Verbatim report of proceedings

Thursday, 13 December 2007 - Strasbourg

5. Economic and trade relations with Korea (debate)

  President. − The next item is the report (A6-0463/2007) by David Martin, on behalf of the Committee on International Trade, on the trade and economic relations with Korea (2007/2186(INI)).

  David Martin (PSE), rapporteur. − Mr President, this report had to be put together rather quickly, because we anticipated – we even hoped – that the Free Trade Agreement between the European Union and Korea might be concluded by the end of this year. That is clearly not going to be the case but, nevertheless, we are pleased that Parliament is able to report today and we hope, through our report today, that we will be able to influence the Commission’s position.

To get to where we are today, some of my colleagues had to work extremely hard, and I would like to thank Christopher Ford from the Trade Committee and Emmanuelle Le Texier from the PSE Group, who worked above and beyond the normal call of duty to get this report prepared in time. I would also like to thank Commissioner Mandelson and his services for the good cooperation I have had from the Commission in producing this report, and also the Korean Ambassador, whose assistance enabled me to get an insight into the Korean position on these negotiations.

Historically, free trade agreements between the European Union and Asian countries have been trade-light, despite their name. I think this could be the exception to the rule. Korea has shown a willingness and an ability to negotiate a far-reaching and comprehensive bilateral trade agreement.

Korea is a significant player in the region in Asia. It is now a wealthy country, the 11th largest economy in the world. Its per capita income is comparable to Spain. It is an economy that is growing quickly, and trade between our two regions – between Korea and the European Union – reached EUR 60 billion last year. So it is a deal worth doing, and, if we can get it right, I think it is a win-win situation. The Korean manufacturing industry, for example, can win through access to European services, enabling Korean manufacturing to expand and to compete more favourably. We can win, through access to the Korean market for some of our key goods and services.

The timetable, as I mentioned, was originally set for conclusion by the end of this year. It now realistically looks like May next year will be the earliest negotiations can be concluded, but I am encouraged that, after five rounds of negotiations, talks seem to be getting down to the nitty gritty and seem to be getting serious. There are clearly still significant gaps between the European Union position on issues like country-of-origin labelling, technical standards for the automobile industry and on tariff concessions for goods. But the key point is that negotiations are now being conducted at a serious and detailed level.

My main concerns come in the field of, firstly, social and environmental standards. Even with this delay, the Korean agreement looks like being the first of the new generation of FTAs that we agree. As such, it can be a template for further FTAs, and I would like to see our ambitions in relation to environmental and social standards raised. I would like to ensure that there is a dispute settlement mechanism in the Agreement. I do not believe that we should settle for anything less than the United States have settled for, and they have got a dispute settlement mechanism in their report. I believe issues like ratification of key ILO conventions and the post-2012 application of any new climate change agreement cannot be left to mere gentlemen’s agreements or simply encouraging people to do things. We have to actually have some mechanism for settling disputes. I hope the Commission will look at this again.

I also want to argue that the Kaesong Industrial Complex should be looked at sympathetically in relation to such an agreement. I accept the Commission’s approach that, firstly, we have to get the Free Trade Agreement; but if we can get the FTA, before signature we should look at how we can assist South Korea in terms of encouraging North Korea to come into the real world. The Kaesong Industrial Complex, based in North Korea but run by South Korean companies, is a way of engaging North Korea with the rest of the world, and it is a process that we should be encouraging. I believe that, through our trade agreement, we can do much to assist South Korea in this process. It is not just a matter of interest for South Korea but it is a matter of interest for the world. It makes the world a safer place if North and South Korea can cooperate.

I believe this is an important free trade agreement. I believe it is one that both the EU and Korea can win if we get the right deal. I support the Commission’s view that we should not rush to a settlement, and that a good settlement is better late than a bad settlement that we get early. I hope, when Korea changes president at the beginning of next year, that the new president will instruct his administration to work tirelessly to reach this agreement before the summer.

  Peter Mandelson, Member of the Commission. − Mr President, I welcome the excellent and speedy work done by the rapporteur, Mr Martin, and his colleagues and staff. Together they have produced a comprehensive and balanced report, which I commend.

Parliament’s endorsement of this motion for a resolution will send a clear signal of support for the Commission’s policy of seeking an ambitious and comprehensive free trade agreement (FTA) with South Korea, as part of the strategy laid out in the Global Europe Communication of October 2006. The choice of South Korea as partner for this generation of free trade agreements reflects the important economic and political potential of the country, but it is also an acknowledgement of the reality that important barriers exist and persist to stronger economic and trade ties between us.

