Abolition of tariffs on many major export items… Expected to improve price competitiveness of Korean cars
Korea has concluded free trade agreement (FTA) negotiations with the Gulf Cooperation Council (GCC), concluding FTAs with six GCC countries, including Saudi Arabia, laying the legal and institutional foundation for the spread of the New Middle East boom and laying the foundation for expansion into the Middle East and Africa. compacted.
On the 28th, Minister of Trade, Industry and Energy Ahn Deok-geun announced that the Korea-GCC FTA negotiations were finally concluded and a joint declaration was signed confirming the conclusion of the Korea-GCC ministerial meeting with GCC Secretary-General Jassim Mohammed Al-Budawi in Seoul.
The Korea-GCC FTA is the 25th FTA (based on negotiation conclusion) concluded by Korea, and the second FTA concluded with an Arab country following the Korea-United Arab Emirates CEPA (Comprehensive Economic Partnership Agreement) concluded last October.
The Gulf Cooperation Council is an economic cooperation body in the form of a customs union comprised of six countries: Saudi Arabia, the United Arab Emirates, Kuwait, Qatar, Bahrain, and Oman. It has signed FTAs with Singapore and EFTA, and is currently negotiating FTAs with the UK, China, and Japan. However, FTA negotiations with the EU, Australia, India, Turkey, etc. are suspended.
The conclusion of the Korea-GCC FTA negotiations is expected to serve as an opportunity to strengthen cooperation in various fields as Korea enters the large GCC market with comparative advantage.
The first formal negotiation of the Korea-GCC FTA was held in 2008, but in 2010, the GCC suspended all ongoing FTA negotiations with Korea, the EU, Japan, China, and Australia due to a review of the FTA policy, leading to the Korea-GCC FTA negotiation. GCC FTA negotiations were also halted for more than 10 years, but the door to negotiations was reopened last year.
This year, as Korea and major GCC countries held summits one after another, a strong consensus was formed on the need for a speedy conclusion to the Korea-GCC FTA negotiations, resulting in intensive holding of two formal negotiations, numerous intersessional meetings, and senior representative meetings. It was concluded on this day.
The volume of trade between Korea and the six GCC countries, including Saudi Arabia, reached $102.6 billion as of last year.
Korea mainly imports energy and resource-related items, including crude oil, LNG, and aluminum, from the GCC, and has a trade structure that exports manufactured goods, including automobiles, parts, and machinery, and weaponry.
All six GCC countries are active in building a non-oil industrial base, including fostering their own manufacturing industries, and large-scale infrastructure construction is planned.
In the future, the Korea-GCC FTA is expected to play a major role in diversifying export items to the GCC, including medical devices, cosmetics, and agricultural, livestock, and fisheries products.
Through the Korea-GCC FTA, film and video distribution services and medical and dental services in major GCC countries were opened, creating an environment in which the spread of K-content and the Korean Wave could be accelerated, especially in the Middle East.
In addition, the agreement on digital trade norms, including norms that allow cross-border transfer of information collected in the GCC and promote e-commerce, has laid the foundation for expanding the entry of our products and companies using digital into the GCC.
In addition, the entry and stay conditions for business purposes, which have been a major difficulty for Korean companies entering the GCC, have been relaxed to enable Korean companies to conduct their activities more smoothly in the GCC.
In terms of trade norms, intellectual property rights norms covering copyright, trademark, and design were agreed upon. Through this, we will strengthen the protection of intellectual property rights of Korean companies in the GCC region and secure a remedy to effectively deal with illegal distribution or product theft of K-content and products due to the Korean Wave craze, thereby ensuring the stability of K-content and products in the Middle East region. It is expected to contribute to the spread.
The Korea-GCC FTA covers energy and resources, corporate visits, ICT, science and technology, health industry, agriculture, forestry and fisheries, construction infrastructure, bioeconomy, smart farm, audiovisual services, aviation services, and high-tech industries through a separate economic cooperation chapter. It is also characteristic that it includes provisions for establishing an innovative and comprehensive economic cooperation system centered on 12 areas such as:
Among these, six areas of cooperation, including energy and resources, bio-economy, high-tech industry, smart farm, health industry, and audio-visual services, have adopted individual annexes to include detailed cooperation plans, thereby promoting substantive cooperation between Korea and GCC countries in these areas. It is expected to play a key role in strengthening supply chain cooperation.
After declaring the conclusion of the Korea-GCC FTA negotiations, the government will pursue formal signing within next year after reviewing the law and translating the agreement into Korean. Afterwards, the agreement can come into effect at an early date through each country’s domestic procedures, such as economic impact assessment and National Assembly ratification consent. We plan to pursue this.
In addition, based on the Korea-GCC FTA, we plan to consider concluding FTAs with Middle Eastern and African countries adjacent to the GCC that have close relationships with the GCC.
◆ Market opening
Through the Korea-GCC FTA, tariffs applied to 89.9% of all products in Korea and 80.5% in the GCC were agreed to be abolished or reduced within 20 years.
First, tariffs on many of our main export items, such as automobiles, automobile parts, machinery (valves, steam turbines, etc.) and chemical products (synthetic resins, fine chemicals, etc.), will be eliminated.
With the abolition of tariffs on some passenger cars and trucks, the price competitiveness of Korean-made vehicles is expected to improve, and with the abolition of tariffs on key parts for internal combustion vehicles and electric vehicles, investment in local assembly and production by Korean companies is also expected to gain further momentum.
