Huge trade deal with India opens up major market

Korea and India yesterday signed the bilateral Comprehensive Economic Partnership Agreement which will eliminate or reduce tariffs on 85 percent of Korean exports to India and 90 percent of India’s shipments to Korea.

The CEPA will give Korea liberal access to India’s 1.2 billion people, the world’s second largest market by population. A CEPA is similar to a free trade agreement, but phases out tariffs more slowly. This is the first trade deal to be signed between Korea and the so-called BRICs group of fast-growing developing economies - Brazil, Russia, India and China.

“We will now be able to have access to one-sixth of the global market,” said Korea’s Trade Minister Kim Jong-hoon after signing the trade pact in Seoul with his counterpart, India’s Commerce Minister Anand Sharma. “The CEPA will send signals throughout the world that the two countries are committed to free trade and are against protectionism.”

This CEPA, negotiations for which began in 2006, is slated to take effect on Jan. 1, after ratification by the Korean legislature. India has completed all necessary procedures to ratify the pact, according to the Korean foreign affairs ministry.

This CEPA involves goods, services and investments. Under the pact, tariffs on Korean auto parts, the nation’s biggest export item to India, will be reduced to as low as 1 percent over eight years from the current level of 12.5 percent.

Indian exports to Korea, including leather, industrial diamonds, raw materials, gasoline and polycarbonates, will see tariffs phased out. However, fisheries and agricultural products, including beef, will be excluded from tariff concessions. In the service sector, India will open its markets for telecom, advertising, accounting and medicine. India’s computer programmers, engineers and other IT experts, as well as English teachers, will be able to gain access to the Korean market as the two countries agreed to let skilled professionals work temporarily in each other’s countries.

Also, India will allow Korean companies to invest in the machinery, automaking and electronics sectors. Products made at the Kaesong Industrial Complex in North Korea will be classified as made in South Korea, under the CEPA. Trade between the two countries totaled $15.6 billion last year, up 39 percent from the year before. Korea had a trade surplus with India of $2.4 billion.

By Cho Jae-eun [jainnie@joongang.co.kr]