It’s taken three years, but the deal is done: South Korean Minister of Trade Yoon Sang-jick inked the final draft with Chinese Commerce Minister Gao Hucheng last Monday, although particulars of the agreement were finalized in November 2014. China and South Korea (ROK), the largest and seventh largest exporters worldwide, could create economic opportunity for dozens of ROK municipalities spanning from Seoul to Jindo upon the pact’s execution. Experts call the signing an epic milestone designed to cement an already strong economic partnership with China.
Small and medium size enterprises will obtain greater access to the expansive Chinese trade market, but more importantly, the pact will see South Korean erase trade tariffs on 92 percent of Chinese products within 20 years of the pact’s effect date, while China will eliminate 91 percent on South Korean products. Losing that expense would allow both countries to invest in jobs, product development and other joint ventures aimed at remaining competitive in worldwide export. In 2012, trade between both countries was an estimated $212 billion; with the new free trade agreement, that number is expected to amass $300 billion.
This agreement, the first of its kind with separate chapters on communications, electronics and finance, hasn’t gone without skepticism. Researchers believe the new agreement creates an overly liberalized trade platform in an already wide open market, although Korean reports indicate China’s willingness to sign an agreement of this magnitude shows how serious they are about opening trade lines and keeping consumer costs reasonable. South Korean industries which expect to see the largest impact include tourism and retail, while China will leverage ROK’s vast chip and semiconductor knowledge in their own enterprises.
FTA’s like this show how far Asian countries will go to create a more diverse yet stable economic environment. South Korea-based Coupang also recently received $1 billion from Japan’s Softbank, another major sign that countries surrounding ROK are equally intrigued by ROK’s ecommerce capacity and how it affects free trade within Eastern Asia.
Other FTA’s currently being explored include a three-way agreement between Japan, ROK and China along with an immense regional pact that would include New Zealand, India, Australia, China and 12 other countries called the Regional Comprehensive Economic Partnership.
