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Entry 2020.11.15 18:12
Under the RCEP agreement, the government predicted that liberal trade could expand and respond effectively to the weakening of multilateral systems like the World Trade Organization (WTO) and the movement to reorganize the global supply chain. The government analyzed that it will play an important role in the expansion of the Korean export market and the diversification of the commercial structure. According to government authorities, Korea’s RCEP exports amounted to $ 269 billion, which is half of total exports.
The government analyzed that the aftermath of Corona 19 and the trade conflict between the United States and China will play an important role in the RCEP, which was launched amid the contraction of the economy and world trade and the strengthening of protectionism. In the position of Korea, which is highly dependent on exports, the pace of the new southern policy is expected to accelerate as well as the expansion of the economic territory. It is explained that it will be the first to sign an FTA with neighboring Japan.
The government excluded sensitive items such as cars and machinery from the concession due to the sensitivity of the Korean industry to Japan. Even if it’s open, you’ve decided to abolish long-term tariffs for 10-20 years.
India, a giant market, was omitted from the RCEP deal. India did not participate in the final signing due to the expansion of the trade deficit with China.
Through RCEP, 10 ASEAN countries further opened their product markets to Korea. The tariff elimination rate also increased from 91.9% to 94.5%, which is higher than the 2007 NAFTA ASEAN-Korea tariff elimination rate (79.1% to 89.4%).
In addition to Korea’s top export items such as cars, spare parts and steel, it has secured additional market opening for promising Corona 19-related items such as hygiene and medical products. Under the RCEP agreement, the market for content, such as games and movies, can enhance the intellectual property (IP) rights protection of Korean Wave content along with smoother exports.
The government explained that the RCEP can minimize the ‘spaghetti ball’ effect that occurs when the FTA is concluded by applying a unified standard of origin between countries in the region. The spaghetti ball effect is an expression that means that it is difficult for a company to receive the benefits of NAFTA due to different rules of origin and customs procedures, which are different from one country to another, like spaghetti tangled in a plate. Existing product exports to China and ASEAN faced difficulties due to different standards of origin, but the convenience of the company is reinforced as it can be unified as one through RCEP.
Additionally, even if materials are purchased and processed through RCEP participating countries, cumulation of origin can be recognized. Previously, when Korea imported materials from China and exported them to Australia, only Korean quantities were recognized as origin, but in the future, Chinese quantities could also be recognized as accumulation of origin, allowing for tariff benefits.
After signing the RCEP, the Korean government plans to proceed with the approval of the National Assembly. The government expected the RCEP to come into effect as early as the first half of 2021. As a reference, for the RCEP to come into effect, 6 out of 10 ASEAN countries and 3 out of 5 non-ASEAN countries must deposit their instruments of ratification in the Secretariat after each country’s ratification. It enters into force 60 days after the deposit of the instrument of ratification.
Reporter Kim Hyung-won [email protected]
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