South Korea’s free trade agreement (FTA) with Vietnam got underway on Sunday (December 20). According to the FTA, the 12 per cent tariff on Korean fabrics and textiles is to be eliminated within three years, and the 7 to 25 per cent tariff on auto parts is to be removed in five to 15 years, which means Korea’s intermediate goods exports to Vietnam can increase with time. South Korea will open up its market for 499 more items including Vietnamese tropical fruits and garlic, while Vietnam will remove its duties on an additional 272 South Korean products. Seoul will reduce import duties on more than 95 per cent of Vietnamese goods, including key export items like shrimp, fish, crab, tropical fruits, garment and textiles, and wooden products. The FTA signed last month is expected to boost Vietnam’s exports to Korea and more than double bilateral trade over the next five years. The agreement includes some of the items that were excluded from the earlier ASEAN-Korea FTA. Vietnam will remove import tariffs on 92.2 per cent of all products under the FTA, compared to 86.2 per cent of goods in the ASEAN-Korea FTA. Vietnam has simplified its rules of origin and customs clearance, which will benefit textile and garments made in the inter-Korean Kaesong Industrial Complex. Korean companies specialising in cotton would benefit in price competitiveness vis-a-vis Japanese companies in Vietnam. On the other hand, Vietnam-made garments such as men’s trousers and shirts, women’s suits, coats, jackets, blouses, and cotton yarn will get duty-free entry into the Korean market once the FTA takes effect. For South Korea, Vietnam is the ninth-largest trading partner in the world, and second-largest among Asean nations. The volume of Korean exports to Vietnam increased three-fold from $7.16 billion in 2009 to $21.8 billion in 2013, according to the Korean Ministry of Trade, Industry and Energy. The FTA aims to increase the bilateral South Korea-Vietnam trade to $70 billion by 2020. South Korea is the biggest investor in Vietnam, with $38 billion in more than 4,200 projects. The FTA with Vietnam is the third such agreement Korea has set in motion On December 20, the other two being with China and New Zealand.
