Sweden seeks EU-South Korea trade deal by 2010

Sweden’s Prime Minister Fredrik Reinfeldt said Monday that the European Union and South Korea could conclude a free-trade agreement (FTA) by year’s end.

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"Korea is an important partner for the EU ... I hope that this EU-Korean agreement can be concluded during the Swedish presidency," Reinfeldt said during a joint press conference with South Korean President Lee Myung-Bak in Stockholm.

Reinfeldt, whose country holds the EU's rotating presidency until December 31, told reporters that the proposed agreement would "send strong signals against the use of protectionism" throughout Europe and the rest of the world.

President Lee said the FTA "will bring new opportunities to the economies of the EU and (South) Korea."

"It is very critical for us to work towards reviving the global economy so we can come out of this (economic) crisis. One way to do that is to revive global trade," he said.

EU member states have given broad backing to the FTA but are still to fully endorse it, diplomats in Brussels told AFP.

All 27 member states must give the green light before the agreement can enter into force.

"We also have to finalize (the deal) with the other member countries," Reinfeldt said.

In March, the two sides reached a deal on most points but follow-up talks have failed to settle two outstanding issues -- duty drawback and rules of origin.

South Korea wants permission to refund import tariffs for manufacturers which use imported materials to make products for export. Brussels says this would give Korean firms an unfair advantage.

On rules of origin, South Korea wants items made at a Seoul-funded industrial complex in North Korea to be treated as South Korean goods.

Also, since South Korean manufacturers import many parts from China and elsewhere, the two sides are trying to agree what percentage of a finished item must be made in South Korea.

But when asked if the refund issue had been raised during the talks, Swedish premier Reinfeldt said: "Frankly, we have not discussed details ... The finalization of the agreement in itself will now follow ... These kind of specifics will then be sorted out and discussed at length."

The European bloc was South Korea's second-largest trading partner last year after China, with two-way trade worth more than $90 billion.

Interests in the EU are the biggest foreign investors in South Korea, with outstanding investment reaching $43.40 billion at the end of 2007.