At a meeting on November 10 between South Korean President Park Geun-hye and her Chinese counterpart, Xi Jinping, both of whom were in Beijing for Asia-Pacific Economic Cooperation meetings, it was declared that "substantive negotiations" on the proposed free trade agreement (FTA) between their two countries had been successful.

It was in July this year, at their previous meeting in Seoul, that Park and Xi placed an impetus on the FTA talks, which had started in May 2012.

Immediately after the final round of talks, the two leaders watched as South Korea's Trade Minister, Yoon Sang-jick, and China's Minister of Commerce, Gao Hucheng, signed off on the substantive elements of the treaty and charged officials with concluding its "technical details" by the end of 2014.

A statement from China's Ministry of Commerce (MOFCOM) revealed that South Korea and China have agreed to eliminate import tariffs on over 90 percent of all products traded between them and over 85 percent of their annual trade by value. The FTA covers not only trade in goods and services, but also e-commerce, competition policy, and government procurement. Both sides have committed to further talks on services and investment in the future.

It is expected that import duties on non-sensitive products will be cancelled either immediately or within ten years, and those on sensitive products will be abolished within 10-20 years after the FTA becomes effective.

However, the two sides have also decided to exclude certain ultra-sensitive items from the agreement. There had been particular concerns in China regarding opening its manufacturing sector to South Korean imports, and in South Korea on the effect of Chinese imports on its agricultural markets.

South Korea has agreed to a part-opening of its agricultural sector, while continuing to exclude such products as rice, pork, and beef, and concentrating on opening the Chinese market sectors of most interest to its small- and medium-sized enterprises, for example those producing apparel and accessories, infant supplies, sports and leisure goods, medical devices, and advanced home appliances. Trade barriers for their automotive industries, on the other hand, have been maintained.

China is already South Korea's primary trading partner, accounting for over a quarter of its exports. According to MOFCOM figures, total trade between South Korea and China reached over USD270bn in 2013, and is targeted to reach USD300bn in 2015. South Korea has been running a trade surplus with China since 1993 and, last year, the surplus was over USD60bn.

The FTA, the 13th for South Korea, will be the most substantial it has ever signed, and, when it goes into effect, is expected to expand the value of the country's trade covered by trade treaties from the current 60.9 percent to 73.2 percent.

Source: Tax News

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