before and after the FTA, we see that world trade contracted by 4%, but our bilateral trade volume increased by 4.8%. Korea’s investment in the EU really experienced a boom during this time, namely a 333% increase of the investment flow from Korea to the EU. And the EU is the largest foreign investor in Korea.”
Yeo, who had served as a trade diplomat for several years and was involved in the negotiations of the EU-South Korea agreement, became trade minister in August 2021. He explained to EURACTIV that he believes the agreement now needs an upgrade.
With an eye on the recently launched trade and technology council between the EU and the US, he called for the incorporation of new technologies into the agreement and suggested that the agreement might benefit from the inclusion of an investment chapter.
“Korean companies in the battery and the automotive sectors have invested heavily in the European Union. […] I think it’s time for us to think about how we can better facilitate and protect these two-way investments between Korea and the European Union,” Yeo said.
Yeo is a proponent of the multilateral trading system. Confronted with worries that a non-cooperative China might stand in the way of multilateral trade, he argued that the supporters of multilateral trade have to find ways to coexist with China.
As a response to China’s rise, the EU recently published a strategy for cooperation in the Indo-Pacific. Trade minister Yeo called this a “very promising area for cooperation.”
“We need partners who share our fundamental values, like the European Union”, Yeo said.
Cooperating on Semiconductors
South Korea and the EU are currently in discussions to form a digital partnership. “In our current framework, we don’t have an e-commerce or digital chapter. Fifteen years ago, there was no such concept,” Yeo explained.
A digital partnership between the EU and South Korea will need to address data protection and cross-border data flow. The European data protection board has raised concerns about South Korea’s privacy framework because it includes national security and law enforcement exceptions that the data protection board regards as incompatible with the EU’s data protection standards.
However, the South Korean trade minister saw no problem arising from this, pointing out that “both sides are in constructive discussion to address whatever issues may arise”.
For Yeo, the semiconductor supply chain is another important area in which the EU and South Korea could cooperate.
“Korean companies are more active downstream in the supply chain, while many European companies are active upstream in the supply chain. Without each other, it’s not going to function,” he said, mentioning that this was also a topic of discussion in his meetings with European Commission Vice-President Valdis Dombrovskis and Industry Commissioner Thierry Breton.
Unease about Carbon Border Adjustment Mechanism
Climate policy is another point of discussion between the EU and South Korea. Yeo said South Korea would back an initiative for a moratorium on new coal power stations at the COP 26 climate conference in Glasgow later this year.
However, he was worried about the European Commission’s proposal for a carbon border adjustment mechanism, which should impose a levy on imports from countries that do not follow a similarly rigorous climate policy as the EU.
“I think Korea and the EU are like-minded countries when it comes to climate change. But I think what some of our industries are concerned about is the possibility of this kind of new measures to function as new trade barriers. I think it’s a legitimate concern,” Yeo warned.
“If the EU, and maybe also country A, country B, and country C begin to compete to introduce these new measures, I think it’s going to be chaos.”
However, he also suggested that the South Korean emissions trading system – modelled after the European system – would put his country in a position to collaborate with the EU.
“I’m going to discuss with EU officials how Korea and the EU can work together to make this system WTO-compliant and prevent it from functioning as a new trade barrier,” he concluded.
[Edited by Zoran Radosavljevic]