The Korea-EU free trade agreement has taken effect, scrapping tariffs on a wide range of consumer products, including cars, clothes, jewelry and wine and raising hopes among consumers here that they will become much cheaper. But with the exception of cars, wine and a small number of other products, prices will stay more or less the same.

In Europe, too, there is no great excitement. The European subsidiaries of Samsung Electronics, LG Electronics, Hyundai Motor and other major Korean businesses feel the FTA will not lead to any immediate changes because there are many areas that are not affected by it.

◆ Pre-emptive Price Hikes

Luxury brands like Prada and Miu Miu are considering raising the prices of products in Korea in the second half of this year, according to industry sources. Louis Vuitton already hiked prices by 5 percent on average on Sunday, a week before the FTA took effect. Under the pact, tariffs on European-made clothes, shoes and leather goods are abolished immediately or in stages over the next three years.

By hiking their prices, the luxury brands hope to keep the benefits of lower tariffs for themselves and keep their image exclusive. "Looking at the latest directives from our headquarters, the atmosphere seems to favor holding on to our luxury image by bolstering high-priced products,” one staffer with a label shop said.


◆ Home Appliances Exempt

The prices of most European home appliances will not be lowered even though the 8-percent tariff will be lifted, because they are actually made in China. Lee Sang-gu of the Korean subsidiary of Dutch home appliance maker Philips, said, "Most of the lighting equipment, kitchen products and audio-visual products sold under the Philips brand are manufactured in China, and only a small number of products like high-end electric shavers are imported from Europe."

The situation is much the same for Korean products that are exported to Europe. Most Korean mobile phones and home appliances sold in Europe are manufactured in other countries. "Most of the products are manufactured in China, Southeast Asia and Eastern Europe, so they are not affected by the Korea-EU FTA,” said Kim Seok-pil of Samsung Electronics.

◆ Port of Loading

At PPR Group, which owns the Gucci, Yves Saint Laurent and Bottega Veneta brands, production takes place in Italy but the products are shipped from the Swiss inland port of Basel along the Rhine and since Switzerland is not an EU member, they are not affected by the FTA. Prada and Burberry products are imported via Hong Kong and also do not fall under the FTA. Luxury watches, such as Omega, and high-end jewelry, such as Bulgari are either made in Switzerland or shipped from there. European-made sofas and beds, which are popular in Korea, are already tariff-free.

◆ Rising Raw Materials Prices

Ahn Gyu-moon of the Korean subsidiary of German home appliance maker Miele said, "If you consider the rise in raw material prices, you could say prices have remained unchanged." German kitchen appliance maker Fissler said it cannot slash prices because the cost of stainless steel has increased significantly." French kitchenware maker Tefal gave a similar answer.

Apparel firms, meanwhile, say tariff cuts will not affect their prices much since raw textile costs rose by 8-10 percent early this year.