South Korea-EU free trade deal imminent - Seoul

SEOULJuly 12 (Reuters) - South Korea and the European Union have tentatively reached a free trade deal that will boost their $100 billion two-way trade and will likely announce it on Monday, the trade ministry in Seoul said.

The EU's first major trade pact in Asia has been stalled by wrangling within the bloc over how a deal would affect its struggling car industry.

"An announcement is expected after discussions at a summit meeting (by South Korean president) with Sweden which has the EU presidency on Monday in Stockholm," South Korea's trade ministry said in a statement.

South Korean President Lee Myung-bak is visiting Sweden and holds a meeting with Prime Minister Fredrik Reinfeldt on Monday.

Seoul and Brussels had launched the talks in 2007 shortly after the United States struck a free trade deal with South Korea that has not been ratified by either country's legislature.

The prolonged negotiations had hit a snag earlier this year over differences on politically sensitive issues such as place of origin rules and customs drawback, which act in a way similar to export subsidies.

Under duty drawback, South Korean carmakers can import cheap components and have all import duties paid on those parts reimbursed if they are in cars destined for the EU market.

The EU's auto industry -- employing 2.3 million people directly and a further 10 million in related sectors -- and some governments are unhappy over South Korean manufacturers having this advantage.

The European Union is South Korea's second largest export market after China, and South Korea is the EU's fourth largest non-European trade partner.

The agreement, if reached, would need the approval of the South Korean assembly and the European Parliament but not of the EU's 27 individual member states.