The motion is timely: free trade negotiations with South Korea were launched in May 2007, and have progressed rapidly so far. We are ready to work for an early conclusion so long as the substance and quality of the outcome are right. That is our bottom line and it will remain so.

Our FTA with South Korea should be fully WTO-compatible. That goes without saying. We seek far-reaching liberalisation in trade in goods and services, as well as in investment. We are paying special attention to non-tariff barriers and to rules and regulations in key areas, such as intellectual property rights, competition and government procurement. I fully agree with the importance the report attaches to non-tariff barriers and to effective dispute settlement machinery in this and other aspects of the prospective agreement.

Studies have suggested that, in some sectors in Korea, non-tariff barriers are now more important than the tariffs themselves. Substantial improvements on these behind-the-border barriers to trade, creating real market access for EU exports to South Korea, will be absolutely key to conclusion of the FTA.

On a few of the specific concerns that have been raised, the question of Kaesong raises complex technical and political questions. We welcome the amendments proposed in this regard, because they highlight the complexity of the question, which will require careful consideration. The recognition and promotion of the social and environmental aspects of trade – sustainable development – will be an integral part of the free trade agreement with South Korea.

I agree that effective enforcement of standards is key to securing an ambitious and effective result on sustainable development in this agreement. However, a cooperative tone can achieve much more in this area than the appearance of coercion. We expect to cover a greater number of multilateral environmental agreements, and to include issues such as decent work and a stronger commitment to ILO core conventions, and expect to go beyond other recent agreements, such as those covered by the Korea-US FTA. We will also aim to involve the social partners and civil society in this cooperation.

The sustainability impact assessment has been launched. The main findings of draft reports in the different phases will be discussed with civil society. We have set up the SIA to ensure that there will be continuous and rapid feedback into the negotiation process. This builds on the initial contacts we had with civil society at the start of the negotiations.

We have also worked closely with Parliament. The cooperation with the rapporteur and the Committee on International Trade has been excellent. I myself, as well as the Director-General, have regularly updated that Committee. As far as the ratification procedure is concerned, this will depend on the content of the agreement itself, but the Commission is in favour of involving Parliament as much as is possible under the Treaty.

Finally, a possible future FTA covering the bilateral trade relations with South Korea will be part of an overall and coherent framework of EU relations with South Korea. The existing bilateral framework agreement will continue to govern bilateral cooperation and political dialogue.

To conclude, the goal of this FTA is to complement an ambitious Doha outcome by going deeper and further bilaterally with South Korea. Past experience shows that such agreements can road test liberalisation solutions and become stepping-stones for the future evolution of the WTO. An ambitious and comprehensive FTA with South Korea is not just commercially significant, but will also mean an important upgrading of the bilateral EU-Korea relationship. It is also a recognition of the engagement of the EU on the Korean Peninsula and in the region. In a wider sense, it is part of our broader commitment to ensuring that EU trade policy in Asia is keeping up with the dramatic development of that region, and securing the benefits in terms of jobs, growth and growing trade for both sides.

  Werner Langen (PPE-DE), draftsman of the opinion of the Committee on Industry, Research and Energy. − (DE) Mr President, the Committee on Industry, Research and Energy thanks the rapporteur for adopting our proposals. We think an agreement is reasonable, but would nevertheless point out that there have been considerable sectoral problems with Korea in the past. I am thinking here of the discussion on dumping prices in the shipbuilding industry in recent years, for instance, where we also had lawsuits. We wish to ascertain whether these sectoral problems are being resolved in order to ensure that both sides really are opening up and Korea is not the unilateral beneficiary, and that – even when we think of our pharmaceutical industry, the car industry, of the many industrial sectors – reciprocity is guaranteed.

One particular subject was Kaesong. The Commissioner has just addressed the issue of how to involve these North Korean special zones. According to what I am hearing, eight other special zones are planned. In the opinion of the Committee on Industry, international standards must apply here. We cannot undermine our own free trade agreements in this way. We therefore ask that this aspect in particular be thoroughly checked. Otherwise, many thanks – to the Commission, too – for these negotiations!

  Peter Šťastný, on behalf of the PPE-DE Group. – Mr President, let me first congratulate my colleague, the rapporteur Mr Martin, for a high-quality and comprehensive report. Our negotiators should take note of it. We should also learn from the recently completed USA-Korea FTA, which shows that speed of conclusion is important, but should not be the top priority. The main goal should clearly be to accomplish high quality and an even playing field in flows of trade. Today, those flows are still seriously impeded by non-trade barriers.

