Free Trade
The Korea-China FTA was provisionally signed on Feb. 25. It includes some concessions regarding major export items in the manufacturing sector for the protection of primary industries, and preferential tariffs for a number of products produced in the Kaesong Industrial Complex. The wages paid in the industrial complex are excluded from the value of non-originating materials, and the Committee on Outward Processing Zones on the Korean Peninsula is set up to provide against the possibility of another Kaesong Industrial Complex.
“The Korea-China FTA is more beneficial than other FTAs in many aspects,” the Ministry of Trade, Industry & Energy commented, adding, “For example, the preferential tariffs are put into force upon the agreement taking effect, and no less than 310 items are subject to preferential tariffs.”
In the manufacturing sector, China made a concession in cold rolled plates, hot rolled stainless steel sheets, universal thick plates, and the like, while Korea applied a long-term concession to ferroalloys such as ferromanganese and excluded cast-iron pipe from the agreement. In the petrochemical sector, China is allowed to have a preferential opportunity with regard to high value-added products like ion exchange resin, super-absorbent resin, and polyurethane in view of the bilateral trade situation of Korea’s export to China being more than 13 times China’s export to Korea. However, items sensitive to Korean small firms such as ethyl acetate are to remain protected.
In the textile industry, the Chinese market has almost completely opened, including knitted goods, functional clothes, and baby clothes, and the tariffs on items sensitive for Korea such as cotton fabrics and pure cotton yarn are to be maintained or partially reduced. China will also open market segments such as washing machines, refrigerators, medical instruments, electric rice cookers, and electronics components.
Korea will not eliminate the tariffs on heavy electric equipment like electric motors and transformers for the time being.
Primary industries are what the Korean government paid the greatest attention to. Rice was excluded from the negotiations from the get go, and was joined by 548 other food items including pork, apples, pears, beef, chili, garlic, and tangerines. These foodstuffs account for about one-third of the agricultural and livestock products that Korea produces, and are not going to be subject to tariff elimination. Meanwhile, China is scheduled to eliminate tariffs on 91 percent of farm produce. Korea’s 20 major fishery products like seaweed, mackerel, abalone, squid, and anchovies are put on the highly-sensitive list without exception.
In service and investment, negative rules are adopted for the opening of legal, construction, and distribution services. This is meaningful in that China has adopted no negative rules concerning the service industry in any other FTAs.