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China; South Korea: Landmark Free Trade Agreement Signed

(June 11, 2015) On June 1, 2015, China and South Korea signed a bilateral free trade agreement (FTA). (Brittany Felder, China, South Korea Sign Free Trade Agreement, PAPER CHASE (June 2, 2015).) The landmark document, which was finalized in November 2014, will eliminate tariffs on more than 90% of the two sides’ goods over the next 20 years. (South Korea, China Sign Free Trade Deal (June 1, 2015), ABC NEWS (June 1, 2015); Shannon Tiezzi, It’s Official: China, South Korea Sign Free Trade Agreement, DIPLOMAT (June 2, 2015).) Talks on the agreement began three years ago, in May 2012. (ROK and China Formally Sign FTA for New Era of Future Partnership, Republic of Korea Ministry of Trade, Industry and Energy website (June 1, 2015).)

The FTA covers 22 areas of commerce, but not South Korea’s rice industry or automobiles. Reportedly, it is the first time that China has included financial, telecommunications, and e-commerce industries in an FTA. (South Korea, China Sign Free Trade Deal, supra.) In 2014, the volume of trade between China and South Korea reached US$290 billion, and there was bilateral investment of more than US$60 billion. (Gao Hucheng and Korea’s Minister of Trade, Industry and Energy Yoon Sang-jick Conduct Talks, Ministry of Commerce of the People’s Republic of China (June 2, 2015) (in Chinese).)

South Korea’s Ministry of Trade, Industry, and Energy estimates that the agreement will “boost China-South Korea trade to over $300 billion a year, up from $215 billion in 2012, when the negotiations began.” (Tiezzi, supra.) Other benefits may follow, as the two countries are likely to begin negotiations in 2017 on removing service sector barriers. (Id.) According to The Diplomat, although China and South Korea each have FTAs with other countries, this one is “uniquely significant,” given that “China is already South Korea’s largest trading partner.” Furthermore, the new agreement may result in “unique dividends” that match the scale of the trade relationship in general and, in terms of the volume of trade affected, is China’s largest such pact. (Id.)

Gao Hucheng, China’s Minister of Commerce, and Yoon Sang-jick, South Korea’s Minister of Trade, Industry and Energy signed the pact for their respective countries. The FTA is expected to be in force by the end of 2015, but it must first be approved by the legislatures of the two nations. (Felder, supra.) The FTA will enter into force 60 days after each country notifies the other in writing of the completion of domestic procedures for the agreement’s implementation or on a date agreed to by both sides. (ROK and China Formally Sign FTA for New Era of Future Partnership, supra.)