By Yoon Ja-young
The free trade agreement (FTA) between Korea and Colombia will take effect today, opening doors wider for Korean exporters to Latin America’s third-largest market.
“Colombia is an important member of the Pacific alliance leading Latin American economies. The Korea-Colombia FTA will provide new opportunities for businesses of both countries,” said Kim Hak-do, Korea’s deputy trade minister.
According to the Ministry of Trade, Industry and Energy (MOTIE), tariffs will be eliminated immediately on 4,390 export items while 2,797 items will see lower tariffs.
Colombia is a rapidly growing market in Latin America. Its population of 47.6 million is the third largest in the region while its $377.9 billion GDP is the fourth largest. The country attained 3.1 percent economic growth in 2015, following 4.9 percent growth in 2013 and 4.4 percent in 2014.
The country also boasts abundant natural resources. It is the fourth-largest oil producer in Latin America, second-largest in nickel and the sixth in natural gas.
Colombia is the third Latin American country to sign an FTA with Korea, following Chile and Peru, while Korea Colombia’s first Asian FTA partner. Korea and Colombia officially signed the FTA in February 2013, but it took some time to take effect due to delayed ratification in Colombia. This brings Korea’s active FTA partners up to 52 countries.
Korea exports cars, auto components and petrochemical products to Colombia while importing crude oil, coffee and ferroalloy. Korea’s exports to Colombia totaled $1.1 billion last year, while imports marked $800 million.
Korea expects cars, auto components and cosmetics to benefit most under the free trade pact. A tariff on cars, currently at 35 percent, will be scrapped within 10 years while the auto parts tariff will also be eliminated within five years.
Cosmetics will also get a tariff exemption within seven to 10 years while medical devices and non-alcoholic beverages such as aloe and red ginseng drinks will see tariffs eliminated immediately. The ministry said that the outlook is especially rosy in sectors like beauty, medicine and health as Colombians are showing increasing interest due to rising household income.
KOTRA reported that Korean businesses will benefit from the FTA with Colombia in the medium to long term. “Price competitiveness against Chinese steel companies is especially expected to improve,” it noted.
Citing Colombia’s natural resources, KOTRA picked coffee, foods and cosmetics as promising industries. “When combined with Korean companies’ advanced technologies, the two countries are likely to complement each other,” it added.