Korea and India sign CEPA

Korea and India signed a landmark free trade agreement in Seoul yesterday with the vision of boosting their economies through liberalized exchange of industrial goods and services, as well as the axing of non-tariff barriers.

Korean Trade Minister Kim Jong-hoon and Indian Commerce Minister Anand Sharma signed the Comprehensive Economic Partnership Agreement that would either eliminate or reduce tariffs on 85 percent of Korea`s exports and 90 percent of India`s exports between eight and 10 years.

"Today marks the historic signing of the comprehensive economic agreement," Trade Minister Kim told reporters in Seoul following the signing ceremony. "The Korea-India CEPA is the first FTA that Korea signs with the BRICs nations and for India we are the first OECD country; (the agreement) signifies the highly complementary nature of the two economies."

The two sides hope the accord will take effect as soon as January 1, 2010. The pact just needs to be approved by the Korean legislature.



Both Kim and Sharma stressed the significance of the accord with respect to timing, underscoring the importance of avoiding protectionist tendencies in the protracted economic downturn. They also highlighted the significance of the scale of economic growth potential through the complementary nature of their partnership.

"Bilateral relations will be further solidified, and the CEPA sends the message to the world that the two countries are committed to free trade and are against protectionism," Kim said. "The Indian economy has a huge economic growth potential, considering that it has one-sixth of the world`s population; it also has the fourth-highest GDP purchasing power parity," the minister added, noting that the Indian economy in the next five to 10 years will be very different than what it is today.

Sharma cited the "astonishing growth of Korea" and that its growth story serves as a model for his country. He noted that his country sees a complementary nature of the two sides in terms of capabilities.

On the reason for the South Asian country signing a CEPA with Korea ahead of other major economies, the Indian policymaker cited the growing economic engagement between the two led by the initiative of Korean industries, particularly in the automobile and electronics sectors.

He said Hyundai, LG and Samsung have become household names in India and have been making significant contributions to his country`s economic and industrial development.

"(Their) significant investments and presence in the Indian economy have helped India become a manufacturing base," the official said, highlighting that 400,000 Korean-brand cars produced in India last year went to Europe. He added that Korea`s steelmaker, POSCO, recently made the single-largest investment ever in India.

Both policymakers noted that the knowledge-based industries of their economies further corroborate their complementary nature. As the trade accord is expected to allow free inflow of human resources, Korea is looking forward to bringing in world-class Indian professionals, particularly in the field of information technologies, one of Korea`s major economic growth drivers.

Sharma also noted that professionals in manufacturing and hardware also have a lot to contribute.

"(The CEPA) is a strategic step forward, which will also connect both countries with other major Asian and other major economies," the policymaker added. "This is just the beginning," he emphasized.

The CEPA is projected to expand bilateral trade by as much as $3.3 billion annually, according to estimates by the state-run Korea Institute for International Economic Policy. Two-way trade reached $15.56 billion last year, up 39 percent from the previous year, with Korea posting a surplus of $2.39 billion.

Following the news conference, Sharma and Kim attended a luncheon hosted by the Korea Chamber of Commerce and Industry. Sohn Kyung-shik, the chair of the business lobby group, and about 160 local business heads were present at the event held to enhance bilateral commercial ties.

"This CEPA will not only expand trade volume but will also increase investments in India by our companies in the manufacturing and services sector," Sohn said. "Both sides can create more opportunities for growth if the competitiveness of Korea`s electronics, telecommunications, automobile, steel, shipbuilding and construction sectors is well combined with India`s top-class human resources and huge domestic consumer market," the executive stressed.

(sohjung@heraldm.com)



By Yoo Soh-jung