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Last Updated:[13-09-2010 08:45:03 EDT] Zoom in Zoom out Back to Tradenews

Italian Fears are not Baseless - Koreans Make Cost-effective Cars

tradenews It is not about who makes a better auto-mobile - but in today's globalized market, it is rather who makes cost-effective and fuel-efficient ones. Climate change and rising hydro-carbon prices have zeroed in the global auto industry on low priced and low carbon vehicles.

Such facts make the Italian auto industry to believe that a tariff-free trade pact between the EU and South Korea would shake the very foundations of its industry. As far as the Korean auto industry is concerned, Hyundai is a clear winner and Kia is not way behind in market penetration globally.

The statistics indicate the storm is not in a tea cup, the Korean car makers already have an important share of the EU markets and their presence is growing. In the first quarter of 2010, Hyundai's car sales in Europe grew by over 10 percent, year on year. While Kia saw sales growth of almost 13 percent, according to the Association of European Car Manufacturers. Whereas, Italy's biggest car maker, Fiat, witnessed its sales in the region decline by almost 10 percent during the same period.

According to the latest reports by the AFP, the Belgian presidency of the EU expressed optimism on Monday that Italy would drop its opposition to a free trade deal with South Korea this week. Italy refused on last Friday to endorse the FTA owing to reservations on the impact it would have on its auto industry, orchestrated by car and truck giant Fiat.

The EU-Korean FTA recommends removing the EU's 10 percent tariff on Korean cars over a period of three to five years. Likewise, the 8 percent duty on the European auto exports to Korea will also be eliminated over the same period.

Italy's worries cannot be unfounded particularly because even in a highly competitive market of India the Korean cars have been able to become successful despite the presence of Japanese cars. After the arrival of Japanese and Korean cars in India, Italy's Fiat which often sold old models had to vacate the coveted top position it enjoyed up to the 1980's.

With the given situation, it is most likely that Italy would press hard to delay the accord as the Korean aggression could cause serious damage to its auto industry. Moreover, the domestic political scenario for the incumbent prime minister of Italy Silvio Berlusconi is also not very favourable either.

The bilateral trade between the EU and Seoul in 2009 was worth about $79bn (€62bn). The EU is South Korea's second largest export market after China, and the Asian powerhouse is the EU's fourth-largest non-European trade partner. The successful signing of the deal is expected to give a gigantic boost to the two-way trade between both sides, and is estimated to be more than $125bn (€97.5bn).

By Jose Roy

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