India and South Korea have agreed to reduce tariffs on 11 items under an early harvest programme signed between the two sides as part of the on-going negotiations for upgrading the existing Comprehensive Economic Partnership Agreement (CEPA).
New Delhi, which is struggling against a growing trade deficit with Korea, managed to keep out certain sensitive items that Seoul had been pushing for such as automobiles, certain grades of steel and some categories of textiles, a government official told BusinessLine .
“The South Koreans had offered to include 17 items in the early harvest programme. India, however, was not keen on some items on the list as early lowering of tariffs on the items could hurt the domestic industry. The two sides then settled on 11 items,” the official explained.
Addressing a joint business council meeting on Monday, South Korean President Moon Jae-in, who is on a four-day official visit to India, expressed hope that the on-going negotiations for expansion of the bilateral CEPA are concluded soon and stressed that free trade pacts are in the best interest of both India and his country.
“Right now, India and Korea are engaged in two negotiations — one on upgrading the CEPA and the other is the RCEP negotiation (with 14 other members including ASEAN and China). Expansion (of trade pacts) is in the best interest of people. We hope the negotiations can be concluded soon,” Jae-in said at a meeting organised by industry body FICCI.
Growing trade deficit
India, however, is more careful about expansion because of growing trade deficit with the country since the implementation of the CEPA in January 2010 and has stressed that the CEPA expansion should clearly benefit both countries.
India’s trade deficit with South Korea in 2017-18 stood at $12 billion. While India’s exports to South Korea increased insignificantly from $3.72 billion in 2010-11 to $4.46 billion in 2017-18, its imports from South Korea jumped from $10.47 billion in 2010-11 to $16.36 billion in 2017-18.
Earlier this year, Commerce Secretary Rita Teaotia had pointed out to a Korean team that widening trade deficit had aroused concern in many quarters and that for long-term sustainability “we will need to work towards a mutually beneficial and a more balanced trade”.
“We are committed to raise Korea’s relations with India to the level as those with four major powers around the Korean peninsula. This commitment is embodied in my new southern policy that aims to move beyond economic-cooperation to building prosperous people centric community of peace,” he said.