The European Parliament approved a free trade pact with South Korea on Thursday, bringing it one step closer to coming into force this July, diplomatic sources said.
The trade accord, adopted in Strasbourg, France, during the European Parliament's plenary session, is the most ambitious free trade pact the European Union (EU) has so far negotiated, and the first of its kind with an Asian country.
The European Parliament also passed an implementation bill for emergency safeguard measures to limit South Korean imports if they soar in the eurozone after the bilateral free trade pact is put into effect.
Seoul and Brussels signed their bilateral free trade agreement (FTA) on Oct. 6 following two-and-a-half years of negotiations, agreeing to put the pact into effect starting on July 1.
The pact must be ratified by the 27 member states of the EU before taking full effect. The deal also still needs to be ratified by South Korea's parliament in order to go into effect as was scheduled.
The South Korean government welcomed the approval of the pact, expressing hope that it will be ratified by the National Assembly as soon as possible in order to become effective from July.
Hailing the approval, the country's ruling party called for starting discussions to ratify the deal, while the opposition parties claimed that thorough examinations on the impact of the deal are required prior to ratification and that following measures should be implemented as such.
The government submitted the trade pact to the parliament in October last year for approval, but opposition parties have boycotted reviewing free trade pacts, including a similar deal with the United States.
Earlier this week, South Korea's main opposition party agreed to end a two-month parliamentary boycott that has floated dozens of legislative bills, including free trade deals with the U.S. and the EU.
The European Commission (EC) also welcomed the approval of the free trade deal with South Korea by the European Parliament in its statement. The EC was entrusted by 27 members of the EU to hold negotiations on the deal with South Korea.
Overall, the South Korea-EU deal is expected to boost bilateral trade by as much as 20 percent in the long term, according to earlier estimates by the state-run Korea Institute for International Economic Policy (KIEP).
In 2009, two-way trade totaled US$78.8 billion with South Korea enjoying a surplus of $14.38 billion. In 2008, their bilateral trade reached $98.4 billion.
Under the deal, Seoul and Brussels would eliminate or phase out tariffs on 96 percent of EU goods and 99 percent of South Korean goods within three years after the accord takes effect. They have also agreed to abolish tariffs on most industrial goods within five years of the deal taking effect.
The accord also permits duty drawback, which allows the tariffs levied on parts used by a manufacturer to make a product such as a car to be refunded when the final product is exported.
But the deal includes a provision that caps refundable tariffs should there be "dramatic changes in foreign outsourcing" within five years of the accord taking effect.
On the issue of rules of origin, both sides agreed on the level of allowable foreign contents at 45 percent. In the cases of auto parts and some other products, the level is set at 50 percent.
One of the most sensitive issues has been auto trade. After much wrangling, the two sides agreed to eliminate tariffs on cars with an engine displacement of more than 1.5 liters within three years. Tariffs for smaller cars with an engine displacement of less than 1.5 liters would be lifted after five years.
South Korea currently imposes an 8 percent import duty on European cars, while the EU imposes a 10 percent duty on autos from South Korea.