European auto manufacturers on Monday urged Brussels not to sign a free trade agreement with South Korea due to be inked over the coming days.
In an open letter to the European Union's 27 member states, the European Automobile Manufacturers Association said its members would be hammered under terms negotiated by Brussels.
It said that without "tangible improvements" in an "unbalanced text," the draft agreement "should not be signed" by Trade Commissioner Catherine Ashton.
South Korea's deputy trade minister Lee Hye-Min told journalists that the accord would be signed in October, but the automakers' body said the proposed conditions would set a precedent for future bilateral trade deals.
Accusing Brussels of using the declining European car manufacturing industry as a "bargaining chip," it said the deal would have a "serious impact" on manufacturing employment across the bloc.
It claimed the EU's trade deficit with South Korea would increase from its current level of around 15 billion euros (US$22 billion) per year and said the 1,000-page draft would give an "unfair competitive advantage" to South Korean manufacturers such as Hyundai. It added that an automotive annex would prove meaningless if Seoul changes its environmental and safety regulations.
The association said it "prefers no agreement rather than a bad one."
Gripes center on two issues -- import duties and rules of origin.
South Korea wanted permission to refund import tariffs to manufacturers that use imported materials to make products for export. Brussels said this would give them an unfair advantage. On rules of origin, South Korea wanted items made at a Seoul-funded industrial complex in North Korea to be treated as South Korean goods.
Also, since South Korean manufacturers import many parts from China and elsewhere, the two sides were trying to agree what percentage of a finished item must be locally made.
The Korea Institute for International Economic Policy estimates the pact will eventually increase trade by up to 20%.
The EU was South Korea's second-largest trading partner after China last year, with two-way trade totaling more than $90 billion. The European bloc was the country's biggest foreign investor last year.
Under the deal, the two sides will phase out tariffs on 96% of EU goods and 99% of South Korean goods within three years.
Copyright Agence France-Presse, 2009