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EU Automakers Oppose South Korean Trade Pact

European car makers said European Union was preparing to sign an ‘unacceptable’ trade pact with South Korea that would open the door to cheap Asian imports into Europe.

BRUSSELS (AP) -- European car makers said Wednesday that the European Union is preparing to sign an "unacceptable" trade pact with South Korea that would open the door to cheap Asian imports into Europe.

EU and South Korean negotiators say they are close to a deal to open trade between them, but they have been hindered by differences over refunds South Korea pays to local companies for tariffs incurred on imported parts used in exported goods.

The EU car maker association ACEA -- which represents Volkswagen AG, BMW AG, Fiat SpA and others -- said this "effectively opens the door for cheap imports from China and other Asian countries" because South Korean rivals can buy cheaper car parts and sell cars for less.

The EU's executive commission rejected this, saying these refunds would be capped permanently if there was a notable increase in imported parts by Korean manufacturers.

EU spokesman Lutz Guellner said many European companies -- including car makers -- were keen to strike a deal that would give them access to new customers.

The EU says the free trade agreement would eliminate euro1.6 billion in yearly duties for EU exporters and save car makers euro2,000 on each car worth euro25,000.

ACEA also complains that the pact would "not sufficiently improve access to the South Korean market," because South Korea would not accept international safety and emission standards used by European car makers.

"There is absolutely no reason to open a European market of over 500 million people on Korean terms," the group said.

Europe's car industry -- the world's largest -- has been hit particularly hard by the global recession and has seen demand for its exports drop sharply since last year. It fears an influx of cheaper imports that could undercut higher-priced European models.

South Korea exports 73 percent of the cars it manufactures, but EU access to the Korean car market remains limited: in 2008, the EU exported a mere 37,000 cars. Europeans bought 446,000 Korean cars last year.

The European Union said EU and Korean car makers had a similar market share in each others' market of around 3 percent and Europeans were already enjoying strong growth rates of 25 percent a year. Imports of Korean cars to the EU have been decreasing substantially over the last two years, it said, down 38 percent.