Senior officials are set to discuss the upgrade of the existing India-Korea Free Trade Agreement on Wednesday in Seoul. This next round of negotiations is expected to pan out from 17th July to 19th July.
An official stated that in the 11th round of negotiations, both sides would discuss the general framework to finalize the deal. According to some Korean officials, Korea is eager to wrap up the talks within this year. The focus has been on securing increased market access for specific products currently restricted under the agreement’s negative list, with no tariff concessions granted for these items.
The Department of Commerce has collaborated with various ministries, including heavy industries, steel, and chemicals, to compile the list of offerings. India is pushing for expanded market access for products such as steel, rice, and shrimp from South Korea, aiming to bolster exports of these goods. Concerns have been raised by India about Korean firms not purchasing Indian steel.
Trade Balance Favoring Korea
The current trade balance of India with South Korea stands in a deficit indicating that the imports exceed exports. This upcoming round of talks is expected to further enhance and strengthen the economic engagement between both countries.
India’s exports to Korea declined to $6.41 billion in the fiscal year 2023-24, down from $6.65 billion in 2022-23 and $8 billion in 2021-22. Imports amounted to $21.13 billion in the last fiscal year, slightly lower than $21.22 billion in 2022-23 but higher than $17.5 billion in 2021-22.
The economic think tank Global Trade Research Initiative (GTRI) reported that the trade deficit with South Korea grew significantly faster than its deficit with the global average.
CEPA Aiding India and Korea Economic Relations
The Comprehensive Economic Partnership Agreement (CEPA) is a bilateral free trade agreement between India and South Korea. It was signed on August 7, 2009, at a ceremony in Seoul, with Commerce Minister Anand Sharma and South Korean Commerce Minister Kim Jong-Hoon signing the agreement.
The negotiations spanned three-and-a-half years, beginning in February 2006. The South Korean parliament ratified the agreement on November 6, 2009, followed by the Indian parliament the subsequent week. The CEPA officially came into effect sixty days after its passage, on January 1, 2010.
The agreement contributed to South Korea’s extensive collection of bilateral and multilateral free trade agreements established during the presidency of Roh Moo-hyun. The negotiations aligned with Prime Minister Manmohan Singh’s Look East initiative, aimed at enhancing regional integration between New Delhi and East Asian markets.
Navigating Challenges Necessary to Deepen Cooperation
India’s trade with South Korea had seen notable changes after the CEPA came into effect. The total merchandise trade between India and South Korea expanded from $16.91 billion in 2011 to $27.5 billion in the previous year. India’s exports remained within the $5-7 billion range throughout this period, whereas imports rose from $12.4 billion in 2011 to $21.1 billion in the fiscal year 2023-24.
However, exporters here encounter several non-tariff obstacles in South Korea, such as rigorous standards, regulations, and certification requirements. Apparel industry experts hinted that the stringent non-tariff barriers like quality and safety standards kept high by the Korean side block the entry of our apparels to enter the Korean market. These challenges hinder Indian goods from accessing the South Korean market effectively.
High import volume is another major challenge faced by New Delhi. So far, we have initiated multiple trade remedial measures, such as anti-dumping and anti-subsidy measures, to counter and address these issues against South Korea. However, these bilateral safeguards were only applicable during the transition period.
Taking note of all the challenges in line, it is imperative for both sides to continue fair negotiations to fulfil the purpose of the FTA.
