The Ministry of Trade, Industry & Energy of South Korea said on July 5 that a free trade agreement (FTA) between Japan and the EU is likely to have a significant impact on South Korean companies in the automobile and auto parts industries.
The FTA is likely to be signed in the near future, and then the 10% tariff on Japanese cars exported to the EU is eliminated in stages within seven years. In addition, immediate tariff elimination from 3% to 4% is applied to approximately 92% of Japanese auto parts. At present, South Korean automakers are exporting their cars to the EU on a zero-tariff basis while struggling in the Chinese and U.S. markets.
The FTA between the EU and Japan concentrates on the elimination of tariffs on Japanese cars and European primary industry products and, as such, experts point out that the other sectors like petrochemical, consumer electronics, and electric vehicle battery are unlikely to be significantly affected by the agreement.
South Korean petrochemical companies’ main clients are located not in Europe but in Asia. In the European consumer electronics market, competition is between South Korean and European companies in most cases. The impact of the EU-Japan FTA on Korean electronics manufacturers is likely to be rather limited by the presence of the Information Technology Agreement (ITA) as well.