Korea does not apply international norms or labelling requirements regarding automotive products or other important products such as pharmaceuticals, cosmetics and electronics. There is also a need for clarification in the area of intellectual property rights and counterfeiting. These issues need to be resolved before we sign this FTA, in order to ensure free and fair trade. Unless all these issues are resolved to our complete satisfaction, I would advise the Commission not to sign this agreement.

I admire the economic miracle of South Korea, which is reflected in the fact that it is the European Union’s fourth largest trading partner. Having a strong democracy has obviously benefited them greatly, and one has to feel sorry for their brothers and sisters in North Korea.

We should be prepared to do all we can to bring about an emotional reunion similar to the one we saw in the late 1980s between East and West Germany. This should, of course, be based on the principle of democracy, which has brought so much success to South Korea.

  Erika Mann, on behalf of the PSE Group. – (DE) Mr President, I should like to address three aspects. First of all I would like to thank the rapporteur, Mr Martin, on behalf of my group. The report has been written with great care and it actually alludes to all the points that are important and have to be debated. It also advises on the appropriate caution to be exercised on certain subjects, e.g. in the automotive sector. In this respect I believe it is an excellent report, which is a good prerequisite and should accordingly be considered by the Commission and the Council. I am pleased to hear that the Commissioner has responded so meticulously to it.

Secondly, I should like to ask the Commissioner: how will negotiations with Korea generally proceed, in your view? Negotiations are indeed underway and are at a very difficult stage. It seemed very much better at the beginning, I believe, than we have thought in the meantime. Parallel negotiations with all the ASEAN nations are also being added, of course. These negotiations are also – as far as I have gathered from the Minutes – at a very difficult stage. What is the Commission’s assessment of this? What influence will our ongoing negotiations with ASEAN have on negotiations with Korea?

My last question to the Commissioner relates to the fact that the Heads of State or Government are just about to sign the Reform Treaty today, 13 December. Under this Reform Treaty, Parliament will in future have a great deal more influence in the retail sector, for which we in this Parliament have been fighting for a very long time. I should like to thank the Commission and Commissioner Mandelson in particular for always having backed this.

My question, however, is this: can you imagine that the Commission will support us when we ask the Council for the right that has already been brought forward under the upcoming free trade agreement and that Parliament will therefore keep the relevant endorsement obligation? Can we assume that we have you on our side in this, Commissioner?

  Ignasi Guardans Cambó, on behalf of the ALDE Group. – (ES) Mr President, I would also, on behalf of my group and very formally, like to congratulate the rapporteur David Martin on the excellent quality of the report that he is presenting to the House. In reality, not all reports are equal. It is important that, although here we vote on all sorts of documents, we point out when some of them have a content and a solidity that enable them to be examined in detail, and cover all the subjects that are up for discussion. I therefore congratulate the rapporteur and the team that supported him in making this happen.

It is true that we do not talk about Korea very much here; we do not talk about it enough, although it is undoubtedly one of our major commercial allies, and indeed the fourth largest outside of Europe, as the report states. The European Union is the leading investor in Korea, which is also, undoubtedly, one of the strongest democracies in the whole of that region.

If we consider what I have just said, on the one hand, therefore, and on the other hand the difficulties in the multilateral context and the reality that there are obstacles to accessing the market for European products and services, which are major non-tariff obstacles, it is obvious that this makes it a very clear candidate for a bilateral agreement that has the full support of Parliament. This agreement, however, needs to be well put together, well negotiated and ambitious.

There are difficulties in very specific areas. I would highlight the subject of services, which has already been mentioned, and the subject of intellectual piracy, in one of the countries with the greatest Internet penetration in the world, and where, therefore, there are very specific problems resulting from the fact that copyright and rights protecting the audiovisual sphere are not taken seriously.

Finally, on the question of Kaesong: my group is going to support the text as it is in the report; in other words, we recognise and understand the political content of this area between South Korea and North Korea, but we understand that, if free trade with the European Union were simply introduced into this context, it could cause serious problems, and therefore we would not support the simple inclusion of the Kaesong area in a possible agreement with the European Union.

  Zbigniew Krzysztof Kuźmiuk, on behalf of the UEN Group. – (PL) Mr President, in rising to speak on behalf of the Union for Europe of the Nations Group in the debate on economic and trade relations between the European Union and Korea, I wish to draw attention to the following matters. In a situation where Korea has signed a Free Trade Agreement with EFTA and ASEAN and also with the United States, but will not sign such an agreement with the European Union, the competitiveness of European companies taking advantage of duty-free access to the Korean market will decline. This will have a negative impact on the level of economic growth and the level of employment in EU countries.

