Korea to sign FTA with india.

Korea to Sign FTA With India

2009-08-11
Korea and India are to sign a de facto free trade agreement (FTA) today in Seoul, which will remove or reduce tariffs over the next 10 years, and also open up the two countries' services and investment markets wider.
Seoul officials expect the pact to go into effect next January following ratification from the Korean legislature. On the Indian side, the pact holds good upon approval by the Cabinet.
South Korean Trade Minister Kim Jong-hoon and Indian Commerce and Industry Minister Anand Sharma will sign the Comprehensive Economic Partnership Agreement (CEPA) today, wrapping up three years of negotiations. A CEPA is practically the same as an FTA, but tariffs are reduced in phases.
Korea will become the second country after Singapore to sign a deal with India, which is in negotiations with the European Union and Japan. This is also the first trade agreement that Korea will sign with a member of the BRICs, a fast-growing group of Brazil, Russia, India and China.
Duties on Korean auto parts, the country's biggest trading item, will be slashed from the current average of 12.5 percent to 1 percent over the next eight years. Fisheries and some agricultural products, however, were excluded from the tariff exemption.
In addition, India agreed to open its telecommunication, accounting, medical, advertising and banking markets to Korea. Both sides will also allow freer temporary migration of professional workers, including English teachers, engineers and computer programmers.
On rules of origin, both countries agreed that the level of foreign content should be a maximum 65 percent. Goods made at the Gaeseong complex will be regarded as made in South Korea under the deal. India will also allow South Korean companies to invest in the machinery, auto manufacturing and electronics sectors.
Seoul said the CEPA is significant in that Korea has laid the foundation to benefit from the fast-growing Indian market ahead of rival countries such as China and Japan.
"The duty-reduction rate is lower in the CEPA than in FTAs, but both sides will have more discussions on tariffs for possible termination in the future," said Choi Kyong-lim, Korea's chief negotiator.
Trade data show that the agreement is unlikely to bring an immediate boost to the local economy, as India takes up only a limited share of Korea's overseas trade, and manufacturing takes up just 15 percent of its gross domestic product (GDP).
Last year, the South Asian country accounted for 2.1 percent of Korea's exports and 1.5 percent of imports with Korea posting a $2.4 billion surplus.
Business experts, however, predict the deal will have long-term benefits for both countries. The Indian economy, with the second-largest population and fourth-largest GDP in the world, has great potential to improve globally.
"Effects of the CEPA should not be evaluated merely by tariff cuts. The pact should be appreciated as having given Korea a stepping stone into the Indian market," Cho Choong-jae, an associate research fellow at the Korea Institute for International Economic Policy (KIEP) told The Korea Times.
"In view of its potential, India could emerge as a leading trade destination for Korea similar to China."
A 2004 KIEP report estimated the bilateral trade will grow by $3.3 billion annually. Last year's two-way trade topped $15.6 billion, a three-fold jump from 2004.
Source: The Korea Times (August 6, 2009)