The Second Phase of the China-South Korea Free Trade Agreement Negotiations Are Highly Anticipated

The Second Phase of the China-South Korea Free Trade Agreement Negotiations Are Highly Anticipated

According to news from the Ministry of Commerce, on February 26, 2021, the Ministry of Commerce of China and the Ministry of Trade, Industry and Energy of the Republic of Korea held a meeting of chief negotiators for the second phase of the free trade agreement negotiation via video. Both parties believe that the promotion of the second phase of the China-Korea Free Trade Agreement negotiations will achieve substantive results as soon as possible, will enhance the level of bilateral service trade and investment liberalization and facilitation, promote the integration of the East Asian industrial chain and supply chain, and will also combat the new crown pneumonia The epidemic supports free trade and multilateralism to play an active role.

It is understood that the China-South Korea Free Trade Agreement formally came into effect on December 20, 2015. So far, seven tariff reductions have been carried out, and the coverage rate of zero-tariff trade has exceeded 55%. The second phase of the China-South Korea Free Trade Agreement negotiations was jointly announced by President Xi Jinping and South Korean President Moon Jae-in in December 2017. It is China's first negotiations on the liberalization of trade in services and investment in the form of a negative list. Prior to this, on March 22, 2018, the first round of negotiations for the second phase of the China-South Korea Free Trade Agreement was held in Seoul, South Korea.

"China Trade News" reporter learned that in the past five years, despite the continuous impact of complex changes in the international political and economic situation, foreign trade companies engaged in Sino-South Korean trade have truly enjoyed the dividends of the free trade agreement. Weihai Hanjiawei Trading Co., Ltd. imports food from South Korea for domestic sales. Mr. Liang of the company told the reporter of China Trade News that since the implementation of the China-Korea Free Trade Agreement, import tariffs have fallen and the prices of imported goods have also fallen. "Of course, the trade between China and South Korea was greatly affected by the THAAD incident. At that time, our trade volume dropped from a peak, and it has been gradually recovering in recent years. In the past, Korean TV dramas and entertainment programs were popular in China and neighboring countries, and Hallyu products were all because Benefit, sales will increase, and this kind of dividend has been reduced in recent years."

Yantai Shenhan Import and Export Co., Ltd. imports frying pan-related products from South Korea. Due to the impact of the epidemic, the cost of testing has increased, and the sales of products have been average since the Spring Festival. The staff of the company hope that commodity tariffs will continue to fall, and hope that the China-South Korea Free Trade Agreement will make more progress. Another trading company in Yantai, Shandong is also engaged in trade with South Korea. The China-South Korea Free Trade Agreement has reduced the tariffs between the two countries, and the sense of enterprise gain has increased significantly.

The effectiveness of the China-South Korea Free Trade Agreement at the macro level has also been affirmed by industry experts. Professor Cui Riming of Liaoning University and Dean of the Graduate School said in an interview with a reporter from China Trade News, “The China-South Korea Free Trade Agreement has made China-South Korea more trustworthy in economic and trade relations and made bilateral investment more stable. Whether it is between China and South Korea. Goods trade, service trade, and investment are all developing relatively fast. We can see that South Korean capital has invested heavily in Shanghai, Qingdao, Beijing and other places."

Dong Xiangrong, a researcher at the Institute of Asia-Pacific and Global Strategies of the Chinese Academy of Social Sciences, believes that before the China-Korea FTA, China-Korea economic and trade cooperation was already very close, and bilateral trade volume was considerable. Since the implementation of the China-South Korea Free Trade Agreement in 2015, China-South Korea economic and trade relations have been affected by military and political factors such as the THAAD incident. As the bilateral economic and trade relations are affected by many factors, and the tariff reduction and exemption under the China-Korea Free Trade Agreement are gradually being carried out, and are gradually moving forward, for a while, I did not see the China-Korea Free Trade Agreement bringing bilateral trade by leaps and bounds. The change is understandable. The demonstration of the effect of the implementation of the free trade agreement does require a process, and it cannot be achieved in one step. It can be said that the institutional arrangements of the China-South Korea Free Trade Agreement have enhanced the resilience of China-South Korea economic and trade relations, and enhanced the pressure and stability of bilateral economic and trade relations. In terms of details, the implementation of the China-Korea Free Trade Agreement has brought many bright spots, such as the progress of bilateral cooperation industrial parks and the benefits of relevant customs system arrangements for enterprises.

According to news from the Ministry of Commerce of China, the two sides have conducted further consultations on service trade and investment rules and market opening in a negative list model, and the negotiations have made positive progress.

The interviewed experts all appreciated the negative list model and thought it was a good attempt. "China has many bilateral economic and trade partners. When dealing with them, they emphasize bilateral reciprocity and are also exploring better negotiation methods. In the second phase of the China-South Korea Free Trade Agreement negotiations, China used the negative list for the first time to advance. Negotiations will help China and South Korea accelerate service trade cooperation, investment cooperation and market opening, and enhance the depth and breadth of bilateral cooperation." Dong Xiangrong said that under the influence of the new crown pneumonia epidemic, all countries are adjusting, and the industry is reflecting on the supply of the industrial chain. Whether the chain is too long, and whether it should invest in countries or regions with stronger trust relationships. Against this background, it is of great significance for China and South Korea to continue to deepen cooperation in free trade agreements and hold high the banner of free trade.

"China's introduction of a negative list in the field of foreign investment is a very good move. Worldwide, China has achieved good results in reducing tariffs, but in the field of service trade, China started a little later, but it has also continuously introduced relevant policies to encourage the innovation and development of service trade. Service trade is highly valued in the field of international economy and trade. Service trade is also a new growth point for China’s economy. Compared with goods trade, service trade has a very large room for growth." Cui Riming analyzed that from the perspective of international negotiation practices in the field of trade and investment, the negative list is International practice. China's adoption of the negative list model in the second phase of the free trade agreement negotiations with South Korea is a concrete manifestation of its integration with international standards. This helps the South Korean side recognize that China is acting in accordance with international practices and is easier to be accepted by the other side.

Looking forward to the future, experts also put forward suggestions for advancing the China-South Korea Free Trade Agreement and deepening Northeast Asian economic and trade cooperation. Cui Riming said that the economic cooperation in Northeast Asia has great potential and requires more efforts to promote it, including further intensifying China-South Korea economic and trade relations and advancing the China-Japan-Korea free trade agreement. Due to the signing of RCEP and the fact that China and South Korea already have a free trade agreement as the basis for the RCEP, the possibility of the realization of the China-Japan-Korea free trade agreement has further increased. It is hoped that this east wind will facilitate the conclusion of a China-Japan-Korea free trade agreement at an early date, thereby promoting healthy economic and trade cooperation in Northeast Asia, which will greatly help China's economic development.