Economy

India, Korea to begin negotiations to tweak comprehensive economic pact

| Updated on: Nov 09, 2011

The Comprehensive Economic Partnership Agreement between India and Korea came into force on January 1, 2010, but now both sides are getting ready for fresh negotiations.

The reason: lot of things have happened on both sides that the tariffs agreed under the pact have lost their relevance.

On a number of items covered by the pact, agreed tariffs are higher than what India has offered on Most Favoured Nation basis to many other countries.

On its part, Korea has since concluded free trade pacts with the US and the European Union at better terms, Korea's Ambassador to India, Mr Kim Joong Keun, told Business Line today.

Looking at the CEPA afresh is also likely to address the issue of the skew in trade against India.

In 2010, India imported goods worth $11.4 billion and in the first eight months of the calendar 2011, bought $8.5 billion. But India's exports to Korea in 2010 was $5.6 billion, which rose to $5.5 billion in the first eight months of 2011.

A research paper presented at a Indo-Korea dialogue conference organised here today by the Indian Council for Research on International Economic Relations (ICRIER) notes that a further 10 per cent reduction in tariff on all items except agriculture and fishery products would increase Korea's exports to India by $180 million. But it will also lead to increase in India's exports by $ 600 million.

Korean re-unification

Asked when a reunification of North and South Korea would happen, Ambassador Mr Kim said, “not long from now.”

Asked about the effect of the merger of the two countries on India, he said that a unified Korea would give Indian companies huge opportunities to invest.

Korea was split into two in the 1950s and the North went into the communist fold during the Cold War.

After the Cold War ended in the late 1980s, North Korea ceased to get concessions from the Warsaw Pact countries, such as cheaper crude oil and as a result, the North Korean economy went into a tailspin.

However, North Korea is a resource-rich country. Ambassador Mr Kim noted that the country had in abundance two of the three factors of production — land and labour. “You (India) can bring in capital,” he said.

Published on November 09, 2011

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