China, South Korea Initial Bilateral Trade Agreement
South Korea and China initialled a bilateral free trade agreement on Wednesday, following two years of negotiations. Officials say that they hope to complete the formal signing process during the first half of the year, with ratification by both sides before the end of 2015.
The agreement aims to reduce and remove barriers of trade and investment between the two Asian countries, excluding those placed on major agricultural products, motor vehicles, and auto parts. Topics covered under the deal are reported to include 17 areas, including but not limited to goods, services, government spending, e-commerce, and investments.
Within the first 10 years following its entry into force, the deal will lead to Seoul eliminating tariffs on 79 percent of imported Chinese products, while Beijing will remove tariffs on 71 percent of South Korean goods. Those numbers will then rise to 92 and 91 percent, respectively, two decades after the FTA takes effect.
Average tariff levels between the two sides are currently at 8 percent for South Korea and 4.1 percent for China; together with the high volume of bilateral trade between them, eliminating tariffs on so many products is expected to yield a notable boost in trade and investment.
China is the world’s largest exporter and is South Korea’s biggest trading partner. While the free trade agreement between the two countries is expected to have significant impacts on their individual economies, Chinese President Xi Jinping has said he hopes the deal will also serve to “promote the integration of the Asia-Pacific region.”
The news comes fast on the heels of other major trade developments in the region, with China and South Korea separately reaching individual trade deals with Australia over the past year and a half, the latter of which is already in force. (See Bridges Weekly, 20 November 2014 and 12 December 2013, respectively) South Korea has also concluded talks for an agreement with New Zealand.
Notably, both countries are also part of a broader initiative known as the Regional Comprehensive Economic Partnership (RCEP), an ongoing 16-country negotiation that also features all members of the Association for Southeast Asian Nations (ASEAN), as well as Australia, India, Japan, and New Zealand. (See Bridges Weekly, 21 November 2012)
The RCEP talks were officially launched in November 2012, with the most recent round of negotiations taking place this month in Thailand. The deal, if completed, would form one of the world’s largest trade pacts.
ICTSD reporting; “S. Korea, China expected to initial free trade deal next week: official,” ARIRANG NEWS, 21 February 2015; “FTA to reshape Sino-Korea relations,” CHINA DAILY, 26 January 2015; “S Korea, China initial bilateral free trade pact,” YONHAP NEWS AGENCY, 25 February 2015; “Korea, China sign provisional FTA, aim to conclude it in H1 2015,” ARIRANG NEWS, 25 February 2015.