[xtypo_dropcap]T[/xtypo_dropcap]he European Union approved on Thursday its first free trade agreement with one if its largest partners, South Korea, expected to come into effect next year.
Leaders plan to sign the pact at the EU-South Korea summit in Brussels on Oct. 6, effective beginning July 1, 2011, after being ratified by EU member states and South Korea.
The decision was reached after Italy removed its veto, worried that the removal of trade tariffs would impact its automobile industry.
Italy's biggest carmaker, Fiat, has taken a 10 percent drop in sales in the first quarter of 2010, according to the Association of European Car Manufacturers.
At the same time, Korean car manufactures occupy an important part of the EU market. Car sales of Hyundai in Europe, one of South Korea’s main car exporters, grew by more than 10 percent in the first quarter of the year. The sales of another large car exporter, Kia, have grown almost 13 percent.
South Korea is the EU's eighth-largest trading partner while the EU is South Korea's second-largest destination for exports.
The agreement initiated last year provides progressive liberalization by both parties of trade in goods and services, as well as rules on trade-related issues such as competition and state aid, intellectual property, and government procurement.
Under the treaty Seoul will lift import tariffs on 92 percent of manufactured goods in the first three years and 99 percent within five years, while the EU will eliminate 93 percent of its tariff on manufactured goods in three years time and 100 percent within five years; duties on industry and agriculture will also be cut by 98.7 percent by both sides within five years.
The deal will impact non-tariff barriers across all sectors, including in industries of particular interest to the EU, such as automotive, pharmaceutical, and consumer electronics.
Korea represents one of the most important markets for EU farmers, who send the Asian nation large quantities of vegetable oils, fats, and crops.
A report by the Leuven Centre for Global Governance Studies at the Katholieke Universiteit Leuven says that Korea can be considered a key partner for important issues, ranging from the crisis in Afghanistan to climate change and environmental problems.