by Na Haejung
SEOUL, Aug. 7 (Xinhua) -- South Korea and India wrapped up their three-and-a-half-year-long bilateral trade talks on Friday, signing the so-called Comprehensive Economic Partnership Agreement(CEPA) which calls for tariff reduction in auto and other manufacturing sectors in both countries.
CHANGES EXPECTED FOR SOUTH KOREA
Similar to the free trade agreement (FTA) in nature, the CEPA is expected to bring positive changes to both economies as bilateral relations become further solidified, local media reported.
The CEPA binds South Korea to phase out or reduce tariffs on 90percent of Indian goods over 10 years, while India is to eliminate tariffs on 85 percent of South Korean exports within the same period, which is longer than what is written in other FTAs South Korea settled with.
In particular, South Korea will see a tariff reduction in the auto industry, which is the country's biggest trade sector, up to 1 percent over eight years from the current 12.5 percent.
Although some experts point that the changes in auto industry is more disappointing than previously forecast, the result is still advantageous in that South Korea has secured a superior position over its competitor in the market, such as China and Japan, South Korean Trade Minister Kim Jong-hoon said.
In addition to tariff reduction, South Korea will be able to move into various industrial sectors of the Indian economy, such as food processing, textiles, garments, chemicals, metals and machinery, according to South Korea's trade ministry
The deal also opens the service and investment sector, with India accepting South Korean company inflows in its telecom, accounting, medical and advertising markets, as well as allowing South Korean financial firms in the investment market, the ministry said.
With respect to rules of origin, both countries agreed on the allowable level of foreign contents to be up to 65 percent.
The issue of goods made at the Kaesong Joint Industrial Complex, on which South Korea had a hard time to narrow differences while reaching a free trade pact with European Union (EU), was settled to regarding it as being made in South Korea, the trade ministry said.
South Korea expects massive inflows of information technology (IT) workers, engineers, and English teachers as both sides agreed to allow temporary migration of professional workers, which may be threats to local employees in the related sectors, local media expected.
However, the pact did not pay much attention to agriculture, fisheries, and mining, excluding the areas from tariff reduction, as the issue is considered sensitive in both sides, the trade ministry said.
The trade accord is expected to take effect early next year when South Korea's parliament agrees on its ratification.
Overall, the CEPA will boost bilateral trade by as much as 3.3 billion U.S. dollars annually, with South Korea's trade to the market likely to grow 4 percent on year, the state-run Korea Institute for International Economic Policy (KIEP) said.
S. KOREA WELCOMES S.KOREA-INDIA CEPA
South Korea, Asia's fourth-largest economy, expects the pact will bring about more concrete relations with India, the world's sixth-largest economy, together with the economic benefits.
"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 after signing the trade pact.
The trade minister also highlighted that it is the first trade pact between South Korea and a member of BRICs, which represents Brazil, Russia, India and China.
As South Korea is the second country after Singapore which signed such a pact with India, it can be considered to have gained access to the market faster than its competitor, local analysts said.
South Korean President Lee Myung-bak, during a meeting with India's minister of commerce and industry, Anand Sharma, welcomed the settlement, calling it a historical pact.
"The pact is expected to render not only more solidified bilateral economic relations, but also cultural and societal developments in both countries," President Lee said.