All products from the inter-Korean joint industrial complex in Gaeseong, North Korea, will benefit from a reduction or elimination of China’s import tariffs as they will be entitled to the same place of origin status as Korean products.
Korean contractors will be allowed to invest less than a 50 percent stake to win local projects in the Shanghai Free Trade Zone, as a regulation requiring foreign investors to take a more than 50 percent stake will be eased.
The Ministry of Trade, Industry and Energy announced on Feb. 25 that Korean and Chinese governments initialed their Free Trade Agreement containing these and other steps.
Deputy Minister for Trade Woo Tae-hee said, “We’ll do our best to have Korea-China FTA approved by the National Assembly and put into force within the year after the two governments officially sign the deal in the first half.”
In a related development, the government came up with ways of utilizing the Korea-China FTA and shoring up Korea’s competitive edge, calling for the creation of the Korea-China FTA Industrial Complex within the Saemangeum Free Economic Zone (FEZ), which will minimize regulations and allow a one-stop customs clearance.
The written agreement, disclosed on the same day, contains tariff reduction and elimination schedules. Under the deal, China will eliminate tariffs on 7,428 Korean products or 91 percent of all imports from Korea within 20 years after the implementation of the FTA, whereas Korea will remove tariffs on 11,272 products or 92 percent of all imports from China during the same period.
Korean law firms will be allowed to set up joint ventures within the Shanghai Free Trade Zone so that they can provide legal services targeting all customers across China, as China has agreed to allow the Korean legal and hallyu service segments market access to China. Prof. Chung In-gyo of Inha University said some positive elements for Korean companies have been added to the initialed version, compared to the negotiated agreement.
The initialed agreement calls for China to eliminate tariffs on 80 percent of all imports and services from Korea within 10 years after the implementation of the deal and for Korea to remove tariffs on 66 percent of goods and services from Korea during the same period. But the figures are lower compared to the 100 percent elimination of all tariffs within 10 years of the implementation of the Korea-U.S. FTA.
Noteworthy is the granting of the same place-of-origin status to all 310 products — the existing 270 items and 40 newly added products — from the Gaeseong Industrial Complex as South Korean products. The figure is higher compared to the 267 items from the industrial complex under Korea-EU FTA, 108 products under the Korea-India FTA, and 100 items under Korea-ASEAN FTA.
Korean companies will be allowed to parlay China’s hallyu needs into business opportunities. For instance, Korea and China’s joint film production in which the Korean side stands at more than 20 percent in financial and technology contribution levels will be eliminated from the list of China’s screen quotas.
The Chinese government has agreed to positively consider allowing Korean travel agencies to recruit Chinese tourists departing for Korea or third countries.
But there are also many issues that need to be solved, including Chinese’s online purchases of Korean products and non-tariff barriers standing in the way for exporting Korean-made kimchi products.
Industrial analysts said Korea’s mainstay export items, including secondary batteries and OLED panels and color TVs are delisted from the list of eliminating tariffs. Only lithium-ion batteries will see its tariff lowed from current 12 percent to 9.6 percent after five years.
Prof. Lee Hae-young of Hanshin University said the Korean side gave up its demand to include mainstay export items on the list of eliminating tariffs in return for the protection of Korea’s sensitive agricultural products.
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