BRUSSELS (Reuters) - The European Union is examining a request by France to require South Korea to give advanced warning of planned car exports to the EU, the first step towards the possible re-introduction of duties a year after a free-trade deal came into effect.
Sales of South Korean cars to the European Union surged 24 percent last year, even though the EU market is contracting, putting pressure on French carmakers who have lost domestic market share to the likes of Korea’s Hyundai (005380.KS) and affiliate Kia (000270.KS).
“The European Commission confirms it has received a note from the French authorities requesting ... prior surveillance measures for South Korean car imports,” EU Trade Spokesman John Clancy said in a statement. “The Commission is reviewing carefully the request.”
Such surveillance would mean authorities could demand a document to accompany products scheduled for export to the European Union. This would give advance warning of the type and number of products scheduled for shipment to the EU.
French carmakers are struggling in the face of rising competition. The country’s biggest carmaker, PSA Peugeot Citroen (PEUP.PA) last month announced plans to close a plant near Paris and cut 8,000 jobs, creating political tension in austerity-strapped France.
The EU-South Korea free trade agreement (FTA), introduced on July 1, 2011, is seen by the European Union as a model for future trade deals. It includes a safeguard clause that allows Brussels to re-impose duties if producers in sensitive industries are hit by a particularly strong surge in imports.
However, while South Korean car exports to the EU jumped last year to 345,000 vehicles, they were well below the 640,000 units recorded in 2007 and, increasingly, South Korean manufacturers are building cars for sale in Europe in European factories.
“The growth of Hyundai in Europe is based on products designed, engineered and built in Europe,” said Andreas Brozat, a spokesman for Hyundai, the Korean brand with the biggest sales in Europe. “Less than 12 percent of the 232,454 Hyundai cars registered in Europe during the first half of 2012 were built in Korea, while 70 percent came from the European region.”
Hyundai’s main European plants are in the Czech Republic and Turkey.
EU Trade Commissioner Karel De Gucht has said that trade with South Korea benefits Europe overall, pointing to data showing EU exports to the Asian country jumped 16 percent in 2011 to 32 billion euros. That compares to 25 billion euros in 2007.
Reporting By Sebastian Moffett; Editing by Susan Fenton