Ahn Choong-yong
Distinguished Professor, Chung-Ang University
It was significant that the European Union and Korea launched together three weeks ago in Brussels a highlevel bilateral track II forum to discuss broad issues of mutual interest, ranging from security, diplomacy to trade and cross-border foreign direct investment (FDI) flows, following the effectuation of the Korea-EU free trade agreement (FTA) a year ago.
High-level participants from the EU commission, academics and Korean counterparts indicated that the Korea-EU FTA is indeed one of high quality in terms of the elimination and reduction of both tariffs and non-tariffs barriers.
The EU participants assessed that the bilateral FTA should serve as a benchmark for the EU to negotiate a series of intended FTAs with such countries as the U.S., Japan and key developing economies. Both sides reaffirmed their high respect for human rights in a political system and level-playing-field principles in international economic relations.
It is well known that the EU has been engulfed in the sovereign debt crises of southern European member economies and a prolonged recession. Many experts admit that a central dimension of the current EU crisis involves problems in the banking system. EU leaders during the sessions seemed determined to design a new breakthrough to maintain euro integrity and a robust EU economy.
Against this backdrop, this forum was one of the most insightful and rewarding I have participated in as a student of the fascinating integration process of modern Europe. In terms of FDI inflows into Korea, the EU has been the largest investor, occupying about 47 percent of Korea’s total FDI from 2001 through mid-2012, followed by Japan and the United States.
Multinational companies from the EU have greatly contributed a new source of growth, job creation and technology transfer to Korea by being deeply connected in increasingly rising global value chains.
To name just a few for which I, as the Foreign Investment Ombudsman, have helped in terms of business operations, Bosch Rexroth Korea, Odfjell Terminals Korea, Solvay and Tesco Academy have all been involved in supplying essential components, storage and distribution, training and R&D activities in renewable energy industries to upgrade the Korean economy.
Given the FDI inflow from the EU to Korea, Korea’s FDI outflow to the EU has also been impressive. Korean multinational companies including Hyundai, Samsung and LG have been highly visible in the Czech Republic, Slovakia, Poland, Hungary and other EU member states by investing in auto manufacturing and electronics and hiring hundreds of thousands of locals. In fact, in the past three years, Korea’s outward FDI to the EU recorded $15 billion, far exceeding the EU’s investment of $10 billion into Korea. The beneficial impacts of Korea’s FTA with the EU can be materialized if and only if bilateral cross-border FDI can occur to take advantage of the improved and transparent economic environment as mandated by the bilateral FTA.
This bilateral FDI flow and the surge of European and Korean cars onto the streets of both sides clearly indicate the positive impacts of the bilateral FTA. It should be noted that an increase in Korean cars in the EU is basically due to shipments of Korean brands made within the EU and elsewhere outside Korea.
The Korea-EU FTA model clearly suggests that any protectionist measures are having self-defeating consequences in this globalizing world.
For the EU, Korea could be viewed as an important strategic gateway to a rising Asian economy. For Korea, the EU is a strategic partner with which to upgrade the Korean economy to a higher value-added echelon.
During my flight back to Korea, I kept thinking of the visionary political leaders who conceived European integration. Jean Monnet, a founding father of the EU, once said, “Nothing is lasting without institutions.” We can apply the EU’s integration wisdom to Northeast Asia.
Next year, both the EU and Korea, as likeminded partners, will celebrate the 50th anniversary of mutual diplomatic recognition and continue to address how to co-navigate toward a more peaceful and prosperous world. Ahn is also Foreign Investment Ombudsman at Korea Trade-Investment Promotion Agency.
Ahn is also Foreign Investment Ombudsman at Korea Trade-Investment Promotion Agency.