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South Korea, China Seek FTA By End-2014

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

08 July 2014


South Korean President Park Geun-hye and her Chinese counterpart, Xi Jinping, agreed in Seoul on July 3 that their two countries would conclude free trade agreement (FTA) negotiations by the end of 2014.

In addition to a number of economic and financial agreements being announced after their meeting – most notably for the establishment of an offshore renminbi trading center in Seoul – it was confirmed that the 12th round of their FTA negotiations, to be held in South Korea later this month, will seek progress on all chapters of the proposed agreement, including tariffs, non-tariff barriers to trade, services, investment, intellectual property, and e-commerce.

A breakthrough is thought to be unlikely on cutting tariffs on the two countries' highly sensitive goods and services, which may need to be excluded from future talks. In particular, concerns have been expressed in South Korea's farming sector over the probable deleterious effects of increased Chinese imports, if agricultural duties were to be cut. The South Korean Government has now reiterated that any deal will need to protect its food producers.

FTA negotiations started in May 2012, and the two countries have already decided to eliminate tariffs on 90 percent of all goods, and 85 percent of imports by value. Duties on non-sensitive products will be canceled either immediately or within ten years, and those on sensitive products will be abolished within 10-20 years after the FTA becomes effective.

According to Chinese Ministry of Commerce figures, total trade between South Korea and China reached over USD270bn in 2013, and the two leaders have set a USD300bn target for 2015. China is already South Korea's primary trading partner.

It has been pointed out that, if the FTA can be completed, South Korea will then have trade treaties with the three largest global economic powers – the United States, the European Union, and China.

Its agreement could also provide an added impetus to the talks on the proposed tripartite FTA between South Korea, China and Japan, and to the conclusion of the Chinese-led Regional Comprehensive Economic Partnership, which is planned to bring the Association of Southeast Asian Nations' existing FTAs with China, South Korea, Japan, India, Australia, and New Zealand into a single improved agreement by the end of 2015.

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

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