In the case of weapons, tariffs on most items have been abolished, and arms exports to the Middle East market, where demand for the defense industry has been rapidly increasing, are expected to continue to rise.
In addition, GCC tariffs are expected to be abolished on promising export items such as medical devices and cosmetics, and major agricultural and marine products such as beef, sesame seeds, seasoned seaweed, and fish cakes, thereby expanding the horizons of food trade with the Middle East.
Meanwhile, Korea’s import tariffs on GCC’s main products, such as natural gas and some petroleum products, were gradually abolished, and naphtha tariffs were reduced by 50% to lower production costs in the domestic petrochemical industry and secure price competitiveness.
In the case of GCC agricultural products, damage to domestic related industries was minimized by opening mainly to items such as dates and black tea that are not produced domestically.
In addition, the GCC side is currently imposing a 5% low tariff on most items, and has resolved trade uncertainties by agreeing to maintain tariffs at the current level without future tariff increases even for items excluded from the concession, and prior notification and consultation in case of export restrictions. This was done to alleviate supply chain disruption.
In the case of the service market, the GCC has opened up film and video distribution services, medical and dental services, etc. to a higher level than the existing WTO service agreement.
First of all, the opening of movie distribution services is expected to lay the foundation for supplying Korean movies locally, contributing to the spread of K-content and the Korean Wave.
In addition, a foundation has been laid for the stable establishment and operation of local hospitals and clinics, contributing to the revitalization of Korean medical institutions entering the Middle East.
The entry and stay conditions for work purposes, which had been one of the difficulties for companies entering the GCC, were also eased. In the case of visitors for business purposes, convenience for business activities was promoted through improved concessions compared to GATS in conditions such as length of stay and renewal.
In the case of government procurement, an agreement was reached with the UAE and Bahrain to mutually open the procurement market. When promoting procurement contracts, in principle, open bidding is conducted and regulations are stipulated not to discriminate against domestic and foreign companies.
With the UAE, we have expanded the scope of practical market opening by agreeing to a lower limit on the applicable procurement scale than the Korea-UAE CEPA, and it is expected that our companies’ access to the construction service market for the Bahrain government and public institutions will also improve.
Considering that major industrial products such as automobile parts and machinery, as well as major export products with high competitiveness on our part, are often manufactured using overseas materials or parts, we agreed to apply relaxed standards to allow the use of overseas materials.
Meanwhile, considering the sensitivity of the domestic industry, strict standards have been set for animal products such as meat and dairy products, as well as major agricultural, livestock and fishery products, such that only cases where local ingredients are used are recognized as the country of origin.
Even in the case of processed agricultural and marine products such as seasoned seaweed and red ginseng, the core raw materials used are domestically produced, thereby strengthening linkages with the domestic production base.
Meanwhile, conditions for exporting content, including Korean films, were improved by introducing national treatment for digital products and allowing cross-border information transfer.
Furthermore, for the first time in an FTA signed by the GCC, it laid the foundation for expanding digital cooperation between the two sides by stipulating specific elements of cooperation in new technology fields such as small and medium-sized enterprises, startups, and AI.
In addition, efforts were made to protect unregistered designs and regulations to respond to repeated copyright infringements online were established to accelerate the spread of the Korean Wave, including K-content and dramas.
◆ Economic cooperation
In the Korea-GCC FTA concluded this time, specific economic cooperation-related contents, which were significantly strengthened compared to previous FTAs, were stipulated in six individual annexes.
First of all, for the first time in an FTA signed by the GCC, annexes on ‘energy and resources’ and ‘bioeconomy’ were adopted.
The ‘Energy and Resources’ annex includes alternative and renewable energy cooperation and supply stabilization, and the ‘Bioeconomy’ annex stipulates cooperation such as strengthening supply chain cooperation, human resource exchange, and joint research. The six annexes were adopted focusing on promising areas of mutual interest between Korea and the GCC.
It is expected that its effectiveness will be greatly increased by moving beyond the cooperation memorandum of understanding (MOU) that has been concluded individually and sporadically for each agency and ministry to being included in an intergovernmental treaty.
Ahn Deok-geun, head of the Ministry of Trade, Industry and Energy’s trade negotiation headquarters, said, “The conclusion of the Comprehensive Economic Partnership Agreement with the United Arab Emirates last October, followed by the conclusion of the FTA with the GCC, served as a major opportunity for the spread of the New Middle East boom, and the cooperative relationship between Korea and the Middle East entered a new phase.” did.
He continued, “Starting next year, we will expand trade and investment with the six GCC countries, and based on close cooperation with the GCC, we will focus on cooperation in the industry, energy, and resources fields throughout the Middle East and the adjacent African region to create synergies between trade and industry and energy. “We will maximize the effect,” he said.
Source: Ministry of Trade, Industry and Energy – Policy news, link
Photo: Ahn Deok-geun, head of the Trade Negotiation Headquarters of the Ministry of Trade, Industry and Energy, and Jassim Mohamed Al-Budawi, Secretary-General of the Gulf Cooperation Council (GCC), are taking a commemorative photo after signing the joint declaration on the conclusion of a free trade agreement (FTA) at the Korea International Trade Association in Gangnam-gu, Seoul on the morning of the 28th. (Photo Source: Ministry of Trade, Industry and Energy, link)