Bridges Weekly Trade News Digest • Volume 12 • Number 38 • 12th November 2008

India, South Korea Strike Free Trade Deal

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India and South Korea have concluded a comprehensive free trade agreement that is forecast to come into effect next year, an Indian official said on Tuesday.

“The India-Korea Comprehensive Economic Partnership Agreement (CEPA) will be finalised on 18 November after which it will be taken up by the cabinet,” Dinesh Sharma, joint secretary of the ministry of commerce and industry, said on the sidelines of a seminar organised by the Federation of Indian Chambers of Commerce and Industry, reported the Wall Street Journal. “We hope the agreement will come in to effect not before June next year.”

While India does not require parliamentary approval of the agreement, the trade pact has to receive the go-ahead from the South Korean national assembly.

The deal is expected to accelerate the growth of bilateral trade between the countries, which amounted to US$ 11.2 billion in 2007 and which has been growing at an average of 27 percent over the last three years.

Under the deal, duties will be removed on 90 percent of the goods traded between the countries. The agreement also covers trade in services, measures for trade facilitation and promotion, facilitation and liberalisation of investment flows, and measures for promoting bilateral economic cooperation in identified sectors, among others.

The trade pact between India and South Korea, the world’s 12th and 13th largest economies, respectively, was forged through 12 rounds of negotiations that began in March 2006. The two parties resolved the final ‘outstanding issues’ – involving, among other issues, tariff concessions in the area of farm products and automobiles – in the last round of negotiations held in September.

India, which as a population of 1.1 billion and an annual growth rate of more than 8 percent, has been rapidly advancing its engagement throughout Asia as part of its ‘look east’ programme. A free trade deal with the 10-member Association of East Asian Nations (ASEAN) is forecast to be signed 17 December and New Delhi may also undertake individual deals with countries such as Indonesia and Malaysia. India is currently negotiating with the EU and Japan, and preliminary studies have been undertaken regarding a shared market with Australia and New Zealand.

South Korea has also been pushing bilateral trade deals. Seoul has already forged pacts with Chile, Singapore and the European Free Trade Association, which consists of Iceland, Liechtenstein, Norway and Switzerland. It has a partial pact with ASEAN and a trade deal with the US awaits legislative approval in both countries. Talks are also under way with Canada, the EU and Mexico.

ICTSD reporting; “India strikes free trade deal with S. Korea,” AGENCE FRANCE PRESSE, 12 November 2008; “India-South Korea free trade talks conclude,” WALL STREET JOURNAL, 12 November 2008; “India clinches FTA deal with South Korea,” BILATERALS, 11 November 2008; “South Korea, India reach agreement on free trade pact,” AGENCE FRANCE PRESSE, 29 September 2008.