Dirigisme 2012: Hollande v Hyundai, France v Korea

You've got to hand it to the South Koreans. They've managed to outmanoeuvre everyone else in setting up FTAs with nearly every other region that they have substantial export markets in. While the trade concessions it gains may be comparatively small in this day and age of near-universal WTO membership, any gains are welcome when it comes to obtaining a competitive edge in commodified industries where margins are quite thin alike in automobiles and electronics. (Take that, Japan, which has been an FTA signing slug by comparison--see its merely prospective FTA with the EU.)

Think of all the trade deals involving Korea which have been inked in the past few years: It got the ball rolling with AKFTA between itself and ASEAN member countries. It subsequently managed to finally conclude a KORUSFTA with the United States. Of particular concern here though is its deal with the EU which came into force in July 2011. Call it EUKFTA if you will.

Meanwhile, the new French President Francois Hollande has been touted as more left-leaning than his bling-bling predecessor, Nicolas Sarkozy. With the French automobile ailing--especially its largest carmaker Peugeot--his first big test is "saving" the car industry. And ostensibly being to the left of the already market interventionist Sarkozy, we now have talk that the French industry minister is about to pull a 2008-vintage Obama on the EU with pleas to "renegotiate EUKFTA":

France is considering asking the European Union to place a trade agreement with South Korea under surveillance to limit a rising influx of South Korean vehicles into the bloc, French Industry Minister Arnaud Montebourg said on Wednesday. "In some segments, like small diesel cars, imports have increased by 1,000 percent in a year," he told journalists. "We are therefore justified in asking for surveillance measures that may at some point allow for a restriction clause, as it was the case in the past regarding American and Russian steel." 

What will the French government ask for? From the sound bites of Montebourg, I am inclined to believe that they will ask for safeguard quotas on automobiles from Korea as low-priced competition mounts. Then again, voluntary export restraints may be asked for given the remote likelihood that they can arm-twist the likes of Hyundai into accepting them...

Montebourg, who earlier unveiled a plan to support France's struggling auto sector mainly through subsidies for environmentally friendly cars, said overall imports of South Korean cars into the European Union had increased by 40 percent between 2011 and 2012. He said the rise had been spurred by a drop in import duties on South Korean cars from 10 percent to zero over five years. To limit the effects of what Montebourg called "unfair competition", France may ask the European Commission to place a trade deal between South Korea and the 27-member bloc under surveillance, he said.

"Our commercial policies can no longer be naive," he added. The two-month old Socialist government has vowed to try and revive France's ailing industrial sector, hit this month by the news that top car maker Peugeot will close a factory near Paris and axe 8,000 jobs.

European carmakers' fears of Japan have since receded, but there is a new Eastern spectre haunting the continent.