The European Union and South Korea entered a free-trade agreement to expand their commercial relationship, which is currently estimated at around 70 billion-euro, or $97 billion.
The agreement, which will take effect next July, was signed in Brussels today and will make up to 99 percent of EU-South Korea trade duty-free within five years. Talks are underway with Malaysia on almost the same terms that will culminate in the signing of a free-trade deal.
The EU-Korea accord is the second largest free trade agreement ever since the signing of the $1 trillion North American Free Trade Agreement between the U.S., Canada and Mexico in 1994.
The contract will put an end to 1.6 billion euros currently spent annually on Korean import duties and will also eradicate 1.1 billion euros of the EU levies. Estimates suggest the pact will cause an up tick of 5.6 percentage points in the Korean economy over a period of 10 years and will also create up to 253,000 jobs.
European automakers mounted strong opposition to the deal amid concerns of losing out to Korean companies like Hyundai Motor Co., and Kia Motors Corp. There is already a disparity of trade in the auto industry of the two economic blocks as the EU imported around 450,000 Korean cars and exported around 33,000 autos to Korea in 2008; 15 million cars are sold in the EU each year and up to 1 million in Korea.
The U.S also negotiated a free trade agreement with Korea in 2007 but it was later put on hold by the Obama administration on an alleged imbalance in auto trade.
