SEOUL (AFP) – A sweeping free trade pact between the European Union and South Korea, the first in Asia for the world's largest economic bloc, came into effect on Friday, officials in Seoul said.
"The South Korea-EU Free Trade Agreement (FTA) took effect as of early Friday," Kim Hee-Sang, director for FTA negotiations at the Ministry of Foreign Affairs and Trade, told AFP.
The ministry said in a statement that the deal would "open up new opportunities for trade and investment" between South Korea and the EU and strengthen diplomatic relations between the two partners.
Under the pact, 70 percent of customs duties will be immediately scrapped, rising to 98.7 percent over the next five years.
Tariffs on 96 percent of EU goods and 99 percent of South Korean goods will be eliminated within the next three years.
The EU is currently South Korea's second largest trading partner after China, taking almost 20 percent of its exports.
EU exports to South Korea are worth 28 billion euros ($40.5 billion), while South Korea's exports to Europe amount to $38.7 billion.
On the eve of its implementation, the EU's ambassador in Seoul Tomasz Kozlowski told journalists that the FTA was a "win-win" agreement and would be a model for others that the EU is negotiating in the region.
Apart from multiplying the flow of goods and services, the agreement would "boost exchange of ideas, exchange of people and culture, and ultimately will bring Korea and the EU much closer", he said.
Kozlowski said some studies forecast the FTA would boost trade by 50 percent in the short term and more than double it over the next two decades.
One study forecast more than 250,000 new jobs in South Korea in the long term as a result of the pact.
The deal would "have a wide impact in Asia and in the world", Kozlowski told a news conference Thursday. "It shows the potential for increasing growth and jobs through greater trade between Europe and Asia."
He wrote to the Korea Herald published Friday that the "landmark" deal was the "most ambitious ever FTA negotiated by the EU with a partner outside Europe and the first FTA with a country in Asia."
The pact will bring about yearly savings of more than two billion euros in tariffs, he said.
It will also remove non-tariff barriers, especially those in automotive, electronics and pharmaceutical sectors and consolidate the liberalisation of the service industries, he said.
Some studies suggest the South Korean car and electronic sectors will benefit from access to the EU market of 500 million consumers, others point to likely increased sales of EU industrial machines and luxury goods in South Korea, he added.
The Federation of Korean Industries, a lobbying arm of large businesses, and the Korea International Trade Association, an umbrella group of local trading firms, expressed hope the FTA would boost South Korea's market share in the EU.
South Korea's market share in the EU stood at 1.0 percent, compared with China's 7.1 percent, they noted.
But all are not winners. South Korea's government has announced a plan to funnel $19.8 billion into the agricultural and fisheries industries to help cushion the impact from the deal.
South Korea also signed a free trade agreement with the United States in 2007 but the pact has yet to be ratified by the two countries' legislatures.
US ambassador to Seoul Kathleen Stephens warned last month that US exporters could lose ground to European competitors unless Congress quickly ratifies the agreement.