All the pieces were there - the photo-snapping reporters, the big book of agreements, and flags, the pens. Indian Commerce and Industry Minister Anand Sharma and South Korean Trade Minister Kim Jong-hoon signed their respective copies of the agreement, and then posed with glasses of champagne for the cameras. Afterwards, there was even a celebratory luncheon at the Hilton.
Korea is ahead of the game on this one. The only other country which has signed a free trade deal with India is Singapore. The country has become much more appealing for international trade since the global economic crisis, because it was almost completely unaffected. India remains one of the fastest growing economies with one of the largest populations in the world. At the press conference after the signing, Minister Sharma pointed out that 17% of the country is young people who have increasingly larger demands for consumer goods.
Minister Kim said that this was the first step in strengthening long-term economic relations with the BRIC countries - Brazil, Russia, India, and China. He said that Russia is making moves to join the WTO, and that Korea should wait until Russia joins the WTO before engaging them economically. The Minister also said that Korea and Brazil are doing joint studies on possible economic cooperation, and is weighing all its options before making that move.
One of the major points of the agreement are that the tariffs on Korean autos entering India will be lowered. Minister Sharma also pointed out that while Korea is well-known for autos and electronics, in India Korean companies are also already doing heavy infrastructure development, and India is doing ongoing construction and expansion of the metro network in the major cities of India with Korean help. With this new agreement, that development can be made easier.
Also, the migration of workers between the two countries will be lowered, with Indian IT and language workers expected to make a large impact on the Korean markets
However, when one looks more closely at the agreement, there are details that look strange. For instance, the agreement is not exactly a Free Trade Agreement, but is called a Comprehensive Economic Partnership Agreement. The differences between the two are spelled out under close scrutiny.
First of all, all of the economic stimulus and lowered trade barriers are supposed to happen over ten years' time. Taxes on Korean auto part imports, for instance, are planned to go from the 12.5 percent that they currently have to 1 percent over the next eight years. This is in contrast to the FTAs in progress with Europe and the US, which promise an almost complete elimination of trade barriers within five years. When asked about this, Minister Sharma said "this is just the beginning. We hope that this will help use the opportunities that exist in both Korea and elsewhere."
