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S Korea Initials FTA With Peru

by Mary Swire,, Hong Kong

19 November 2010

A bilateral free trade agreement (FTA) between South Korea and Peru has recently been initialled in the presence of the countries’ respective presidents, Lee Myung-bak and Alan Garcia.

South Korea and Peru reached a final agreement on the FTA in August this year, wrapping up negotiations that started in March 2009. After receiving the approval of both countries' legislatures, the FTA is expected to be in force by the middle of next year.

It should substantially improve trade and other economic cooperation between the two countries, particularly in the development of energy, natural resources and infrastructure projects within Peru. While, in 2009, two-way merchandise trade totalled only the equivalent of USD1.35bn, with Peruvian exports to South Korea reaching almost USD750m, and Peruvian imports reaching USD600m, it is now predicted that bilateral trade will reach up to USD7bn by 2016.

Import tariffs between the two countries are expected to be eliminated over a ten-year period, except for a few agricultural products, such as rice and beef. The FTA will still, however, primarily benefit Peru’s agriculture, fishing and forestry industries, with the South Korean tariff on coffee from Peru being eliminated immediately.

It was reported that Peru’s tariffs on electronic products would be eliminated over ten years, but the tariffs on colour televisions from South Korea would be cancelled immediately. Duties on the latter’s car exports would be reduced to zero over a five-year period, dependent on engine size.

The FTA is the second such agreement for South Korea in South America, after the first with Chile became effective in 2004. Its completion was said to be demonstrative of the fact that, while its FTA with the United States remains stalled, it continues to pursue its ambitious policy of pursuing trade pacts on a global basis.

TAGS: tax | free trade agreement (FTA) | law | tariffs | agreements | Korea, South | Peru | import duty | trade

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