S. Korea, India sign bilateral trade agreement

SEOUL, Aug. 7 (Yonhap) -- South Korea and India signed a bilateral trade
agreement on Friday to cut duties on such goods as auto parts and electronics and
to boost cooperation between the two Asian economic powerhouses.

Both sides started negotiations for the so-called Comprehensive Economic
Partnership Agreement (CEPA) in March, 2006, committing themselves to drastically
lower import tariffs on cars and other manufactured items.
The CEPA is similar in essence to the free trade agreements (FTA) South Korea has
signed with the U.S. and other trading partners, but phases out tariffs more
slowly.
The two countries expect the accord to go into effect early next year after South
Korea's parliament ratifies the pact.
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 Seoul's trade ministry.
Under the agreement, 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 trade 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.
The agreement's slower tariff-removal rate underlines the importance Korea places
on securing a foothold in the Indian market ahead of China and Japan, according
to South Korea's trade ministry. The deal with India addresses trade in goods and
services as well as investments, and contains chapters on competition.
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.
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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