An EU-Korea Free Trade Area: Playing Catch-Up or Taking the Lead?

Both Korea and the EU are pursuing free trade areas (FTAs) aggressively as part of their trade policy strategies. Korea is much further down the road.

There are strong incentives on both sides to conclude an agreement. However, specific issues and EU's desire to do at least as well as, and preferably better than, the Korea-US FTA may delay or even preclude success.

Korea and the EU are not principal suppliers to each other, so while an agreement is predicted to be economically favourable to both sides, the effects are not expected to be very large. Korea has the higher barriers and is expected to make the bigger economic gains.

There are sensitive sectors on both sides, notably automobiles for the EU and services and processed foods for Korea. Both sides have important agricultural constituencies to protect.

Korea's key role in the East Asian production system suggests that rules of origin could be an area of particular difficulty in the negotiation.