(CNN) -- South Korea and the European Union signed a free-trade agreement Wednesday, eliminating or cutting tariffs on nearly all goods within the next several years.
The pact between South Korea and the 27-member economic bloc is to begin taking effect in July 2011.
The agreement was signed in Brussels, Belgium, during the fifth European Union-Republic of Korea Summit. The gathering is taking place back-to-back with the Asia-Europe Meeting in Brussels.
"The agreement requires the two parties to eliminate 98.7 percent of duties in trade value for both industry and agriculture within five years, and to eliminate remaining tariffs almost fully over longer periods," the European Union said in a news release.
Italian automakers had resisted the pact, fearing that their industry would be overtaken by cheaper Korean imports.
South Korea can expect 20 percent growth in trade with the European Union thanks to the agreement, South Korea's official Yonhap news agency said. The nation's exports to the European Union are expected to rise by $2.5 billion and imports are predicted to grow $2.1 billion on an annual average for the next 15 years, Yonhap said, citing joint research by South Korea's state-funded economic think tanks.
They predicted up to 250,000 jobs would be created in South Korea.
The European Union is South Korea's second-largest trading partner after China, with trade last year totaling $78.8 billion. South Korea is the European Union's eighth-largest trading partner.
The agreement also will cover rules on trade-related issues such as competition, state aid, intellectual property and public procurement.
South Korean President Lee Myung-bak predicted the agreement will set a good precedent for other nations concerned that the spread of protectionism is weakening efforts to fight the global economic crisis, Yonhap reported.
Lee said the accord, the European Union's first with an Asian country, will boost economic cooperation and promote exchanges in education, culture, tourism, human rights, sports and other fields.
"This is an agreement which is not only beneficial for the EU and Korea, the world's 12th-largest economy, but also sends a strong signal that trade liberalization is a key element for the recovery of the world economy," said Herman Van Rompuy, president of the European Council.