Korea-U.S. FTA Revision Negotiation

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Extension of Tariff Elimination on Freight Automobile Exports up to 20 Years·Exemption from Tariffs on Steel under Article 232

 

The negotiations for the revision of the Korea-U.S. FTA have been concluded under a cloud of great concern among the entire nation. Although the final procedures are still under way, it has been resolved in effect. The United States has decided to exempt
Korea from tariffs on steel and aluminum products under Article 232 of the Trade Expansion Act, and Korea has decided to extend tariff elimination on freight automobile exports and to lower the automobile safety and environmental standards.
The two countries agreed to exempt Korea from tariffs on steel products under Article 232 of the Trade Expansion Act. Meanwhile, Korea’s steel exports to the United States were set to a quota of 74% compared to the previous year, which corresponds to an average export volume of 3.83 million tons for the period from 2015 to 2017.
The Ministry of Trade & Industry (MOTIE) estimated that the uncertainty of Korean companies was eliminated by securing 74% of exports to the USA last year without additional 25% tariffs, with the early exemption of Korea.
Boards, one of the nation’s main export items, in particular, secured a quota of 111 % compared to the previous year, yet the quota on steel pipes, such as oil country tubular goods (OCTG), was confirmed at 1,040,000 tons.
Accordingly, MOTIE expected a significant decrease compared to last year’s exports of 203 million tons and stated that it would plan to draw up measures to reduce damages including diversification of exports and boosting domestic demand. Talks on steel products are scheduled to commence on May 1.
South Korea also pushed on its concerns through the amendment of the agreement in the field of investor-state dispute settlement (ISDS) and trade remedies through a revised agreement. In regard to the ISDS, it incorporates factors related to the prevention of investors’ abusive litigations and the government’s legitimate policy mandates and has decided to ensure transparency in trade remedies.
It also announced that the uncertainty has been removed by revising the rules of origin standards for some textile items and achieving a position on the further opening of the agricultural and livestock market, a core sensitive area of the country, and the use of U.S.-made auto parts.
On the other hand, instead of obtaining steel, agricultural products, and ISDS, it was decided to step back in the automotive field. Korea has extended the tariff elimination on freight automobile exports to the USA from 2021, the tenth year, up to 20 years until 2041.
In addition, provided that a company complies with American automobile safety standards up to 50,000 units per year, it will be regarded as compliant with the safety standards of Korea, and the detailed test procedures and methods of gasoline vehicles using exhaust gas will be acknowledged alongside.

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S. Korea to conclude three free trade with China, Vietnam, and New Zealand

Korean government is working to conclude further free trade agreements (FTA) with China, Vietnam, and New Zealand within this year in order to help domestic companies’ exports in the global market. The government is now under pressure to facilitate Korean companies’ exports to Vietnam while responding to China’s policy of growing its domestic market. Also, in a move to stay ahead of competitors, including Japan, the nation strategically already suggested a deal for an FTA with Vietnam.

A spokesperson responsible for the Korean government’s FTA policy noted “Conclusion of a Korea-China FTA within this year has great importance, given the fact that Chinese government is now swiftly changing its policy for economic growth from the export-based to local market-based. The conclusion of the FTA aims to secure early advantages in China’s domestic market.”

The Korean government estimates that once the Korea-China FTA is effectuated, Korea’s exports to China would increase from 5.4 percent to 5.5 percent and the nation’s gross domestic product (GDP) also should grow from 2.28 percent to 3.04 percent within 10 years after the effectuation, according to the level of trade concessions.

Between Korea and Vietnam, a trade agreement was concluded through the Korea-ASEAN FTA. But, Vietnam is a late participant in the FTA, so that the commodity group’s transition into a group in the tariff-free condition is scheduled to be carried out by 2020. And the percentage of the commodity group excluded from trade concessions is high. Now more than 3,300 Korean companies operate in Vietnam, and from the Vietnam side, elimination of tariffs between Korea and Vietnam is urgent as Korea comprises 30 percent of total exports.

The trade level between Korea and New Zealand is not so high, but it plays a big role for Korea not to lose its competitiveness in the area in a trade race between Korea and rival trade nations including China. China also enjoys nearly double increased exports ahead of effectuation after announcement of China-New Zealand FTA.

 
 
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