Wednesday, 26 August 2015


The Republic of Korea and the Republic of India signed the Comprehensive Economic Partnership Agreement on 7 August, 2009 and it came into effect on 1 January, 2010. This was India’s first CEPA with an OECD country and ROK’s first with a BRICS country. 

Its objectives include the liberalization and facilitation of trade in goods and services, and expansion of investments; establishment of a cooperative framework, based on transparent rules, for enhancing economic relations through promotion of conditions for fair competition in the free trade area and favourable environment for businesses; creation of effective procedures for the implementation and application of this Agreement; exploration of new areas of economic cooperation and appropriate measures to strengthen the same; improvement of efficiency and competitiveness of their manufacturing and services sectors, and expansion of trade and investment; establishment of a framework for further regional and multilateral cooperation, to encourage the economic integration of Asian economies. 

The trade deal commits the two countries to lowering or eliminating import tariffs on a wide range of goods over the next 8 years, and helps expand opportunities for investments and trade in goods as well as services. CEPA classifies about 11200 tariff lines of ROK and 5200 tariff lines of India broadly into 6 categories for the purpose of reduction/elimination of tariffs – based on the time period of implementing reductions. ROK is to phase out or reduce tariffs on 90 percent of Indian exports while India will phase out or cut tariffs on 85 percent of Korean exports. Most of the agricultural products and textiles, being sensitive to both sides, figure in exclusion category. Rice, beef, blue crab and sesame would not enjoy any reduction in tariffs. Further, the CEPA agreement has allowed the opening of the services market, in sectors such as telecom, construction, distribution (including retail), transportation, real estate, energy distribution, etc in the case of India. It also mutually expands job opportunities for computer specialists, engineers, managing consultants and assistant English teachers. In the financial services sector, India agreed for 10 Korean banks to establish branches in India. It also allows temporary movement of 163 Indian professionals such as computer programmers and engineers, inter alia, to access the Korean services market. 

As a result of the Agreement, bilateral trade in 2010 increased by 40% to US$ 17.57bn, and in 2011 increased by 20.28% to US$ 20.57bn. However, in 2012, with a fall in Korean export growth due to a drop in ship sales, bilateral trade fell by 5.8% to US$ 18.84bn. Trade in 2013 recorded a decline of 4.5% to US$ 17.56bn. The balance of trade continues to favour Seoul. During the then Prime Minister Manmohan Singh’s visit to the Republic of Korea in 2012, both sides agreed upon setting the bilateral trade target of US$ 40bn by 2015. 

Korean FDI to India (up to September 2013) stood at $2.93 billion, as per the ExportImport Bank of Korea. The world’s fourth largest steel maker, POSCO, proposes to invest $12 billion in an integrated steel plant in Orissa. There have been delays, but the pace of implementation has now picked up with environmental clearance being accorded in January 2014. Separately, POSCO has completed construction of its first steel mill in Maharashtra. Major Korean conglomerates that have invested in India also include Hyundai Motors India Ltd, Samsung electronics, LG Electronics, inter alia. 

Indian investments in ROK up to 2012 were about $ 1.3 billion, with major ones being Novelis Inc., TATA Motors Ltd., Mahindra & Mahindra, inter alia. A Joint Committee at the Ministerial level headed by the Ministry of Commerce and Industry, India and the Korean Ministry of Trade, was established, in 2011, to undertake an annual review of CEPA implementation. During the visit of President Park Geun-hye to India in January 2014, it was agreed to establish the "India-ROK Joint Trade and Investment Promotion Committee" at cabinet level to replace the aforementioned Ministerial Joint Committee. 

Further, during Prime Minister Narendra Modi’s visit to the Republic of Korea in May 2015, both sides welcomed the commencement of negotiations to amend the India-Korea CEPA by June 2016 with a view to achieving qualitative and quantitative increase of trade through an agreed roadmap. 

Akshara Bhargava

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