On February 25, 2015, China and South Korea initialed the text of their free trade agreement, negotiations towards which began in May 2012 and were completed in November last year during a meeting in Beijing.
A statement at that time from China’s Ministry of Commerce (MOFCOM) revealed that the two countries have agreed to eliminate import tariffs on over 90 percent of all products traded between them and over 85 percent of their annual trade by value. Import duties on non-sensitive products will be cancelled either immediately or within ten years, and those on sensitive products will be abolished within 10-20 years of the FTA becoming effective.
However, the two sides have also decided to exclude certain ultra-sensitive items from the agreement. There had been particular concerns in China regarding opening its manufacturing sector to South Korean imports, and in South Korea on the effect of Chinese exports on its agricultural markets.
South Korea has agreed to a part-opening of its agricultural sector, while continuing to exclude such products as rice, pork, and beef. Meanwhile, it sought access to Chinese industrial sectors with the most opportunities for its small- and medium-sized enterprises. Trade barriers for their automotive industries have been maintained however.
The FTA covers not only trade in goods and services, but also e-commerce, competition policy, and government procurement, while both sides have committed to further talks on financial services and investment in the future.
According to the South Korean Ministry of Trade, Industry, and Energy, the two governments have agreed to work towards an official signing of the FTA within the first half of this year.
China is already South Korea’s primary trading partner, receiving over a quarter of its exports. According to MOFCOM figures, total trade between South Korea and China reached over USD270bn in 2013 and is expected to reach USD300bn in 2015.
The FTA will be the most substantial deal South Korea has ever signed. When it comes into effect, it is to expand the value of the country’s trade outflows covered by trade treaties from the current 60.9 percent to about 73.2 percent.
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