(News Focus) Trade deal to help Korean firms tap Indian market

SEOUL, Nov. 6 (Yonhap) -- A trade pact with India set to take effect in January
will help South Korean companies make further inroads into Asia's third-largest
economy and solidify their presence there, experts said Friday.

The deal, ratified by South Korea's parliament earlier in the day, does not
require ratification by India.
South Korea and India agreed to eliminate or cut tariffs on goods over the next
10 years with the latter phasing out or reducing tariffs on 85 percent of South
Korean goods. The so-called Comprehensive Economic Partnership Agreement (CEPA)
covers services and investments as well as competition and other issues.
The two countries started their negotiations in March 2006 and initialed the
bilateral trade pact in February this year.
"It is very meaningful that South Korea forged a trade pact with India, one of
the BRIC countries," said Park Dae-shik, vice executive of the Federation of
Korean Industries, South Korea's largest business lobby. "The deal will help
further increase bilateral trade."
Indeed, the deal is the first of its kind between South Korea, Asia's fourth
largest economy, and a member of the BRIC group of fast-growing developing
economies, comprising Brazil, Russia, India and China.
South Korea will be the second country after Singapore with which India has
signed such a treaty.
"Bilateral relations will be further solidified and the CEPA sends signals to the
world that the two countries are committed to free trade and are against
protectionism," South Korean Trade Minister Kim Jong-hoon said in August after
signing the trade pact.
"South Korea will have a chance of gaining access to one-sixth of the global
market," he said.
India, the world's 10th largest economy, is also in protracted negotiations with
the European Union (EU) and Japan over similar trade deals. The country, whose
population tops 1.2 billion, has not yet launched negotiations with China or any
other countries.
Hyundai Motor Co., South Korea's largest automaker, and other electronics makers
such as LG Electronics Co. are already selling their products in the world's
second most populated country.
Hyundai Motor, which operates an auto plant in India, sells around 300,000
vehicles in India annually. LG Electronics also has plants that produce home
appliances and computers in India, while POSCO, South Korea's leading steelmaker,
is seeking to build a plant in the South Asian nation.
"The tariff removal rate under the CEPA with India is relatively lower than the
provision under most other free trade agreements," said Myong Jin-ho, a
researcher at the Seoul-based Institute for International Trade. "But the accord
with India will offer more South Korean companies the chance to make inroads
into the market in advance of their rivals."
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, director general at the ministry's FTA policy
division.
Under the deal, 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.
The CEPA is the latest in a series of free trade agreements that South Korea has
concluded.
India will be the sixth country that South Korea has signed a trade pact with.
Seoul already has agreements with Chile, Singapore, the European Free Trade
Association and the Association of Southeast Asian Nations.
South Korea is in free trade negotiations with 11 countries, including Canada,
Mexico and Australia, to boost its export-dominated economy.
Last month, South Korea and the European Union (EU) initialed a similar trade
deal that they expect will be officially signed before March next year.
A free trade pact was signed with the United States in 2007 but is awaiting
ratification by the legislatures of both countries.
sam@yna.co.kr
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