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India has asked South Korea to do away with non-tariff barriers (NTBs), such as mandatory local certification, bio-equivalence tests and other export hurdles, for at least six items, including textiles, mangoes, steel, engineering goods, pharmaceuticals and rice, to improve market access for Indian businesses and bridge the wide trade deficit.
The matter was taken up at a bilateral meeting headed by Commerce & Industry Minister Piyush Goyal and his Korean counterpart Yeo Han-koo in New Delhi on Tuesday, according to a source close to the development.
Fast-tracking negotiations
The two Ministers also agreed to fast-track negotiations on the up-gradation of the bilateral Comprehensive Economic Partnership Agreement (CEPA) which, India believes, has delivered disproportionately more benefits to the South Koreans. The CEPA was implemented in 2010.
“India made it clear to South Korea that while it appreciated the strengthening of trade and investment ties with the country, the large trade deficit, at over $ 8 billion in 2020-21, had to be checked and that would be partly possible by removal of identified non-tariff barriers,” the source said.
NTBs have been identified in the textile sector in the form of mandatory use of the Korean Certification mark (KC mark) for all textile items sold in the country indicating compliance with mandatory requirements. Under acts for safety management of children’s products, products must be mandatorily tested and inspected by local authorised Korean testing institutions. “The difficulty being faced by Indian exporters to go for local testing and certification has been taken up under the joint working group on standards under the CEPA up-gradation negotiations,” the source said.
Mandatory need for local testing and certification is also making exports difficult for Indian engineering goods as it is a time consuming and expensive process. India is discussing a Mutual Recognition Agreement with Korea in the area to sort out the problem, the source pointed out.
India’s pharmaceutical producers, too, are facing NTBs in Korea as the country insists on conducting bio equivalence studies in their country for drug registration. India has said that it is time consuming, expensive and completely unnecessary as it has world class bio equivalence study centres, which are accepted by stringent regulatory authorities like USFDA and Health Canada.
Exporters of agricultural products are facing their own set of issues. While pre-inspection requirement for mangoes insisted on by Korea, if not exempted permanently, could affect growth potential of Indian exports of the fruit, the tariff rate quotas in rice offered by Korea to China, Vietnam, Thailand, Australia and the US, was leaving very little export opportunity for India. “All these NTBs have to be satisfactorily resolved if Indian exports are to increase. Otherwise, the CEPA will be of not much use to India,” the source said.
Trade imbalance
South Korea’s exports to India increased from $8.57 billion in 2009-10, a year before the implementation of the CEPA, to $15.65 billion in 2019-20 (the pre-pandemic year). Shipments declined to $12.77 billion in 2020-21 due to the pandemic related overall slowdown.Increase in India’s exports to South Korea was, however, miniscule, from $3.42 billion in 2009-10 to $ 4.84 billion in 2019-20 and $4.68 billion in 2020-21.
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