Despite the effort made earlier this month by South Korean President Park Geun-hye and her Chinese counterpart, Xi Jinping, in agreeing that their two countries should conclude free trade agreement (FTA) negotiations by the end of 2014, the latest 12th round of talks were said to have produced little, or no, progress on tariffs.Leaders Park and Xi had decided that the 12th round, which was held for five days from July 14 in the South Korean city of Daegu, would seek progress on all chapters of the proposed agreement, including tariffs, non-tariff barriers to trade, services and investment. In the event, it could only be announced that the two countries had decided, in principle, how to pursue the opening of their service and investment markets, while announcing progress in other areas, such as competition and e-commerce.As far as trade in goods is concerned, it was disclosed that the two sides had tried to narrow their differences on ultra-sensitive items, for which longer-term tariffs of more than 20 years would be allowed, but that there is, as yet, no indication of the basis on which a final agreement will be reached.There remain particular concerns in China regarding opening its manufacturing sector to South Korean imports, and in South Korea on the effect of Chinese imports on its agricultural markets. Before the meeting, the South Korean Government had already reiterated that any deal would need to protect its food producers.However, despite the lack of progress on ultra-sensitive trade tariffs, it has been confirmed that the 13th round of negotiations will be held in China in September.FTA negotiations started in May 2012, and the two countries have already decided to eliminate tariffs on 90 percent of all goods, and 85 percent of imports by value. Duties on non-sensitive products will be canceled either immediately or within ten years, and those on sensitive products will be abolished within 10-20 years after the FTA becomes effective.According to Chinese Ministry of Commerce figures, total trade between South Korea and China reached over USD270bn in 2013, and the two leaders have set a USD300bn target for 2015. China is already South Korea's primary trading partner.It is hoped that a final agreement could provide an added impetus to the talks on the proposed tripartite FTA between South Korea, China and Japan, and to the conclusion of the Chinese-led Regional Comprehensive Economic Partnership, which is planned to bring the Association of Southeast Asian Nations' existing FTAs with China, South Korea, Japan, India, Australia, and New Zealand into a single improved agreement by the end of 2015.

July 22, 2014

Source: Tax News