South Korea and Indonesia Free Trade Agreement: What You Need to Know
On December 16, 2020, South Korea and Indonesia signed a Free Trade Agreement (FTA) to boost cooperation and enhance trade relations between the two countries. The agreement is expected to bring significant benefits to exporters and importers, creating new opportunities for businesses in both countries.
So, what does the South Korea – Indonesia FTA entail, and what impact will it have on trade activities between the two nations? Here’s what you need to know.
What is an FTA?
An FTA is a pact between two or more countries that aims to reduce or eliminate tariffs, quotas, and other trade barriers that restrict the flow of goods and services between them. Under an FTA, the countries agree to offer preferential treatment to each other`s products and services, creating a more liberalized and predictable environment for trade.
South Korea – Indonesia FTA Overview
The South Korea – Indonesia FTA is a comprehensive agreement that covers a wide range of sectors, including trade in goods, services, investment, and intellectual property rights. The agreement aims to reduce tariffs on various items, including electronics, automobiles, steel, and textiles.
The FTA will gradually eliminate import duties on 92% of South Korea`s exports to Indonesia and 91% of Indonesia`s exports to South Korea. This will provide a significant advantage to businesses in both countries, making it easier to access each other`s markets and increase trade.
The agreement also includes provisions on trade facilitation, customs cooperation, and rules of origin to ensure fair competition and prevent trade diversion. This will provide businesses with greater certainty and predictability, making it easier for them to plan and invest in new trade activities.
Benefits for South Korea
South Korea is one of Indonesia`s top trading partners, with bilateral trade reaching $20.8 billion in 2019. The FTA is expected to provide South Korean exporters with better access to Indonesia`s market, particularly in sectors such as electronics, automotive, and steel. The agreement is also expected to increase South Korean investment in Indonesia, as it provides a more predictable and stable environment for trade.
Benefits for Indonesia
The South Korea – Indonesia FTA is expected to increase Indonesia`s export opportunities, particularly in sectors such as textiles, footwear, and agriculture. The agreement will also provide Indonesian businesses with better access to South Korea`s market, as it eliminates tariffs on key products, such as palm oil, rubber, and fisheries.
Conclusion
The South Korea – Indonesia FTA is a significant achievement for both countries, as it provides a solid framework for trade cooperation and economic integration. The agreement is expected to boost trade and investment between the two nations and create new opportunities for businesses in various sectors. As the world becomes more interconnected, FTAs like this one play an increasingly important role in promoting global trade and economic growth.
