[Lee Jae-min] Here comes the Korea-EU FTA

Will you really love me? Just one week before the marriage the concerned bride asks the groom (or the groom asks the bride). Not in private, but in public. The bride (or groom) appears before friends and relatives, and pronounces her (or his) expectation of the upcoming marriage with a list of dos and don’ts and past sins. Friends would then wonder what they have said to each other during the courtship. 

Probably, people would have felt the same untimely awkwardness on June 24 when the European Chamber of Commerce in Korea in Seoul held a press conference to raise the contentious issue of Korean non-tariff barriers asking for their prompt changes and abolishment in as many as 20 industries. This was exactly one week before the Korea-EU FTA goes into effect on July 1. In the press conference, the EUCCK made it clear that the NTBs would continue to be their major concerns and priorities in penetrating the Korean market even in the post-FTA era. In fact, the NTB issue was one of the top priorities of the EU during the Korea-EU FTA negotiations.

Let me be clear. All NTBs, if found, are potential violations of the Korea-EU FTA and any trade agreements for that matter, and should be abolished promptly. NTBs are one of the common ways of circumventing the promises and covenants made in trade agreements. And it cannot be denied that foreign trade partners have long complained about the visible and sometimes invisible NTBs in the Korean market.

The EU’s concern over the NTBs led to the inclusion of provisions in the Korea-EU FTA to eliminate or shrink potential NTBs in key industrial sectors where the EU possesses interest, such as automobiles, electronics, pharmaceuticals and medical equipment sectors. At the same time, at the EU’s insistence, a new annex was included in the Korea-EU FTA wherein a special dispute settlement mechanism is introduced to deal with the NTBs exclusively. Although many countries have talked about this NTB-specific procedure for a couple of years at the WTO level, the Korea-EU FTA is the first trade agreement that actually incorporates the idea for implementation.

This mechanism is different from the regular dispute settlement procedure under the agreement in that it is a non-binding mediation procedure conducted before a mediator. Nonetheless, this is still a procedure to settle trade disputes over the NTBs: a party against which a complaint is lodged by the other party should provide materials and explanations to the mediator in a short timeframe, followed by conferences. Given the number of alleged NTBs and the number of industrial sectors implicated in the EUCCK’s report, there is certainly a possibility that the mediation procedure in the agreement will become quite active. As Korea has also been concerned about the NTBs of various sorts in the 27 member countries of the EU, mainly regarding the trade remedy regulation regime, Korea may find this procedure tempting as well.

The inherent problem concerning the NTBs, however, is that it is sometimes difficult to discern illegitimate NTBs from legitimate governmental regulation. In fact, most of the NTBs raised in the EUCCK’s June 24 report are related to Seoul’s regulation and requirements one way or another. If regulation is designed in a way to discriminate foreign goods and investors in the domestic market in a subtle manner, that would be a classic example of NTBs. On the other hand, if a complaint concerns a logistical burden as a result of the governmental regulation and the regulation equally applies to domestic goods and investors, then it is questionable whether such a measure constitutes an NTB. All these complex issues will be handled by the NTB mediator under the Korea-EU FTA regime. If the mediator fails to resolve a particular dispute, Seoul and Brussels will then have to proceed to the full dispute settlement procedure. But resolution of the disputes over the NTBs would be far from being easy and simple.

The scope and intensity of the EUCCK’s concern over the NTBs last week offer a glimpse of the new challenges in the FTA era. As much as the negotiations and conclusion of the agreement have been extraordinarily difficult and complex, so will be its implementation and management. With the same friendship and flexibility shown so far, the two countries will certainly be able to manage and overcome these challenges.

As of today, the Korea-EU FTA finally goes into effect. This agreement will certainly open a new chapter for Korea’s trade and economy. My last question is, is it on Seoul time or Brussels time? As people say, the devil always lies in the details

By Lee Jae-min

Lee Jae-min is a professor of law at the School of Law, Hanyang University, in Seoul. Formerly he practiced law as an associate attorney with Willkie Farr & Gallagher LLP. ― Ed.