Tue, Jul 10, 2012 - Page 9 News List

Carmakers dampen EU’s free-trade drive

With a Japanese accord next on the EU’s list, a free-trade agreement between the EU and South Korea is agitating European car manufacturers and complicating the bloc’s free-trade agenda

By Robin Emmott and Sebastian Moffett  /  Reuters, BRUSSELS

Illustration: Yusha

South Korea’s biggest car maker, Hyundai Motor Co, decided to boost its European presence five years ago, adding a family sedan and a sporty-looking crossover SUV to its smaller hatchbacks.

The models have been a hit. European sales jumped 15 percent in the first half of this year, even while overall vehicle sales in countries such as France and Italy showed double-digit falls.

The company’s market share has been growing for 41 consecutive months, said Allan Rushforth, chief operating officer at Hyundai Europe.

That achievement is agitating European car manufacturers and complicating the EU’s ambitious free-trade agenda, just as EU leaders look to trade to revive the continent’s stalled economy.

There is barely a corner of the world where the negotiators from the EU — the largest trading bloc — are not trying to deepen trade ties, and talks with 80 countries are under way, from Canada to Cape Verde.

The immediate target of European carmakers’ discontent is a free-trade agreement between the EU and South Korea that went into force a year ago, heralded by the EU trade chief as “the first in a new generation” of trade deals with Asian countries.

With a Japanese accord next on the EU’s list, these sophisticated deals will go beyond simple tariff reduction and take on intellectual property rights, services and regulation.

However, Europe’s ACEA auto industry association is concerned by “the asymmetrical trade flow relations” between the EU and South Korea — meaning big increases in Seoul’s car exports to Europe, yet only modest export gains for Europeans.

ACEA president Sergio Marchionne, who is also chief executive of Fiat, said South Korea’s increasing car exports were a “warning sign” ahead of a free-trade deal with Japan, Asia’s biggest car exporter.

Marchionne might get backing from affected EU countries, all 27 of which must agree for any free-trade deal to take effect, as they worry about the fate of a struggling industry responsible for 12 million jobs in the EU.

Italy, home of Fiat, along with Volkswagen’s homeland Germany, and France, base for PSA Peugeot Citroen, are those most concerned about a Japanese deal, say diplomats involved in preparing for formal negotiations.

“We cannot sacrifice our car sector in the name of trade,” one Italian trade official in Brussels said.

The executive European Commission, which negotiates on trade matters for the bloc, sees an accord with Japan as crucial, because the EU has yet to sign a free-trade deal with a major world economy.

Talks with India, which began in 2007, are nearing a stalemate over India’s tariffs on imports of European cars that are nearly 10 times greater than Europe’s on Indian vehicles.

Free trade stayed in favor even after the global financial crisis of 2008 to 2009, with leaders aware that protectionism helped convert a crisis into a depression in the 1930s.

Trade is especially important at a time when the eurozone debt crisis has sapped household demand for local goods and unemployment is at a record high.

“If we finalize all the trade deals on the table, it would create 2 million new jobs and increase the EU’s economic output by 2 percent on a permanent basis,” Danish Trade Minister Pia Olsen Dyhr said.

“That’s a 275 billion euro [US$338 billion] contribution to the economy,” she said.

Free trade is complicated by EU plans to coordinate its external policies in areas such as trade, aid and foreign affairs. An agreement with Colombia already signed by EU ministers is being held up in the European parliament, which passed a resolution last month asking Colombia to do more on human rights and labor laws, echoing concerns that held up Colombia’s free-trade accord with the US.

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