	Introduction

After more than two years of negotiations, the European Union (EU) and South Korea signed a bilateral free trade agreement (FTA) on October 6, 2010. Both the South Korean National Assembly and the EU Parliament have ratified the agreement, and it went into effect on July 1, 2011. The South Korea-EU FTA (KOREU FTA) is the largest FTA in terms of market size that South Korea has entered into. The KOREU FTA reflects the EU and South Korean trade strategies to use FTAs to strengthen economic ties outside their home regions. It also builds upon the surge in trade and investment flows between South Korea and the EU over the past decade, a period of time in which the 27 member states of the EU countries collectively passed the United States in economic importance to South Korea. The KOREU FTA is very comprehensive, generally mirroring the scope of the KORUS FTA, with some exceptions. As with the KORUS FTA, the KOREU FTA reduces and eliminates tariffs and other trade barriers in manufactured goods, agricultural products, and services and would also cover such trade-related activities as government procurement, intellectual property rights, labor rights, and environmental issues. For example, unlike the KORUS FTA, the KOREU FTA does not include a specific chapter on foreign direct investment and does not allow trade sanctions to be applied where violations of the labor and environment provisions have taken place. The KOREU FTA could have an impact on U.S.-South Korean trade by possibly diverting some South Korean trade away from the United States to the EU and could provide the EU with a "first mover" advantage since it entered into force on July 1, 2011, and the KORUS FTA is expected to enter into force no earlier than early 2012. This is similar to the KORUS FTA. It is not clear whether the difference in approaches between these two FTAs yields different levels of trade liberalization. Potential Economic Impact of the KOREU FTA

Most of the studies done on the impact of the KOREU FTA estimate that the agreement will have a small but positive affect on the economies of the EU and South Korea as a whole and that the larger relative impact would be on the South Korean economy. As with most other FTAs, the greatest economic impact of the KOREU FTA will be on specific sectors in each economy. EU services providers will be expected to experience gains from the agreement, especially in the areas of retail and wholesale trade; transportation services; financial services; and business services. In terms of trade in goods, EU exporters of pharmaceuticals, auto parts, industrial machinery, electronics parts, and some agricultural goods and processed foods will be expected to gain from the KOREU FTA's implementation. At the same time, South Korean producers of cars, ships, wireless telecommunications devices, chemical products, and imaging equipment will be expected to increase their exports to the EU market.
On October 6, 2010, the 27-member European Union (EU) and South Korea signed a bilateral free trade agreement (FTA). The South Korean National Assembly and the EU Parliament have ratified the agreement. The agreement went into effect on July 1, 2011. The South Korea-EU FTA (KOREU FTA) is the largest FTA in terms of market size that South Korea has entered into. The KOREU FTA reflects the EU and South Korean trade strategies to use FTAs to strengthen economic ties outside their home regions. It also builds upon the surge in trade and investment flows between South Korea and the EU over the past decade. On October 12, 2011, both houses of Congress passed implementing legislation for the U.S.-South Korea FTA (KORUS FTA), which the President signed into law (P.L. 112-41) on October 21. The KORUS FTA is expected to enter into force in early 2012.
The KOREU FTA is very comprehensive. It would reduce and eliminate tariffs and other trade barriers in manufactured goods, agricultural products, and services and would also cover such trade-related activities as government procurement, intellectual property rights, labor rights, and environmental issues.
Most studies done on the potential impact of the KOREU FTA estimate that the agreement will have a small but positive effect on the economies of the EU and South Korea as a whole and that the larger relative impact would be on the South Korean economy. The greatest economic impact of the KOREU FTA would be on specific sectors in each economy. EU services providers would be expected to experience gains from the agreement, especially in the areas of retail and wholesale trade, transportation services, financial services, and business services. In terms of trade in goods, EU exporters of pharmaceuticals, auto parts, industrial machinery, electronics parts, and some agricultural goods and processed foods would be expected to gain from the KOREU FTA's implementation. At the same time, South Korean manufacturers of cars, ships, wireless telecommunications devices, chemical products, and imaging equipment would be expected to increase their exports to the EU market.
The KOREU FTA is similar to the KORUS FTA in many respects. Both agreements are comprehensive and both would eliminate tariffs on most trade in goods soon after they enter into force. However, they differ in other respects. Phase-out periods for tariffs on some manufactured goods differ. In addition, the KOREU FTA does not cover investment protection. Unlike the KORUS FTA, the KOREU FTA does not allow trade sanctions to be applied where violations of the workers' rights and environment provisions have been deemed to occur. In addition, the KORUS FTA covers a broader range of trade in services than does the KOREU FTA. It is not clear whether these differences in the structures of the FTAs result in appreciable differences in outcomes in terms of economic gains and losses.