Financial services: FTA falls short of expectations
By Sébastien Falletti in Seoul | Friday 29 June 2012
The implementation of the EU-South Korea free trade agreement (FTA) is moving swiftly in the good sectors but several hurdles remain when it comes to services, European businesses say. European banks and financial institutions complain that their South Korean competitors are not implementing key regulations aimed at opening the local market to foreign competition,
Europoliticshas learnt. Many South Korean banks have not yet changed their rules regarding data transfer to foreign banks, ignoring the new regulations included in the FTA, which entered into force last July. Hence, each transfer to foreign banks still requires specific authorisation from the clients, which slows down the process. “This is a real obstacle to the expansion of European banks on the Korean market,” according to Pascal Kerneis, managing director of the European Services Forum (ESF). Banks like HSBC or Standard Chartered, which are already operating in Asia’s fourth largest economy, were hoping that the FTA would reduce the gap between them and their local competitors.
The European Commission is expected to raise this implementation gap during its meetings with South Korean authorities. If the problems persist, this issue could be included in the agenda of the next annual EU-Korea FTA Trade Committee meeting, co-chaired by Commissioner Karel De Gucht and the Korean trade minister, which will take place during the autumn to monitor the implementation of the deal.
Sergio Marchionne, president of the European Automobile Manufacturers’ Association (ACEA), urged the Commission to check thoroughly whether Seoul was living up to its promises in terms of implementation of the FTA. European businesses see the removal of the so-called ‘non-tariff trade barriers’ as the most valuable part of the FTA. South Korea’s market has a reputation for being well-protected from foreign competition through numerous local regulations and standards that are often too costly for foreign companies to comply with.
Concerns about implementation are heightened further by the recent demise of the EU Chamber of Commerce in Korea (EUCCK), which had played until recently an essential role in conveying European business views to the Korean authorities and the Commission. The EUCCK is massively downsizing its operations after being condemned to pay a €3 million fine following a tax audit. With its bank account frozen, the chamber is unlikely to be able to operate as usual at least during this year. The Commission has called on the Korean authorities to treat the chamber in a “non-discriminatory” way and has expressed its concern regarding the vacuum left by the dramatic scaling down of the EUCCK. “It is in everybody’s interest to have a proper representation of the EU business community in Korea and we will discuss this matter with all relevant stakeholders,” said John Clancy, the spokesperson for De Gucht.