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China & South Korea to lift tariffs on 90% of products


06-01-2015 14:26 BJT

Trade ministers from China and South Korea will sign a free trade agreement in Seoul today.

The FTA is set to contribute to China's economic development and enhance its global competitiveness.

Cosmetics, apparel, electronic devices, food and plastic surgery are among the items that are high on the shopping list of Chinese tourists to South Korea. But now, that will all change.

After years of negotiations and preparation, the China-South Korea free trade agreement was officially approved.

China's Ministry of Commerce says the bilateral FTA between China and South Korea covers 17 sectors, including e-commerce and government procurement, and will remove tariffs on 90 percent of all products traded between China and South Korea.

"Well, it is very significant. A lot of people actually don't know South Korea has surpassed Japan as a bigger trading partner for China. And China for Korean products and services are just as increasingly important," said Xu Sitao, chief economist of Deloitte China.

The FTA involves the largest trade value and the most comprehensive sectors of any that China has signed. It will enable a market with a total population of 1.4 billion and a combined GDP of US$11 trillion .

"So China and South Korea, these two economies, potentially the trade link, could actually rival United States and Canada. It is going to be a united might," Xu said.

The Chinese economy has entered a stage of ‘new normal’ and has shifted gear from the previous high speed to a medium-to-high growth speed. But with the China-South Korea FTA now in effect, the FTA will help provide a 0.4 percent to 0.6 percent increase in China's GDP output in five years.

The agreement comes before South Korea decides whether to join the US-led Trans-Pacific Partnership pact that now does not include China.

"TPP is going to be realized. In the foreseeable future, China is not going to be a member of TPP. But as the biggest trading nation, you do need to look for other alternatives. So this is extremely important issue," Xu said.

Experts say the China-South Korea FTA will provide the modality, as well as the driving force for progress, toward a China-Japan-South Korea FTA and a Regional Comprehensive Economic Partnership.

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