Commission to get tough with South Korea on trade barriers

Date: 01/04/1999

By Renée Cordes

THE European Commission is threatening to launch a complaint against South Korea in the World Trade Organisation if Seoul does not take swift action to lift import barriers on cosmetics and pharmaceuticals.

Korea pledged to open its entire market in return for securing a €51-billion bail-out from the International Monetary Fund more than a year ago to help its ailing economy.

But as the country gets back on track, Commission officials are exerting increasing pressure on the government to ensure that it abides by the terms of its agreement with the IMF.

They argue that Korea is discouraging European cosmetics-makers from selling their goods in the country by requiring all foreign manufacturers to undergo rigorous inspections by Korean officials before being allowed to put their products on the market.

They have similar complaints about Korea's insistence that all foreign pharmaceutical manufacturers must either have a factory in the country or license their products to Korean companies, thereby giving away intellectual property rights in many cases.

" We feel there are many difficulties with Korea," said one Commission official, adding that if Seoul did not act quickly to remove these trade restrictions, the institution would take its case to the WTO.

The move comes as officials are pressing South Korea to stop channelling international financial assistance to its shipbuilders in breach of the terms of IMF and other bail-out loans. Korean officials deny the allegations.

The Commission is also concerned about the restrictions imposed on professionals such as foreign lawyers, who are required to take the Korean bar exam, claiming that they are discriminatory.

Earlier this month, Acting Trade Commissioner Sir Leon Brittan called on Korea and other Asian nations to remove their protectionist measures. "The impact of the [Asian] crisis on European trade balances has been every bit as dramatic as on the US," he said, although he added that the EU would "accept these trade effects so long as genuine economic and political reforms are made in the affected Asian countries".

The Commission has already notched up one victory against Korea in the WTO, which ruled that the country must end the restrictive excise duties paid by foreign alcohol manufacturers. Western beer and whisky exporters are subject to 100% excise duties, compared to 35% for Korean firms.

Korean diplomats in Brussels claim they are making progress towards opening up all their markets to EU and other exporters, and insist they are optimistic that they can stave off another WTO dispute.

They say, for example, that they are examining the possibility of raising the excise duty for Korean liquor producers while lowering the duty for foreign products. "We are liberalising our import regime," said one. "There will be some improvement."

They have also pledged to "simplify" import requirements for cosmetics goods, but have declined to give details until after the Commission concludes its investigation.