By Phillip Souta
Kia, the South Korean car manufacturer proclaims in its advertising that it has the “power to surprise.” Dramatically living up to that, sales of South Korean cars have surged 24 per cent in the last year. France, perhaps less pleasantly surprised, has requested that the European Commission demand advance notice of South Korean car exports into Europe.
South Korea’s exporting success is on the back of the recently signed EU-South Korea Free trade Agreement. The French request is a potentially worrying development.
The European Commission is considering the French request, which comes as cheap but solidly built cars from Kia and Hyundai increasingly give struggling French brands such as PSA Peugeot Citroen a run for their money.
This is especially true in central and Eastern Europe, where cheaper South Korean brands give people with weaker purchasing power the opportunity to buy quality new cars which they would otherwise be hard pressed to afford.
The French argument is couched in terms of having an “industrial policy” which is not “naïve.” Peugeot has recently announced that it will close a factory near Paris, meaning 8,000 will lose their jobs. The two may be related.
Arnaud Montebourg, the French Industry Minister, has said the rise in South Korean car imports has been caused by a 10 per cent drop in import duties to zero over five years.
The FTA includes provisions for the re-imposition of duties if “sensitive industries” are hit by a surge in imports. If the test for that is whether an industry employs people or not, that could apply to any sector. That was not the purpose of the provision.
The EU spent years in negotiations which will mean that European dairy producers – just one sector France is strong in – will save an estimated €380 million in scrapped duties annually.
In total, EU exporters are estimated by the Commission to be in line for an annual €1.6 billion saving. Trade is expected to more than double, and according to a study by Copenhagen Economics, the deal will create new trade in goods and services worth €19.1 billion for the EU and €12.8 billion for South Korea.
Talking about not having a “naïve” trade policy is thinly veiled code for protectionism. France’s priority should be to focus on the competitiveness of French companies. In the long run, protectionism never works, and is an ultimate betrayal of the people whose jobs it seeks to protect.