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José Manuel Durão Barroso

President of the European Commission

Korea and the European Union: Benefiting from a strong partnership

Luncheon with the Business community in Korea

Seoul, 28 March 2012

It is a great pleasure to be able to address you today.

This is the fourth time that I visit Seoul and I have to say that I am always impressed by the sense of dynamism and entrepreneurship of Korea; it is as if the miracle of the Han repeated itself each time.

Korea’s economic success over the last half a century, from an average income similar to that of the Ivory Coast in 1960 to becoming the 15th largest economy in the world, has been studied from every possible dimension and has been a source of inspiration for many.

But I think that your economic miracle is no mystery because I see here the reason: a highly educated and hard working business community which blends entrepreneurial spirit with innovation and an eye for detail.

There are of course differences between the Korean economy and the European economy but there are also strong similarities: both grew after a period of conflict, through a phase of rapid industrialisation, with an emphasis on international trade and, as the 21st century progresses we are both facing the challenges of ensuring sustainable growth, a better distribution of wealth, and appropriate social safety nets.

We both need to adjust our growth model to achieve the right mix between domestic economy and export led models with inclusive and sustainable growth. Working together to meet these challenges will benefit us both.

Mutually beneficial co-operation is not restricted to the economic field. In a world of increasingly global challenges; economic, environmental or climate change, we are both strong supporters of the multilateral system from the World Trade Organisation to the Kyoto protocol, to nuclear safety.

We also have an increasingly strong relationship at the regional level through the Asia-Europe meeting process. This has added both breadth and depth to our relations, in fields such as the environment, research and education.

These aspects of our relationship are of increasing importance, but economic ties remain at the heart of our relations. Korea is the 10th largest trading partner of the European Union and we are your 3rd largest partner. In 2011 our total trade in goods and services was in near balance at around €80 billion.

Under this overall figure there are some interesting trends; on our side we run a surplus on trade in services, on your side you have a surplus in goods. The EU market is the second Korean export destination, with a bigger share than Japan and Hong Kong combined (which rank 4th and 5th). This figure is impressive. Our trade in both directions is overwhelmingly in manufactured goods; machinery and parts, consumer goods, transport equipments and chemicals. These are testimony to the similarities in our economies and a globalising world where small technological differences, design and branding can be driving factors in trade.

There are also strong investment links. The EU remains the largest investor in Korea in cumulative terms (US$ 5 billion in 2011). So, despite of the crisis, it is important to remind that the European Union remains the biggest economy in the world by value. The cumulated investment of the European Union in Korea over the last 30 years is three times greater than that of Korea in the European Union. Three quarters of European Union investment over the last 5 years has been in the service sector and the rest in manufacturing, while Korean investment in the EU is divided between manufacturing -cars and consumer goods - and logistical services.

Ladies and gentlemen,

These are the traditional measures of an economic relationship but our relations are deeper than the mere figures suggest.

The Free Trade Agreement between us is the first of a new generation of agreements which aim to intensify our trading relations beyond trade in goods to cover services, investment standards and other issues. As the figures have shown, our ties reflect much more than traditional trade and the agreement is designed to reflect this.

The agreement is intended to supplement the on-going work in the WTO, not to replace it. It does, however, act as a signal that on both sides we believe in the benefits that an open economy can bring and that we both wish to make these benefits work for us.

Other economic relations are also developing; we are seeing an increase in joint ventures, in investments in research and development facilities, an increase on collaboration between Korean and European firms in the automotive sector and pharmaceuticals to give but two examples. These developments are important: by investing in Korea's dynamism, by integrating our markets and by building on our respective strengths, we integrate our supply chains, multiply opportunities for our companies, and become more competitive on both sides of the partnership.

Ladies and gentlemen,

This brings me to the second element I wished to discuss with you today: the state of the European Economy.

When 10% of your exports are destined for the European market the health of our economy is important for the health of your economy.

It is therefore important that you hear first hand from those at the heart of the matter. I can assure you that we Europeans are dealing with the problems of Europe not with short term fixes but with policies that will strengthen Europe in the medium and long term.

As I said in 2009 to you here in Seoul when we were discussing the FTA, if you want to travel fast you travel alone but if you want to travel far you travel together. In Europe we travel together. In Europe we are 27 democratic countries and we have made the strategic choice of travelling together. This means that we travel sometimes slower than what markets have wished, but we also go farther with the backing of our Member States and of our citizens.

Europe has faced and is facing real economic challenges, challenges that started with the financial crisis which in fact started outside of Europe, but that had a huge impact in Europe, including unsustainable public debt, corporate and private indebtedness and low growth. We recognise this and we have not been complacent in the analysis, and we have put in place mechanisms to deal with these issues of fundamental importance for our common future.

The message that I want to convey to you is that we have no doubts in Europe about further integration. I think that if you look at what is really happening in Europe, no one in Europe from the different governments is proposing to undo the European integration or to go backwards in terms of the euro. On the contrary – all the steps that have been taken are for further integration, discipline, convergence, like the new fiscal compact that was now approved by 25 out of the 27 Member States. So, in fact, much more than the 17 Member States of the Euro area. This is important because sometimes I get the impression that outside Europe people are not really aware of the level of economic integration and interdependence in Europe and what that can mean afterwards for political decisions.

It is very important for business leaders to understand this, because you will understand as business leaders that confidence lies at the heart of any decision. Only from confidence we can have growth and job creation. That is why we have now been focusing our attention on restoring the necessary confidence in our budgets. That is why fiscal consolidation is indispensible in Europe. That is the indispensible condition to restore confidence in the medium and long term in the EU economy and, indeed, not only in the so-called programme countries – countries that are now implementing the programme by the European Union and the IMF – but also in other countries which are taking extremely important measures with great courage in terms of structural reforms for Europe to become more competitive, so that we can come back to growth, but sustainable growth, not the kind of growth that we have had in the past, sometimes fuelled by unsustainable levels of debt. That is exactly where we are in this process: building the foundations for a sustainable recovery. This is at the heart of our growth strategy – Europe 2020 growth strategy – that we have launched in 2010 and which now all the Member States are implementing with strong determination. It is precisely also in this area that I see also a lot of possibilities for cooperation with Korea, including in the fields of green growth, of new technologies.

Today in the Summit with President Lee, we discussed what we can build now on the basis of what we have achieved so far, and it was a very good and positive Summit. The message – and I will conclude with this – is the following:

Contrary to all the negative prophesies about the future of the euro, and even of the European Union, the measures agreed in Europe have proved the irreversibility of the euro, and are a further step in European integration.

These actions allowed us to start turning the corner towards renewed stability and growth. That is why we are, in Europe, a confident, reliable partner – a partner that Korea can count on, and at the same time we are sure that we can count on you. That is what we have discussed today with President Lee and we have proposed to focus on some areas:

  • Make full use of the opportunities of the FTA

  • Enhance cooperation between our scientists and researchers to build innovation alliances at business and research institutes' level – currently there are fewer researchers from Korea participating in EU Research programmes than researchers from many other countries.

  • Work together resolutely on green growth and cost effective tools to reduce greenhouse gas emissions.

Trade, innovation and the green economy should put us on a win-win trajectory in the 21st century.

Ladies and gentlemen,

I understand that there is a Korean saying:

"Even a sheet of paper can be lighter if it is carried by two".

The challenges which we both face and share are considerably heavier than that paper, but I believe that it is also a good advice to carry them together. I am sure that if we do it together, we will have many more possibilities for success.

I thank you for your attention.

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