FTA with Peru allows duty-free car exports
Korea and Peru agreed to a free trade agreement yesterday in Lima, widening access to the South American market for local companies.
According to the Ministry of Foreign Affairs and Trade, the two countries met for a fifth round of FTA negotiations on Aug. 29 and 30 and were able to close the deal, leading to a joint statement yesterday. Peru becomes the second country in South America to finalize an FTA deal with Korea, after Chile in 2003.
In a joint statement by Korea’s Minister for Trade Kim Jong-hoon and Peru’s Minister of Foreign Trade and Tourism Martin Perez, the two countries said the agreement is “mutually beneficial.”
The agreement covers trade in goods, services, investments, sanitary and phytosanitary measures, technical barriers to trade, customs procedures and trade facilitation, financial services, telecommunications, intellectual property rights, government procurement, labor, environment and economic cooperation.
Tariffs will be eliminated for many Korean products including automobiles, electronics, coffee, asparagus and bananas. But many agriculture and fishery products were excluded from the agreement to protect local industries on both sides. Automobiles currently have a 9 percent tariff in Peru. Large vehicles (with more than 3,000-cubic-centimeter engine displacement) will have tariffs eliminated immediately after ratification, while midsize vehicles (between 1,500 and 3,000 cubic centimeters) will be free of tax within five years. All vehicles will be tariff-free in 10 years.
More than 100 agriculture and fishery products - such as rice, beef, onions, garlic, pollack and ginseng - were excluded from the agreement. Cuttlefish imports to Korea, currently under tariffs between 10 and 22 percent, will be tariff-free within 10 years for frozen, seasoned and precooked cuttlefish, while other types will be untaxed in five to seven years.
The agreement has safeguards on imports that may harm each country’s local industries, meaning that trade can be restrained in the future.
For service and investments, Korea will open up its industries in ways similar to the Korea-European Union FTA, while Peru will open up its electricity, gas, broadcasting and communications sectors.
The Korea Trade-Investment Promotion Agency said in a report that automobiles and electronics will benefit the most. It said that for automobiles, which account for about 36 percent of Korea’s exports to Peru, the FTA will boost sales by more than 10 percent. The Korea International Trade Association also said in a report that though few exports will be affected - 49 percent of Korea’s exports to Peru are already tariff-free - automobiles and electronics will benefit from the deal.
“It will be beneficial for Korea to consistently invest in Peru’s energy and resource sectors,” Kim said. “Through cooperation in services and science, Peru has the intention of strengthening its relationship with Korea, and I hope our companies utilize the agreement to their fullest advantage.”
The business world welcomed the deal. The Federation of Korean Industries said that the FTA with Peru will allow Korea to increase its competitive power in Central and South America.
“Countries in Central and South America utilize each country’s strengths well, and the positive effects of the deal are great,” said an FKI representative. “With the Peru deal, if we can widen our FTA deals with other small to midsize countries in Central and South America and the Middle East, we will achieve great results from an increase in exports and securing energy sources.”
The two countries said that after going through a legal evaluation, the agreement will be initialized in November.
By Jung Seung-hyun [email@example.com]