South Korea And India Sign CEPA

by Mary Swire, Tax-News.com, Hong Kong

12 August 2009

India and South Korea have signed a Comprehensive Economic Partnership Agreement (CEPA) which could double trade between the two countries over the next decade.

The CEPA is India’s second comprehensive deal with any country (the first being with Singapore in 2005), and its first free trade agreement with an OECD country. For South Korea, the agreement is its first with the BRICS (Brazil, Russia, India and China) group of fast-growing economies.

Under the CEPA, 85% of South Korea’s and 90% of India’s tariffs, in terms of value, will be reduced or eliminated. The two countries have agreed a 10-year period over which those reductions will be made after the agreement comes into effect.

The CEPA will also facilitate trade in services through additional commitments made by both countries by easing the temporary migration of service professionals, such as computer experts and engineers.

Bilateral trade between the two countries totaled over USD15.5bn in 2008, with South Korea in surplus to the amount of some USD2.4bn. Reported forecasts by the Korea Institute for International Economic Policy have predicted an increase in trade resulting from the CEPA of up to USD3.3bn per year.

All necessary procedures for adherence to the CEPA have been completed in India. The agreement will come into force after ratification by the South Korean National Assembly, and after the subsequent notifications to bring it into effect are made by both two countries, which is expected to be in early 2010.

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