South Korea’s Minister of Trade
The South Korean government officially signed a free trade agreement (FTA) with China, its largest trading partner.
The two countries announced that they had reached a basic agreement on the FTA in Nov. 2014. The only remaining step is ratification in each country’s parliaments, after which the FTA will take effect.
Debate is expected about the verity of the government’s projections of the FTA‘s economic benefits and on the safety of food products.
On June 1, Yoon Sang-jik, South Korea’s Minister of Trade, Industry and Energy (MOTIE), and Gao Hucheng, China’s Commerce Minister, signed the FTA at a ceremony at the Hyatt Hotel in Seoul.
If the FTA takes effect, China will repeal the tariffs on 91%, or 7,428, of all products, and South Korea on 92%, or 11,272, of all products, over the next 20 years. In terms of import volume, this represents 85% and 91% of Chinese and South Korean imports, respectively.
In the areas of service and investment, the agreement will allow South Korean legal firms to engage in joint ventures with Chinese legal firms. Previously, they could only set up their Chinese offices in the Shanghai Free-Trade Zone.
South Korean negotiators also made some gains in liberalizing exports of Korean Wave cultural content, gaining permission for South Korean companies to control a 49% share in concert organizers.
In addition, 310 items that are produced in external processing regions such as the Kaesong Industrial Complex were recognized as originating in South Korea, and an external processing region committee was set up to allow South Korea and China to recognize other external processing regions in North Korea in the future.
The trade volume in items that will be tariff-free as soon as the agreement takes effect amounts to US$73 billion in exports and US$41.8 billion in imports, which exceeds South Korea’s total trade with the US (US$106.3 billion).
According to the government’s assessment of the economic benefit of the FTA, South Korean real GDP will increase by an additional 0.96%, consumer welfare will improve by US$14.6 billion, and 53,805 new jobs will be created within 10 years of the agreement taking effect.
But there is expected to be considerable disagreement about the economic benefits of the FTA, including the benefits of cutting tariffs, while the National Assembly is debating passage of a bill to ratify the FTA.
By Song Kyung-hwa and Park Hyun-jeong, staff reporters
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