With the entry into force of the China-South Korea Free Trade Agreement (FTA) in the future, some analysts predict that smartphones, laptops, cosmetics, small household appliances, etc. produced in South Korea will become hot-selling products in the Chinese market. Labor-intensive products and intermediate products such as handicrafts, clothing, and food produced in China will quickly occupy the Korean market with their price advantages.
It is an indisputable fact that the price of imported Korean goods will fall with the reduction of tariff levels. However, it is worth noting that the current tariff levels for many Korean products are already very low, and high-priced products are affected by many reasons such as higher domestic circulation costs. Under such circumstances, the price drop may not be so obvious.
So, what can China-South Korea FTA bring?
After the establishment of the China-Korea Free Trade Area, it will promote the development of bilateral personnel flows and service trade. Follow-up services for Korean products may enter the Chinese market, which will make Chinese consumers feel more convenient. For example, Chinese people can receive treatment services from Korean plastic surgery hospitals at home, and Chinese laborers can get more employment opportunities in Korean-owned enterprises.
Due to the advantage of the distance between China and South Korea, the China-South Korea FTA’s provisions on non-tariff measures such as “Korean products can in principle be cleared through customs quickly within 48 hours” also have unique “Chinese and Korean characteristics”.
After the China-ROK FTA comes into effect, which products will be exempt from tariffs in the first phase? Li Tianguo, an assistant researcher at the Institute of Asia-Pacific and Global Strategy, Chinese Academy of Social Sciences, pointed out that according to the content of the initialing, after the China-ROK FTA comes into effect, the primary phase In South Korea, the tax items of tariff-free products reached 16.2%, and when measured by the import value, it reached 41.9%. In China, the tax items for duty-free products reach 8.4%, and the import value reaches 38.8%. “Vegetable seeds such as onions, tobacco, radishes, etc., agricultural products such as cattle, pigs, and chickens used for breeding, some seafood, boilers and their parts, etc. are all immediately tax-free products.”
Of course, after the China-South Korea FTA comes into effect, it will definitely create competitive pressure on domestic companies, which will also force domestic companies to reform. But don’t worry too much. The 20-year “specialty” transition period is to reduce the negative impact of open terms on each other. Even if the transition period ends, about 10% of the exception products will still be retained and will not be included in the open scope.
The tax reduction arrangements in the agreement are carried out in stages. During the 10-year transition period, China’s products with zero tax reduction accounted for 71% of the total tax items, and South Korea’s 72%; during the 20-year transition period, China’s products accounted for 91%. %, South Korea’s is 92%. The two countries’ opening up is generally equal and balanced.
