ADVERSE TWEAKING OF KOREAN CEPA STARES AT INDIA
Seoul unwilling to offer English speaking status, tariff line on sesame
The $12-billion trade deficit between India and South Korea could widen if India gives 17 open lines on trade that their visiting delegation is asking. India is also not likely to get the status of ‘native English speaking nation’, though South Korea has accorded this to some other countries, including South Africa. South Korean President Moon Jae-in arrived on Sunday and a revised Comprehensive Economic Partnership Agreement is expected to be signed on Monday. A South Korean recognition of India as ‘Native English Speaking’ opens up an E2 visa for Indians.
The $12-billion trade deficit between India and South Korea could widen if India gives 17 open lines on trade that their visiting delegation is asking.
India is also not likely to get the status of ‘native English speaking nation’, though South Korea has accorded this to some other countries, including South Africa.
South Korean president Moon Jae-in arrived on Sunday and a revised Comprehensive Economic Partnership Agreement (CEPA) is expected to be signed on Monday. A South Korean recognition of India as ‘Native English Speaking’ opens up E2 visa for Indians.
India had asked for zero duty on items like sesame and motor parts but the Koreans are unwilling. Largely grown in Gujarat, sesame export to Korea could bring political benefits there. South Korea imposes 630 per cent duty on Indian sesame while importing 24,000 tonnes a year from China at zero duty.
The Koreans had earlier agreed to 11 tariff lines being opened to them but were digging their heels on 17 during negotiations over the weekend. Opening of tariff lines to a country ensures zero basic customs duty to importers of the country to which it is opened. The duty is applicable for products under those tariff lines.
“A balance has to be struck between intermediate goods and final products. We should allow zero duty only for products not made by us; otherwise, it will impact the government’s Make in India plans,” said Suranjan Gupta, executive director, Engineering Export Promotion Council. “A lot of things are complementary in our trade and, hence, we will have to balance our interests before opening up. In certain sectors like steel, we have had to impose countervailing measures. So, we need to negotiate a corresponding request list if we open up in some lines.”
The Government of India (GoI) wanted to amend the CEPA in place between the two countries since 2009, to allow our exporters greater incentive to ship goods there. And, to not expand the pact beyond its current conditions, said a senior official from the commerce department. This has reportedly caused concern in Seoul, which wants greater liberalisation on India's part. “President Moon is expected to bring up the issue in his bilateral talks with Modi, since all discussions till now have been based on the premise of greater free trade and not more restrictions,” a senior diplomatic source said.
After deciding to expand the pact in September last year, the Centre has been under pressure from domestic business. The latter contend our export lacks enough room to succeed in Korea in major sectors, while import continues to rise at a fast clip.
While the deal is one of India's oldest free trade agreements, trade has historically favoured Korea, with India's import growing much faster than export. Currently, 78 per cent of items from India’s list of goods and 88 per cent of the Korean list are placed in the zero-duty category.
India's ability to export more items under both the CEPAs signed by it — the other has been with Japan — have remained low. Any move by India to widen the CEPA runs the risk of further angering domestic exporters, where the claim is that the pact has disproportionately helped Korean counterparts. India’s export to South Korea was $4.4 billion in 2017-18, annual growth of 5.2 per cent. Import from Korea was four times larger at $16.4 billion and rose 30 per cent in FY18. This ratio of higher inbound to lower outbound trade has strengthened with time. Imports are concentrated in the areas of electronics and heavy machinery, focusing on products for which India has few production capabilities. Enhancing of market access and strengthening of the Rules of Origin clauses will be key to India’s position, a commerce ministry official said.
“While our import dependency can be brought down in major categories such as plastic and related products, and organic chemicals, the same is not true for India’s reliance on machinery products from Korea or select iron and steel import — the two largest import categories,” a Delhi-based trade expert said.
Moon’s four-day tour from Sunday is focused on upgrading business ties to the level Korea has with China. To achieve this, Moon is pushing Korean majors to raise their investment. He will speak at the India-Korea Business Forum on Monday, organised by the Federation of Indian Chambers of Commerce and Industry. In attendance would be the top management of the major ‘chaebols’ or large family-owned mega-conglomerates from Korea such as Samsung, Hyundai and LG. They command large chunks of the export and domestic consumer and industrial markets in Korea. The meet will be the second one of its kind in less than five months. In February, Modi had addressed a mega delegation of 150odd Korean companies, flown to Delhi to attend the first India-Korea Business Summit. He asked the chaebols to further expand the $2.7billion worth of investment they have in the country, mostly in the automobile and engineering sectors.
GoI has streamlined investment norms for Korean firms and maintains a one-stop facilitation desk called 'Korea Plus' for all direct investment from there. Both governments had earlier announced plans to establish a future strategy group, under which joint projects will be taken up in new technologies such as artificial intelligence, the Internet of Things, robotics and ‘green’ tech.