The European Union has signed its first free trade agreement (FTA) with an Asian country - South Korea.
South Korean and EU representatives sign the Free Trade Agreement
The FTA agreement was officially signed during an EU-South Korea summit meeting in Brussels on Wednesday in the presence of South Korean President Lee Myung Bak, the head of the European Council Herman van Rompuy, and the European Commission head Jose Manuel Barroso. Ít is expected to take effect as of July 1, 2011, after ratification by the parliaments.
Most ambitious free trade deal ever for EU
Barroso called it "by far the most important trade deal ever concluded by the EU with one country." It is hoped that the FTA will boost bilateral trade by as much as 30 billion euros ($41 billion) annually. Import tariffs to the tune of three billion euros a year will be scrapped and after a transition period, almost no tariffs will remain.
There will soon be more Korean cars like the Hyundai ix35 on Europe's roads
The car sector in particular is expected to profit from the deal, with European high-end cars and South Korean small cars getting easier access to each other's markets.
Italy blocked the deal for months after it was negotiated last year, fearing a negative impact for its carmaker Fiat. But it was persuaded to drop its objections in September.
Way around WTO stalemate
The agreement is particularly significant at a time when talks for further global trade liberalization under the WTO umbrella have been stalled. Bilateral FTAs are seen by many as an important path to higher growth to overcome the economic crisis.
The 27-member EU is hoping to conclude a number of FTAs with other Asian nations in the near future. Negotiations are already under way with India and Singapore and are starting with Malaysia. At the ASEM summit in Brussels this week, Japan also expressed its interest in a similar agreement. Other possible candidates are Vietnam and Thailand.
Editor: Anne Thomas