India, South Korea set to expand existing trade pact
Livemint | 11 Jan 2011
India, South Korea set to expand existing trade pact
Asit Ranjan Mishra
India and South Korea are set to expand a one-year-old bilateral trade pact at a time when India has concluded talks for a more ambitious agreement with Japan.
South Korean trade minister Kim Jong-hoon is visiting India on 19-20 January to discuss this with his Indian counterpart Anand Sharma.
“Both the countries will set up a joint committee, which will review the existing bilateral trade arrangement and work to further expand the level of liberalization,” a commerce ministry official said, requesting anonymity.
Both countries signed a comprehensive economic partnership agreement (CEPA) in August 2009 that came into effect in January 2010. The treaty includes trade in goods and services as well as investments. It also deals with competition and intellectual property rights. India is also the only country to obtain a commitment for temporary migration of professional workers from South Korea under World Trade Organization rules.
Though India and South Korea are the third and fourth largest economies in Asia, respectively, bilateral trade between them is only $12 billion compared with $42.5 billion trade between India and China in 2009-10.
South Korea is India’s 11th largest trading partner. South Korea is the second country after Singapore with which India signed such a treaty. This agreement covers more than 85% of India’s trade and more than 90% South Korea’s trade and tariff lines.
A similar bilateral pact with Japan, talks for whichhave concluded, is moreambitious, covering 90-95%of traded goods.
According to the official cited above, India’s trade with South Korea grew 40% up to October in 2010 compared with 31% contraction during the same period (January-October) in 2009.
Foreign direct investment flows into India jumped 40.26% at $720 million (Rs.3,262 crore today) during April-October 2010 compared with 14.11% growth during the same period a year earlier, according to the industry department data.
The official said import of automobiles, chemicals and boilers picked up after the bilateral trade deal was signed, while India exported more of petroleum derivatives, cotton yarn, ferro alloys, aluminium, iron ore and other raw materials to South Korea.
Pravakar Sahoo, associate professor at the Delhi-based Institute of Economic Growth, said it may be too early to review CEPA because only one phase of tariff liberalization has happened by now. “However, they might be looking at resolving some particular concerns like the Posco issue during the visit of the South Korean trade minister,” Sahoo said.
Sahoo said CEPA is more beneficial to South Korea as India has to undertake sharper tariff liberalizations because its counterpart has already reduced tariffs substantially prior to the signing of the agreement.
Sahoo said even the provision to allow professionals temporary work permits is not as simple as it appears. “Applications from job seekers from India will go through the same process like from any other country. Even, most of the postings allowed by South Korea is on the outskirts of the country where Indians may not be willing to work,” he added.
