INTRODUCTION

The EU ranks as Korea's fourth largest import and export partner, right after China, Japan and the United States. Trade with the EU accounts for approximately 10 per cent of Korea's external commerce. In 2010, Korea exported 38 billion euros worth of goods to the EU, more than 90 per cent of which was manufactured products – the bulk of them consisting of machineries and transport equipment. Korea, for its part, is the EU's ninth largest trading partner, accounting for about 2.3 per cent of EU external commerce. In 2010, the majority of exports to Korea were, likewise, manufactured goods, representing almost 90 per cent of the goods that were traded. Thus, trade in industrial products dominates commerce between the parties. The ‘gains from trade’ under this setting arise primarily from the broader variety that is available to consumers and the opportunity of scale economies for producers.

The rules in the EU-Korea Free Trade Agreement (FTA) are broadly based on the signatories' World Trade Organisation (WTO) obligations. Many substantive rules either resemble or incorporate the relevant WTO provisions. For this reason, and to avoid conflicting interpretations, Article 14.16 of the FTA stipulates that: