A Safety Valve for No-deal Brexit
The United Kingdom and South Korea signed a bilateral FTA in London on Aug. 22. The agreement is comparable in level to the South Korea-EU FTA and South Korean companies can export their products to the United Kingdom as before even if Britain exits the European Union in late October this year.
The FTA with the United Kingdom is the 17th FTA of South Korea. The United Kingdom is the second-largest trade partner in the European Union for South Korea. Last year, the volume of South Korea’s trade with the United Kingdom totaled US$6.36 billion in exports and US$6.81 billion in imports. South Korea mainly imported crude oil, automobiles and drugs while exporting automobiles, ships, marine structures, etc. The South Korean government is planning to complete ratification procedures before October 31, when Brexit is likely to occur, so that the latest FTA can become effective in a timely manner.
In the South Korea-U.K. FTA, the same tariff concession as the FTA with the European Union is applied so that the current zero tariff can be maintained for every industrial product. As a result, South Korea’s major export items including automobiles and auto parts can continue to be exported without tariffs. The agricultural safeguards applied to nine items, including beef, pork and apples, are lower in implementation criteria than those of the South Korea-EU FTA and a tariff rate quota will be applied to malt, malting barley and supplementary feeds.
The United Kingdom and South Korea agreed to have additional negotiations once a transition period is set after Brexit. The two countries can upgrade their agreement to a level above the South Korea-EU FTA during the transition period if the period until the end of 2020 is fixed after Brexit. The former is regarded as an EU member during the transition period.
The Bank of Korea, in the meantime, said on Aug. 22 that a no-deal Brexit, which can add to global financial market uncertainties and have an adverse effect on the South Korean economy, is likely to have a rather limited direct impact on South Korea’s exports in that its exports to Britain account for only 1.1 percent of its total exports.