Brittan seeks assurances from Seoul

Date: 16/11/1995

By Tim Jones

CARS, ships and product dumping will dominate discussions when Trade Commissioner Sir Leon Brittan visits South Korea at the end of the month.

The European Commission considers its commercial relationship with the world's second largest shipbuilder, third largest maker of semi-conductors, and number six in car production and export, to be of crucial importance in its Asian strategy.

Nevertheless, Brittan will press hard for assurances from Foreign Minister Gong Romyung that Seoul will adhere to the multi-lateral agreement to cut back on subsidised shipbuilding capacity brokered by the Organisation for Economic Cooperation and Development last year. Similarly, he will want guarantees for Europe's car-makers that South Korea's notoriously closed market for foreign cars is opening.

“We would like to see the Korean government fulfil the measures they have announced to liberalise the market,” says James Rosenstein, spokesman for the Association of European Automobile Manufacturers (ACEA). “On paper, their suggestions look fine. We would like to see assurances that these will be implemented.”

South Korean car exports are booming and exacerbating the Union's huge deficit on car trade. For the first nine months of this year, exports grew by a massive 63&percent; to 775,000 vehicles, compared with 475,000 in the same period last year. Analysts expect South Korea to hit the one million mark this year and take over the mantle as the world's fifth largest exporter.

In the EU, South Korea's exports have risen 57.6&percent; to 131,615 cars, while its market share has surged to 1.9&percent; from 0.9&percent; last year, with particular inroads into Belgium, Spain, the Netherlands and Greece.

At the same time, the number of European cars exported to South Korea can be counted in four figures.

Tariffs are not the problem since these are below the EU's, but South Korea's strict - the EU believes excessively strict - rules on standards and testing, as well as regulations on the financing of sales concessions, put obstacles in the way of foreign car sales.

The Commission has long pressed - and did so again at a meeting of official-level negotiators in Seoul last week - for the introduction of self-certification to avoid rounds of government testing.

The ACEA wants more. “There is still a negative bias against buying foreign cars. There is room for the Korean government to take positive action to speed up the process in changing this,” says Rosenstein.

The Commission wants the issue of obstacles to manufactured consumer goods sorted out despite the European Union's 1.392-billion-ecu surplus with South Korea in 1994.

This is because raw materials and capital goods for industry account for a large proportion of South Korea's imports. Once the investment boom peters out, this would leave Europe open to the return of deficits it experienced with Korea earlier in the decade.

The South Koreans, for their part, will renew their call for 'fairness' in the EU's anti-dumping policies. With 15 cases of definitive and provisional duties placed on South Korean exports - including televisions, video recorders and microwave ovens - Seoul feels it has been victimised.

“We will raise again the frequent use of anti-dumping measures taken by the EU side,” a Korean trade official said. “We believe that the initiation and procedure of the investigations is not transparent while the assessment of injury within the internal market is ambiguous.”