New Partnership With India
Korea Can Boost Cooperation With South Asian Country
A partnership agreement between South Korea and India is expected to open a new horizon in bilateral economic cooperation. The two countries will sign a Comprehensive Economic Partnership Agreement (CEPA) today, concluding more than three years of negotiations. The signing has significant implications as the pact is seen as a free trade deal. Under the accord, Korea and India will get rid of or reduce tariffs on goods over the next 10 years, while opening their services and investment sectors.
The CEPA comes after Korea signed a free trade agreement with Chile, Singapore, the European Free Trade Association (EFTA), the Association of Southeast Asian Nations (ASEAN), and the United States. The country has recently concluded another FTA with the European Union (EU). Thus, the nation has laid the groundwork for a free trade network with the world's major markets, including the Americas, Europe and Asia.
When FTAs with the U.S. and the EU as well as the CEPA with India take effect, South Korea's trade with free trade partners is likely to be 35.3 percent of its total trade, almost a threefold growth from the current 12.1 percent. This means that Korean-made products will improve its competitive edge, aided by lower tariffs and easier access to lucrative markets. Of course, the country will have to open its market wider to foreign goods, services and investment. However, as an export-oriented economy, Korea has no other choice but to promote free trade.
Therefore, it is important for the country to forge mutually beneficial ties with its free trade partners. Especially, India has great potential to develop collaborative relationship with Korea that can supplement each other's industrial and economic structure. India is one of the so-called BRIC countries, including Brazil, Russia and China. India has a population of 1.2 billion, the world's second largest after China. The International Monetary Fund (IMF) predicted the South Asian country will enjoy a strong economic growth of 6.5 percent this year and 5.4 percent in 2010.
The Korea Institute for International Economic Policy (KIEP) forecast that the CEPA will help increase Korea's exports to India by 80 percent or $2.8 billion annually, while its imports from the partner will rise by 30 percent or $500 million. Two-way trade stood at $15.5 billion last year with South Korea recording $2.3 billion in trade surplus. The state-run think tank also said the pact is likely to boost the nation's gross domestic product (GDP) by 1.3 trillion won and create 48,000 jobs.
Korea and India should focus on long-term benefits rather than short-term gains, because the partnership accord calls for a lower level of market opening and a slower pace of tariff phase-out than free trade agreements with other countries. Thus, it is necessary for Korean companies to take advantage of India's potential for production and consumption. Korea can benefit from its strong automobile, parts, machinery and electronics sectors.
It is also worth noting that India has agreed to recognize goods produced at the Gaeseong complex, an inter-Korean industrial zone in North Korea, as South Korean-made. Such an agreement is the first of its kind with any trading partners. The CEPA is also expected to facilitate the influx of Indian scientists and engineers, especially those specializing in the IT sector, into South Korea.
To ensure the success of the bilateral partnership, both India and Korea should double their efforts to smoothly translate the accord into action and step up cooperation not only in economy and trade but also in politics, diplomacy, defense, security, culture and education.