Cho Seong Dae, chief researcher at the FTA & Industry Research Office Institute for International Trade, part of the Korea International Trade Association, comments on the impact of a free-trade agreement with the European Union on South Korean petrochemical companies.
Once the agreement takes effect in July, the European bloc’s tariff on more than 90 percent of Korean petrochemical products, currently 5 percent to 6.5 percent, will end immediately and the remaining ones will be phased out over five years.
South Korea reported a $66 million trade deficit for petrochemical products with the EU in 2010, compared with a surplus of $166 million in 2009, according to data from the association.
“Once the agreement takes effect, there will be tariff (saving) effects to buyers in the EU amounting to 40 billion won ($37 million) to 50 billion won a year.
‘‘Korean petrochemical companies are now enjoying growing momentum, driven by rising demand from China, but it’s doubtful how long the demand will last. The Korea-EU FTA indicates they will be able to win a significant market, which will enable them to be balanced and hedge the China-market risk.
‘‘In competing with Japanese and Chinese rivals, Koreans will benefit from the pact, especially in the market for synthetic resins and other widely used petrochemicals, where price is an important factor in selecting suppliers. They will enjoy that advantage for several years as it’s unlikely the bloc will develop FTA talks with Japan and China soon.
‘‘It’s important for Korean petrochemical companies to market that advantage aggressively to their partners in the EU. They can increase the gains to more than the tariff savings.’’
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