Analysis: Carmakers dampen EU's free-trade drive

Fri Jul 6, 2012 6:35am EDT
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By Robin Emmott and Sebastian Moffett

BRUSSELS (Reuters) - South Korea's biggest car maker, Hyundai Motor Co, decided to boost its European presence five years ago, adding a family sedan and a sporty-looking crossover SUV to its smaller hatchbacks.

The models have been a hit. European sales jumped 15 percent in the first half of this year, even while overall vehicle sales in countries such as France and Italy showed double-digit falls. The company's market share has been growing for 41 consecutive months, said Allan Rushforth, chief operating officer at Hyundai Europe.

That achievement is agitating European car manufacturers and complicating the European Union's ambitious free-trade agenda, just as EU leaders look to trade to revive the continent's stalled economy.

There is barely a corner of the world where the negotiators from the European Union - the largest trading bloc - are not trying to deepen trade ties, and talks with 80 countries are under way, from Canada to Cape Verde.

The immediate target of European carmakers' discontent is a free trade agreement between the European Union and South Korea that went into force a year ago, heralded by the EU trade chief as "the first in a new generation" of trade deals with Asian countries.

With a Japanese accord next on the EU's list, these sophisticated deals will go beyond simple tariff reduction and take in intellectual property rights, services and regulation.

But Europe's ACEA auto industry association is concerned by "the asymmetrical trade flow relations" between the European Union and South Korea - meaning big increases in Seoul's car exports to Europe, yet only modest export gains for Europeans.

ACEA President Sergio Marchionne, who is also chief executive of Fiat FIA.MI, said South Korea's increasing car exports were a "warning sign" ahead of a free-trade deal with Japan, Asia's biggest car exporter.   Continued...