South Korea and Peru reached a Free Trade pact to expand trade. On Tuesday, South Korea wrapped up its one-and-a-half-year-long free trade negotiations with Peru and agreed to sign a deal.
Holding a ministerial-level meeting in Lima, South Korean Trade Minister Kim Jong-hoon and his Peruvian counterpart Martin Perez reached an agreement on a bilateral free trade pact and announced a joint statement.
"The (South) Korea-Peru FTA is mutually beneficial to both sides," the countries said in the statement, calling the agreement "a comprehensive and high-quality FTA."
"The deal will further contribute to promoting the prosperity and development of both countries," the statement said.
The free trade pact incorporates a bilateral agreement on goods, trade safeguards, intellectual property rights, government procurement, and economic cooperation.
Under the deal, the two countries are obliged to eliminate or cut tariffs on goods within 10 yrs after the deal takes effect.
Accordingly, tariffs on South Korean autos with engine displacements of 3,000 cc or more and color TVs will be removed right away, while those with engine displacement of less than 3,000 cc will be erased in five years. The pact also states elimination of tariffs on home appliances, such as refrigerators and washing machines in 4 and 10 yrs, respectively.
With respect to agricultural products, 107 items that South Korea found sensitive have been excluded from the deal, while other 202 items were subject to be traded off tariffs in 10 years.
In addition, tariffs on Peruvian coffee will be abolished right after the deal comes into effect. The statement also deals with an agreement on protection measures such as import safeguards and a clause to extend intellectual property rights from 50 to 70 years.
Products from the Kaesong Joint Industrial Park located in the Democratic People's Republic of Korea (DPRK) will also be recognized as originating from South Korea, the joint statement said.
The two countries will have a legal review on the pact until September 3, after which they will push for allowing the deal to take effect in November. South Korea and Peru went through three ministerial-level meetings and four official rounds of negotiation talks since March 2009.
Bilateral trade reached US$1.56B in 2009, with South Korea's exports to the South American country reaching US$641M. Upon the Free Trade pact, local experts are expecting that it will bring about an overall growth in competitiveness of South Korean goods in the South American market.
As the deal marks the second of its kind, South Korea reached with a Latin American country following the FTA with Chile signed in April 2003, an upgrade of South Korea's status in the market is a likely result, experts said.
According to the Korea Trade-Investment Promotion Agency (KOTRA), the country's trade promotion agency, South Korea's automobile, heavy machinery, TV and computer exporters are to reap gains from the deal as the tariffs on such products which amount to rates as high as 17% will be eliminated.
In particular, local automobile companies, whose total market share amount to 23% in the Peruvian market, will see a sales gain of 10% thanks to price competitiveness against their Japanese rivals.
Above all, the deal will contribute to South Korea's energy sector the most, local experts are saying in one voice, providing the country with a stable supply of energy resources.
According to local daily Hankyung, Peru is the second largest holder of copper and ranks third in terms of zinc and tin reserves.
As South Korea's imports from Peru are mostly allocated to the three natural resources, with the total imports of the three items taking up 86.3% of the total amount in 2007 and 2008, the country is expected to see the greatest benefit in the natural resources sector.
Also, South Korea will be able to increase its investment in resources development projects with nine local companies, led by SK Energy Co., whic are already involved in resource development projects in Peru, South Korea's Yonhap News Agency said.
The South Korea-Peru FTA will also pave way for the country to strike a deal with another Latin American country, Mexico, with which South Korea has been holding negotiations.
Alongside deals with South American countries, South Korea has so far inked free trade pacts with India, the Association of Southeast Asian Nations (ASEAN), Singapore and the European Free Trade Association (EFTA).
source: APEC-VC Korea