New Central American FTA partially in force todayCoffee could become cheaper, but chili prices are likely to be unaffected, as a free trade agreement (FTA) with two Central American countries goes into effect.
According to the Ministry of Trade, Industry and Energy on Monday, the FTA with Honduras and Nicaragua is in force from today. Costa Rica, El Salvador and Panama are in the process of ratifying the agreement.
The latest deal is Korea’s 16th FTA. The country signed its first with Chile in 2004 and achieved an agreement with the United States in 2012 and with Canada in 2015. It also has FTAs with Peru and Colombia.
The ministry said the latest FTA is particularly important as it connects the free trade networks Korea has established with North American and South American countries.
The government also hopes that trade expansion with Central American countries will help take the edge off the trade conflict with Japan and conflict between the United States and China.
“We expect a diversification of export markets and increased trade with Central American countries through the FTA amid a challenging trade environment,” a ministry official said.
Under the new FTA with the Central American countries, both sides will lift tariffs on 95 percent of products being traded.
Tariffs on most of Korea’s major export items, including automobiles, steel and cosmetics, will be lifted. The ministry said the FTA will likely benefit many Korean small- and medium-sized enterprises.
The Korean government said tariffs on coffee will be lifted immediately, but some items, such as red chilies, garlic, beef and shrimp, will have their tariffs phased out over periods as long as 19 years. Rice was excluded from the FTA negotiations.
According to the Korean government, last year’s trade between Korea and the five Central America countries totaled $2.98 billion.
Last year, Korea exported $2.5 billion worth of goods to Central America, up 14.6 percent compared to the previous year, while it imported $453 million worth of goods, a 28.3 percent year-on-year increase.
In terms of value, 70 percent of exports to the five countries were ships. Cars were 5.1 percent of the total.
Ships were also the No. 1 item imported from Central America, at 48.1 percent of the total, followed by coffee, which accounted for 10 percent of imports.
Korea has also been increasing investment in Central America. Last year it invested $66 million in the five countries, up 20 percent on year.
BY LEE HO-JEONG [firstname.lastname@example.org]