Korea-ASEAN sign FTA over goods sector

South Korea signed its fourth free trade agreement (FTA) May 16 with the Association of South East Asian Nations (ASEAN). The agreement encompasses the goods market sector, and under it, products from the Kaeseong Industrial Complex in North Korea will be regarded as South Korean products and preferential tariffs will be levied on them.

Seoul announced it had reached a final agreement at a ministerial meeting in Manila, Philippines, on May 16. South Korea and ASEAN have yet to discuss any agreement on the service and investment sectors, but an overall FTA between the two parties, which was introduced into negotiations February last year, is expected to be completed within the end of this year.

Under the new goods market FTA, tariffs against 90 percent of imported goods to South Korea and ASEAN will be completely abolished by 2010 and duties on the other products will be reduced sharply or abolished by 2016. ASEAN, most of whose members are developing countries, is currently imposing high tariffs on key manufactured goods such as electronic products, autos and steel, all of which are South Korea’s main exports. Therefore, South Korean manufacturers will significantly benefit when the new agreement is put into effect.

For example, Indonesia, The Philippines, and Malaysia will lift tariffs over semi-finished cars by 2010. Tariffs on finished cars also will be abolished by 2010 or lowered by up to 5 percent by 2016.

In the meantime, South Korea excluded 45 sensitive agricultural and marine products, such as rice, beef, chicken, garlic, onions, green peppers and live fish, from the list. Thailand couldn’t take part in the negotiation over the goods sector, as it is currently resolving its domestic political issues.

The Asian economic bloc holds a bigger market than any other region. The region, with a population of 540 million, is an emerging market with great potential. As of last year, ASEAN countries represent South Korea’s 4th largest export market and 3rd largest investment partner. With the new FTA, Korea’s exports to ASEAN countries will grow $10.1 billion and its trade balance will increase by $5.6 billion, as forecast by the Korea Institute for International Economic Policy (KIEP).