S. Korea, India agree to remove or cut tariffs over next 10 yrs

(ATTN: ADDS more details throughout)
By Park Sang-soo
SEOUL, Aug. 6 (Yonhap) -- South Korea and India will eliminate or cut tariffs on
goods over the next 10 years under a trade agreement to be signed this week that
aims to boost their economic cooperation, Seoul's trade ministry said Thursday.
Wrapping up three years of negotiations, the two countries will sign the
so-called Comprehensive Economic Partnership Agreement (CEPA) on Friday,
committing themselves to drastically lower import tariffs on cars and other
manufactured items.
The trade pact is similar in essence to the free trade agreements (FTA) South
Korea has signed the U.S. and other trading partners, but phases out tariffs more
slowly.
Overall, the CEPA is expected to boost bilateral trade by as much as US$3.3
billion annually, according to estimates by the state-run Korea Institute for
International Economic Policy (KIEP).
Two-way trade increased 39 percent to $15.56 billion last year, with South Korea
logging a surplus of $2.39 billion.
South Korea exported $3.6 billion of goods to India, and imported $1.6 billion in
the first six months of this year, according to the ministry.
"The overall economic impact (of the CEPA) will be larger than expected in the
long-run," said Choi Kyong-lim, the director general at the ministry's FTA policy
division.
The official said the accord is expected to take effect on January 1 after South
Korea's parliament ratifies the deal in October.
Under the trade pact, South Korea will phase out or reduce tariffs on 90 percent
of Indian goods over 10 years after the accord takes effect. India will eliminate
or cut tariffs on 85 percent of South Korean goods within the same period.
Tariffs on South Korean auto parts, the country's biggest trading item, are to be
reduced to as low as 1 percent over an eight-year period from the current average
of 12.5 percent. But both sides agreed to exclude fisheries and some agricultural
products -- including dairy, beef and pork -- from tariff concessions.
"It is true that the tariff-removal rate with India is lower than those of the
existing free trade agreements with such nations as the U.S.," said Choe. "But
both sides agreed to further discuss tariff eliminations in the future."
The South Korean trade ministry said that the slower tariff-removal rate with
India underlines the importance of Korea securing a foothold in the market ahead
of China and Japan. The agreement with India addresses trade in goods and
services as well as investments, and contains chapters on competition and
intellectual property rights.
In the service sector, India agreed to open its telecom, accounting, medical and
advertising markets to South Korean companies with the exception of agriculture,
fisheries and mining. South Korean lenders will also be allowed to open branches
in India.
South Korea will be able to invest in food processing, textiles, garments,
chemicals, metals and machinery, according to the ministry.
Both sides agreed to allow temporary migration of professional workers such as
computer programmers and engineers. South Korea has not offered that kind of
commitment to any of its FTA partners.
On rules of origin, both countries agreed that the allowable level of foreign
contents should be 65 percent or below. Goods made at the Kaesong complex, a
South Korean-built industrial zone in North Korea, will be regarded as being made
in South Korea under the deal, according to the ministry. India will also allow
South Korean companies to invest in the machinery, automaking and electronics
sectors.
South Korea will be the second country after Singapore with which India has
signed such a treaty. The Comprehensive Economic Cooperation Agreement between
India and Singapore took effect in August 2005.
India is in the middle of negotiations with the European Union and Japan on
similar trade deals. The South Asian giant, populated by over 1.1 billion, has
not yet launched negotiations with China.
sam@yna.co.kr
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