President Park Geun-hye and President Xi Jinping announced the de facto conclusion of the Korea-China FTA in Beijing at their summit talks on Nov. 10, about 30 months from the start of the negotiations to that end.
“Minister of Trade, Industry and Energy Yoon Sang-jik and Minister of Commerce Gao Hucheng signed the agreed minutes for the Korea-China FTA in the presence of both Presidents,” said Presidential Senior Economic Secretary Ahn Jong-beom, adding, “The Presidents told their staff to wrap up the specific matters before the end of this year.”
Under the circumstances, both countries are going to work with each other for legal review and modification of the details before the provisional signing at this year’s end and official conclusion early next year. Then, the free trade deal takes effect through the National Assembly’s ratification agreement. The agreed minutes, which is a sort of memorandum of understanding, constitutes a declaration of the conclusion prior to official documentation.
Korea has already signed FTAs with the United States and the European Union. Its FTA with China signifies that Korea’s economic territory expands to 73.2 percent of the global GDP, which is the third-highest in the world. The Korea-China FTA is the 13th free trade deal for Korea. It has signed FTAs with 11 out of the 14 largest economic powerhouses with the exception of Japan, Brazil, and Russia. The Korean government is expecting that the newly-signed FTA will allow it to take a pivotal role in Asia-Pacific economic integration. “It is predicted that the focus of Korea’s exports to China, which is the number one trade partner and export destination for Korea, will be shifting from capital and intermediary goods to consumer goods, services, etc.,” Secretary Ahn continued.
The two countries concluded the agreement in 22 sectors, including commodity, services, investment, finance, and telecoms. China included finance, communications, and e-commerce in its FTA for the first time.
When it comes to commodities, they agreed to free trade on at least 90 percent of items. Specifically, China is planning to eliminate its tariffs on 91 percent of trade items and 85 percent of imports (US$137.1 billion) while Korea is doing so on 92 percent of items and 91 percent of imports (US$73.6 billion) within 20 years. Forty-four percent and 52 percent of imports are subject to immediate tariff eliminations for China and Korea, respectively. Automobiles are excluded from concessions and the tariffs on LCDs will be eliminated within 10 years.
The primary industry is subject to a 70 percent opening in terms of the number of items and 40 percent in imports. The Korean government succeeded in excluding rice from the agenda. Also, both countries agreed on customs clearance within 48 hours, certificate of origin exemption for US$700 or less, preferential tariff applications within one year from imports in the event of the absence of origin certificates, opening of the Chinese entertainment market for greater Hallyu investment, designation of organizations to assist Korean companies in China, and introduction of dispute settlement procedures for non-tariff measures.
“The Korea-China FTA will allow Korean companies to save US$5.44 billion in tariffs a year,” the Secretary explained, adding, “Also, its impact on our primary industry will be limited to a minimum.”