(MENAFN- Gulf Times) China and South Korea yesterday formally signed a free trade agreement (FTA) that would remove most tariffs between Asia's largest and fourth-largest economies, whose trade is already worth more than $200bn.
The pact € largely agreed in November and signed by the two nations' trade ministers yesterday € aims to gradually remove tariffs on more than 90% of traded goods within 20 years.
China is the South's top trading partner as well as the biggest export market, and two-way trade stood at around $235.3bn in 2014, according to state data in Seoul.
South Korea is also one of the biggest foreign investors in China, pumping in some $1.6bn in the first quarter of this year.
South Korean President Park Geun-Hye, in a letter to Chinese leader Xi Jinping, called the accord a "historic milestone" that would further cement relations.
"The Korea-China FTA will ... take the bilateral ties that had been built over the years to a whole new level," Park said in the letter delivered to the visiting Chinese trade minister Gao Hucheng.
Pending mandatory parliamentary approval, the FTA will allow small and medium-sized South Korean firms greater access to China's vast consumer market and help create more than 50,000 jobs in the South, Seoul's trade ministry said.
"In particular, exports of consumer goods in fashion, cosmetics, home appliances and high-end food products will increase greatly," it said in a statement.
The agreement will remove tariffs on 71% of South Korean exports to China in 10 years and 91% in 20 years.
Seoul will in return remove tariffs on 79% of Chinese imports in 10 years and 92% in 20 years.
Negotiations for the agreement, which began in May 2012, have often been marred by angry protests by South Korean farmers who feared an influx of cheap Chinese imports.
The final pact excluded many of South Korea's major farming and fisheries goods like rice, beef, pork, pepper and squid.
By the same token, China excluded or delayed the opening of its relatively less-developed manufacturing segments such as the auto sector and display panel production.
Kim Hyuung-Joo, an analyst at the LG Economic Research Institute, said the arrangement may eventually bring more harm than gain to the South.
"I don't think South Korea's well-protected agriculture sector will be able to improve competitiveness in 10 or 20 years," Kim said.
"But the sectors China managed to protect like LCD (liquid crystal display) panels or carmaking will surely improve their productivity and competitiveness," he added.
The deal to slash trade barriers between them, including tariffs on goods produced in a North Korean factory park run jointly with the South, South Korea's Trade Ministry said.
In all, 310 products made at the Kaesong industrial zone, just north of the border between North and South Korea, will benefit from the free-trade agreement.
Many South Korean factories have set up operations in Kaesong to take advantage of cheap North Korean labour. Most of the products covered by the trade pact are clothing and electrical components.
China and South Korea spent three years negotiating their free trade agreement. Products made at Kaesong were not included in tariff cuts under South Korea's free trade agreements with the US and the European Union.
Woo Tae-hee, South Korea's assistant minister for trade and chief free-trade negotiator, said it was hoped the agreement with China would lead to more industrial zones like Kaesong along the border with North Korea. "We think this can contribute to the peace of the Korean peninsula," Woo told reporters after the signing ceremony.
China and South Korea normalised diplomatic relations in 1992 and bilateral trade grew 37-fold to $235.4bn in 2014 from $6.4bn in 1992, South Korean data shows.
The deal does not include rice and automobiles, areas where South Korea was worried about Chinese goods flooding its market.
China is the world's largest exporter and also South Korea's biggest trading partner. South Korea is one of the few developed countries that runs a surplus with China - to the tune of $55bn in 2014 according to Seoul - thanks to exports of cars, smartphones, flat screen TVs, semiconductors and petrochemicals.
The two Koreas remain technically at war after their 1950-53 war ended in a truce. China is involved in six-country talks that include the US, aimed at easing tension over the North's nuclear ambitions. The talks have been stalled since 2008.
Legal Disclaimer:
MENAFN provides the information “as is” without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the provider above.