South Korea Expands FTAs around the Globe Despite COVID-19 Pandemic

- In 2021, the effectuation of Korea-UK FTA as a starter, the RCEP is expected to take effect in the second half of the year -

The Free Trade Agreement (FTA) between South Korea and the United Kingdom came into effect on January 1, 2021 at 8 am (Korean time). Now, South Korea has 17 free trade agreements with 56 countries around the world. As of 2019, the trade volume with those partners accounted for around 70 percent of South Korea's overall trade. If the Regional Comprehensive Economic Partnership (RCEP), a mega FTA, goes into effect in the second half of this year, South Korea will have a free trade pact with Japan under RCEP and  the trade with the free trade partners will take up 77.1 percent of the country's total international trade.

According to a report titled “New Environment for South Korea's Free Trade Agreements in 2021” issued by the Center for Trade Studies and Cooperation (head: Choi Yong-min) of the Korea International Trade Association, the South Korean government made continuous efforts to expand the scope of its FTAs in 2020 despite the spread of COVID-19. For instance, South Korea effectuated the Korea-UK free trade agreement in preparation for Brexit, signed RCEP and the Comprehensive Economic Partnership Agreement (CEPA) with Indonesia and started the Korea-Cambodia FTA negotiations.

Above all, with the dramatic conclusion of the negotiations on the future relationship between the United Kingdom and the European Union at the end of December last year and the UK's exit from the EU became a reality, the preemptive Korea-UK free trade agreement allows Korean companies to enjoy the same preferential tariffs as before for imports and exports with the UK.

The report stated, “Apart from the effectuation of the FTA, the U.K. customs authorities’ workload is likely to increase after the Brexit and South Korean companies are required to pay close attention to the high possibility of delayed import clearance,” and added, “It is also necessary to carefully review changes in regulations such as customs clearance and certification, and rules of origin under the UK-EU agreement.”

Regarding South Korea's FTAs this year, the report said, “The Korea-Indonesia CEPA, which signed last year, is highly likely to take effect within this year. The RCEP is also expected to be effectuated in the second half of this year given the condition that it can enter into force when more than 6 out of 10 ASEAN countries and 3 out of 5 non-ASEAN countries complete the ratification process.” The report also emphasized, “With the free trade agreements signed with large economies, in 2021, South Korea needs to strive for FTAs with emerging countries with great potential such as Cambodia, MERCOSUR (four South American economies such as Brazil, Argentina, Uruguay and Paraguay), the Philippines, and Russia, and focus on qualitative upgrades of existing FTAs.”

Choi Yong-min, head of the Center for Trade Studies and Cooperation of KITA, said, “When the RCEP comes into effect in the future, bilateral FTAs, multilateral FTAs, and mega FTAs will overlap and Korean companies should work on the strategies to select and use the most favorable FTAs by period.”