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South Korea, Vietnam Sign FTA

by Mary Swire,, Hong Kong

06 May 2015

On May 5 South Korea and Vietnam signed a bilateral free trade agreement.

While South Korea's FTA with the Association of Southeast Asian Nations (ASEAN), which includes Vietnam, has been in operation since 2007, it only includes low-level tariff concessions. The bilateral FTA upgrades the ASEAN agreement by further cutting import duties.

The two countries will remove import tariffs on more than 90 percent of all their traded goods under the new FTA. Vietnam will remove its duties over a 15-year period on additional South Korean products, including auto parts and home appliances, while South Korea will open its market for more Vietnamese goods, including Vietnamese fishery products and tropical fruit. The deal, however, excludes more sensitive agricultural products such as rice.

The successful negotiation of a higher-level FTA by South Korea with Vietnam will help Korean companies to compete more effectively with businesses from other countries that have signed a bilateral FTA with Vietnam, such as Japan.

Vietnam is South Korea's ninth-largest trading partner, with South Korean exports to Vietnam tripling to USD21.8bn between 2009 and 2014. South Korea is also Vietnam's third largest overall trading partner. Among ASEAN nations, Vietnam is South Korea's largest investment destination and second-largest trading partner.

While total trade between the two countries reached USD30bn last year, the total trade target after completion of the improved FTA has been set at USD70bn by 2020.

The two countries are working to implement the new FTA soon, with parliamentary ratification of the deal being necessary in both countries.

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

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