E.U./Korea Free Trade Agreement Must Be Changed Says ACEA
No Reciprocity With South Korean Market
As Europe’s car manufacturers protested easing the taxes on South Korean imports, Hyundai announced spectacular global profits, with more to come.
The European Commission has signed a free-trade agreement with South Korea, and the European Car Makers Association (ACEA) has been lobbying furiously to stop it being signed by the member states, saying this is unfair competition and will lead to what it calls “economic distortion”.
According to ACEA Secretary General Ivan Hodac, the deal not only eliminates tariffs, it fails to ensure reciprocity in trade with South Korea, and Korea isn’t being stopped from imposing barriers to sales with possible unreasonable safety and environmental rules. The Korean currency is also being manipulated by the government to give its manufacturers an unfair advantage, ACEA said.
According to Global Insight, ACEA is worrying that upcoming negotiations with India, ASEAN and Japan pose similar dangers, and points out that South Korea made 3.8 million cars in 2008, exported 2.7 million of them, with up to 700,000 going to Europe. The E.U. exports only about 30,000 vehicles a year to South Korean, a market of more than 1 million sales annually. Global Insight said under the proposed trade deal, tariffs in Europe on South Korean cars will drop from 10 per cent to zero in three to five years, an expected cost advantage of what it calls “700,000 times €1,000”.
Only VW will earn more
To underline ACEA’s worries, Hyundai announced global net profit of $832 million in the third quarter, more than three times the figure for the same period last year. Reuters reported that analysts it had spoken to reckoned Hyundai is likely to earn about $1.7 billion in all of 2009, with only VW likely to earn more with €1.95 billion in net profit. Hyundai affiliate Kia also announced net profit of $340 million, compared with a small loss in the same period of 2008
This comes at a time of a slump in the world automotive industry, and the bankruptcy of General Motors and Chrysler in the U.S.
Deutsche Bank said it has raised its global sales forecast for Hyundai and Kia to 3.25 million in 2010 from the previous estimate of 3.2 million and increased its net income forecast by 6 per cent.
All this even before the E.U. free trade agreement takes effect.
Neil Winton – November 1, 2009