Secondly, according to analyses carried out by independent research centres, as a result of the conclusion of a free trade agreement, two thirds of the benefits accruing from such an agreement would go to Korea, and only one third to the European Union. It is therefore necessary for Korea, in addition to this agreement, to make a commitment to the EU in which Korea undertakes to observe European social standards, and in particular the basic elements linked to decent work, as well as environmental and consumer protection standards.

Thirdly, this approach gives an opportunity to lead on to honest competition between Korean and European companies. It is only then that Korean companies will include in their manufacturing costs the overall costs of labour, environmental protection and consumer protection, and thus the price of their products will reflect the full manufacturing cost.

  Caroline Lucas, on behalf of the Verts/ALE Group. – Mr President, let me start by thanking Mr David Martin for his report and by underlining the crucial importance of this dossier. The EU-Korea Treaty will be the first application of the new EU trade doctrine Global Europe, a doctrine that is highly controversial, not least because it seeks such deep market access conditions through the removal of all kinds of barriers to all-out import penetration, precisely at a time when more and more people are becoming aware that there are very many losers as well as some winners in a completely liberalised global economy.

On the positive side, the report sets out some very good standards for trade and social and environmental fields, which Greens absolutely support, and in that respect I think the report sets a very important precedent for further upcoming parliamentary responses to other free trade agreements, with India and ASEAN, for example. So we welcome the fact that the report insists that there must be no exceptions to the rule that access to the European market is conditional on compliance with environmental protection standards.

We welcome the fact that it demands that the trade agreement with Korea incorporates binding social and environmental clauses and, to our mind, this by itself makes it difficult to contemplate that the North Korean Kaesong industrial complex would be included within the FTA rules. Most importantly, it intends to give teeth to those binding clauses by demanding that they are subject to the standard dispute settlement mechanism.

But we do have some serious misgivings about this report as well. First, there is the demand to scrap all non-tariff barriers (NTBs) to trade without any attempt at differentiating what really constitutes a legitimate NTB and what does not. We should not assume that everything that prevents unfettered free trade is an illegitimate obstacle. There are some very good reasons to qualify trade, especially when public policy wants to put in place controls for social, health or environmental reasons.

We are also opposed to the full introduction of the so-called ‘Singapore issues’ into the free trade agreement. Again there are good reasons why total investment freedom or public procurement should remain outside the scope of a trade agreement. Korea had a devastating experience with the free flow of capital in the late 1990s and they have used sheltered public procurement policies to get back on their feet since then. Now, it is not up to us to judge whether they should offer those items on their side, but we are allowed to judge for our side, and my Group does not support giving unlimited freedom to foreign investors in Europe or destroying the possibility of engaging in public spending for social goals through specific domestic procurement policies.

  Philip Claeys (NI). – (NL) Mr President, South Korea is one of the EU’s main trading partners outside Europe, something that is highlighted clearly in this balanced report. It is a country that arouses sympathy owing to its contiguity with the most backward, most totalitarian communist regime in the world.

Trade relations have grown substantially in recent years, which in itself is a very good thing, but that does not mean there are no problems. If we conclude a free trade agreement with South Korea, it must be based on complete reciprocity. South Korea still has far too many tariff and non-tariff barriers for us to really talk of reciprocity.

Europe must insist on the elimination of all these barriers, and must be able to come to agreements that are at least as advantageous as those of the free trade agreement between South Korea and the United States.

  Hubert Pirker (PPE-DE). – (DE) Mr President, as leader of the European Parliament Delegation for relations with the Korean Peninsula, I should like to congratulate the rapporteur specifically and say that I am very happy to back this report.

I should also like to emphasise something that many still do not know: that the Republic of Korea is an important trading partner. Precisely for this reason it is important that we conclude a free trade agreement. The aim of this agreement must be to achieve fair and equitable trading conditions to our mutual advantage and our mutual benefit.

I can also say that I am pleased that the negotiations have been running substantially better in the fifth round than they did in the fourth round. I should like to encourage Korea to support EU proposals for the faster and reciprocal abolition of import duties. The EU’s target for this would be 2015.

As we all know, the motor vehicle sector is and remains a challenge in the negotiations. What we as the European Union expect is that our safety standards are accepted by Korea just as we, too, accept Korea’s standards in this sector.

