South Korea and China on 1 June 2015 signed the Korea-China Free Trade Agreement (FTA) in Seoul, South Korea. The agreement was signed by the South Korea’s Minister of Trade, Industry and Energy Yoon Sang-jick and Chinese Commerce Minister Gao Hucheng.
The negotiations for the agreement that began in May 2012 formally concluded in November 2014.
Features of Korea-China FTA
• It aims to gradually remove tariffs on more than 90 percent of traded goods between both the countries within 20 years.
• China will remove tariffs on 71 percent of South Korean exports in 10 years and 91 percent in 20 years.
• South Korea will remove tariffs on 79 percent of Chinese imports in 10 years and 92 percent in 20 years.
• Many of South Korea’s major farming and fisheries goods like rice, beef, pork, pepper and squid are excluded from the agreement. This decision taken was taken in the backdrop of protests against the inclusion of these products by the agricultural community of South Korea.
• China excluded or delayed the opening of its relatively less-developed manufacturing segments such as the auto sector and display panel production.
• It would recognize products made in Kaesong Industrial Region (KIR) of North Korea as South Korean products for the purpose of trade between the two countries. However, final modalities for operationalisation of this provision are still underway.
Significance of the Korea-China FTA
• The FTA is expected to augment trade between China and South Korea, Asia’s largest and fourth-largest economies respectively.
• It will allow small and medium-sized South Korean firms, especially in consumer goods in fashion, cosmetics, home appliances and high-end food products, greater access to China’s vast consumer market and help create more than 50000 jobs in South Korea.
• It would provide momentum not only to efforts to expand trade and investment between the two nations but also to help enhance bilateral cooperation in a wide range of areas, including industries, culture and energy.
• The FTA is expected to create a large-scale regional economic community worth 12 trillion US dollars by removing trade barriers, going beyond a simple increase in trade.
• The pact will also greatly contribute to the economic integration of East Asia, the Asia-Pacific region and the development of the world economy. For this, negotiations for a trilateral Free Trade Agreement (FTA) among China, South Korea and Japan were launched in November 2012.
Since the establishment of diplomatic relations in 1992, the trade volume of both countries increased over the past 23 years from 5 billion US dollars to 235.3 billion US dollars in 2014. The volume of mutual investment also multiplied, from 0.11 billion US dollars to 61.64 US billion dollars.
China is already Korea’s largest trade partner and its largest destination for investment which stood at 1.6 billion US dollars between January-March 2015.
South Korea is China`s third largest trade partner and is the fifth largest investment destination.
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When: 1 June 2015