Union forges new ties with South Korea

Date: 31/10/1996

By Elizabeth Wise

AFTER years of worrying and griping, the EU is finally consolidating an economic and political relationship with South Korea.

A series of bilateral and multilateral agreements have been concluded almost simultaneously in recent weeks, as if by design to create an unbreakable web of relations binding the two sides to abide by the commitments they have made.

Not the least of these is Seoul's accession to the Organisation for Economic Cooperation and Development (OECD).

Last week, South Korea became the second Asian nation, after Japan, to join the club of western powerhouses. In doing so, it took on the status of aid provider rather than receiver, of responsible government setting a political example. Above all, it must now be considered a western ally.

South Korea's accession to the club may also give the EU and the US more leeway to influence Seoul in the World Trade Organisation forum.

Korea will be among those at the WTO ministerial meeting in Singapore before Christmas which will discuss whether or not to include labour conditions in future world trading rules.

Seoul has promised to revise the labour laws introduced by Korea's former military government and still in force, and, with its OECD membership only days old, the International Confederation of Trade Unions (ICFTU) has already called on Seoul to keep its promise.

A rubicon in EU-South Korea relations was crossed this week when South Korean Foreign Minister Ro Myung Gong signed a five-year framework agreement creating a mutual most-favoured-nation trading status for the two partners.

Relations are also strengthening on the political front, with the two sides cooperating in an international effort to provide North Korea with an alternative to its menacing nuclear power industry.

South Korea, the US and Japan - all members of the Korean Peninsula Energy Development Organisation (KEDO) which aims to replace North Korean reactors, which may be used for military purposes, with alternative sources of energy - have been trying to get the EU on board since shortly after the programme was founded in 1994.

Individual member states joined and the Union pledged 15 million ecu from its budget, but the EU could not become a member of the organisation in its own right because it had no legal entity.

The Union will next month put forward its nuclear agency, Euratom, as a candidate for membership. Negotiations will begin on 11-12 November and there are hopes that the talks could be concluded by the end of this year.

The Union hopes its new status as Korea's partner will also help it resolve a series of trade disputes with Seoul.

EU officials have watched in anger as Washington and Seoul have struck a series of lucrative deals, particularly in the telecommunications and automobile sectors. Only last week, South Korea's Samsung Aerospace Industries announced a deal with Boeing Corp of the US to build a giant passenger aircraft with up to 600 seats.

The Union and Seoul have also been wrangling for more than two years over European access to Korea's fast-growing telecoms procurement market.

Korean law requires state-owned Korea Telecom to buy Korean-made equipment where it is available, and foreign parts only if domestic ones do not exist. The EU maintains that the private firm Dacom, Korea's second largest operator, runs a similar purchase policy. It wants Seoul to stay out of the purchasing affairs of Dacom and other private operators.

According to the Union, the buy-domestic policy keeps European manufacturers out of almost 80&percent; of Korea's 6-billion-ecu a year telecoms equipment market. US suppliers are not subject to the same restrictions, thanks to a bilateral agreement struck between Washington and Seoul in 1992.

EU negotiators have so far failed to persuade Seoul to sign a pledge to stop interfering in procurement bids. Frustrated, the EU requested WTO consultations in May. These were held in June and July and bilateral talks resumed last week.

Korea and the Union are also involved in multilateral talks on telecoms liberalisation. Korea is among the 15 countries with which the EU is negotiating the Information Technology Agreement (ITA), aimed at reducing customs tariffs and duties on semiconductors, telecoms equipment and computer software and hardware.

The automobile market is another source of friction between the two sides.

Korean car manufacturers are targeting western Europe, which accounts for some 25&percent; of its exports, and their strategy of opening plants in eastern Europe and undercutting Japanese and American prices is paying off.

This has sparked panic in Europe, particularly from French carmakers warning of the dangers of a new Korean tidal wave.

Trade Commissioner Sir Leon Brittan tried to soothe French fears last week by saying he would bring up the car issue in talks with Korean officials. But he told an audience in Paris that European carmakers would have to furnish some proof that their Korean rivals were competing unfairly in Europe.

“We need to see if there is a question of unfair competition or dumping,” he said. “I am waiting for European industry to provide evidence.”

Figures provided by the European Automobile Manufacturers' Association (ACEA) show that Korean cars have only captured 1.8&percent; of the western European market, just half a percentage point more than last year.

While small in comparison with the 10.5&percent; market share Japanese cars hold in Europe, the South Korean figure nevertheless represents a steep climb from the 0.2&percent; share its manufacturers had in 1990.

It is also in stark contrast to the feeble performance of European carmakers in South Korea. ACEA says European producers have only increased their market share there from 0.1&percent; in 1990 to 0.4&percent;.