I am optimistic that the barriers in the pharmaceutical products and services sectors, and particularly in the banking and legal advice sectors, can be removed. With regard to Kaesong, I should like to say that it would be significant for the negotiating partners to find a way of supporting the Kaesong project and other projects, on economic and political grounds, particularly for introducing North Korea to the international community of states.

We are generally on the right track and I hope that there will be a conclusion at the beginning or in the first half of 2008.

  Kader Arif (PSE). – (FR) Mr President, I would first like to thank Mr Martin for the quality of his report. When negotiating this future trade agreement with Korea, we would do well to remember that our priority should remain multilateralism, because we know that the excessive proliferation of bilateral agreements is damaging to the regulated multilateral structure that we belong to. That is why, if we enter a new era of bilateral trade agreements, these should include guarantees and principles, some of which are mentioned in Mr Martin’s report.

The future free trade agreement with Korea should be up-to-date and include restrictive environmental and social requirements such as those in the fundamental ILO conventions, which aim to promote proper working conditions.

Moreover, following Parliament’s commitment to enable better access to generic medicines, I am delighted that the provisions on public health have been included and that our wish has been respected that any demands that would limit our partners’ ability to make use of the flexibilities provided for in the atypical Doha declaration agreement should not be included.

On the other hand, despite its positive points, it is unacceptable that this text makes no reference to the fate of workers in the Kaesong free trade area, as our rapporteur wanted, and I deplore this.

  Bogusław Rogalski (UEN). – (PL) Mr President, Korea is one of the leading economies in the world, but at the same time it has the greatest difference in income among the OECD states. Korea is the EU’s fourth largest trade partner outside Europe, whereas in 2006 the EU was the largest foreign investor in Korea.

The main problem in our bilateral trade relations is difficulty of access to the market across non-tariff barriers, including a lack of accepted norms and international standards. A free trade agreement with Korea should include protection for foreign investments, a competition policy, public order transparency and trade facilitation.

We must also bear in mind, though, that this agreement could have a negative impact on the European automobile industry, so the Commission must give careful consideration to the strategy of gradual removal of EU import duties. First of all, non-tariff barriers on the Korean side must be withdrawn, so that it does not turn out that the sole beneficiary of this cooperation is Korea.

  Glyn Ford (PSE). – Mr President, I wish to join with the other speakers in congratulating Mr Martin on his report on a free trade agreement with South Korea, which is the EU’s fourth largest trading partner outside Europe and the world’s eleventh largest economy.

I want to deal briefly with two issues. Firstly, the opposition of trade union and farmers’ groups to the free trade agreement with Korea and, secondly, the case of the industrial zone. In the first case, we need to place the opposition in perspective. Thousands demonstrated against the US agreement with Korea and a number of people burnt themselves to death. Rather than thousands, we have only dozens protesting, possibly because we are attempting to include in our free trade agreement an associated political cooperation agreement – social, political and labour clauses that will help protect labour standards in the south and may well enhance them. At the same time, we will not have the discussion over rice which Korea had with the United States.

With respect to Kaesong, we are not arguing that this should be included. We are arguing that we should not automatically exclude it. That is a rather different position, and I hope that on that basis the Liberals will be able to change the way they vote. As the former Prime Minister of Jamaica once said, the only thing worse than being exploited is not being exploited. Some of us had the opportunity to visit Kaesong last month, as part of an EU workshop on economic reform held in North Korea. I saw thousands of happy North Koreans flooding from the zone, smartly dressed, because they have standards of living six times higher than in the North. This is an opportunity, politically and economically, to actually change that regime and move things in the right direction. Kaesong can transform the North and, allowing for the difficulties, should be encouraged and not killed.

  Peter Mandelson, Member of the Commission. − Mr President, let me make three brief points. First of all, on the issue of Kaesong, I think that Mr Ford’s formulation – that we should not automatically exclude Kaesong – is the right approach to take. We in the Commission will be very prudent on this subject, but I think, on that basis, the amendment is probably a worthwhile one.

Secondly, I was asked about the overall prospects for the negotiation. Well, in this job I have not discovered a trade negotiation that is not in some difficulty. However, I would say that this negotiation is in less difficulty than some other trade negotiations I could identify.

Lastly, Ms Mann asks whether the European Parliament can obtain rights earlier than the Treaty ratification in respect of this agreement. When asked about this in a different context, I overstepped my collective Commission responsibility in my enthusiasm, so today I shall be a little bit more careful and simply stress that we will seek to involve Parliament as much as possible.

(Applause)

  President. − The debate is closed.

The vote will take place today at 11.30 a.m.

IN THE CHAIR: MR ONESTA
Vice-President