Korea, China to agree on free trade deal

South Korea and China have largely concluded a free trade agreement in 22 years after the two countries established diplomatic relations. South Korean President Park Geun-hye and Chinese President Xi Jinping declared the practical closure of a free trade deal between the two countries in the summit at the Great Hall of the People in Beijing on Monday. The Korea-China relationship has made a dramatic development changing from enemy states to economic allies in 22 years. It is also significant since the bilateral trade agreement between Korea and China, the world’s largest market with a population of 1.3 billion, could be a breakthrough to the sluggish Korean market. China is Korea’s largest exporter and importer.

Korea and China signed a long-stalled free trade at 8 a.m. on Monday, 105 minutes before the leaders of the two countries had a summit. It is in two and a half years since the two countries started trade negotiations. Key issues of the negotiation included the levels of opening, rice issue, and the standard on the origin of products.

“The conclusion of the Korea-China free trade deal is welcome news to the global economy, which has a delayed recovery and continues low growth,” President Park said at the Korea-China summit. “I hope that we could continue the cooperative trend and further develop our strategic partnership going forward.” Korea’s achievements in the deal were completely excluding rice from the negotiating table and minimizing the opening of the agricultural and fishery markets. Meanwhile, China excluded automobiles from the list of tariff-free items and put LCD panels on the list of items whose tariffs will be abolished “within 10 years.” By doing so, Korea can protect the agricultural and fishery sectors and China can safeguard its manufacturing sector for some time.

Thanks to the Korea-China free trade deal, Korea has become a country that has free trade deals with the world’ three largest economies – the U.S., the EU and China. If the Korea-China trade deal takes effect, Korea is expected to reduce tariffs of 5.44 billion U.S. dollars every year.

The bilateral free trade deal is also meaningful to China since it is the nation`s first with one of its 10 major trading partners. However, some observers see that the Korea-China trade deal has more diplomatic and security implications rather than economic benefits. It could be interpreted that by including Korea in its economic bloc, China has laid a foundation for countering the Korea-U.S. diplomatic alliance.

Seoul and Beijing will sign the free trade deal officially early next year after fine-tuning the final wordings of the agreement and having a legal review by the end of this year.