Exploring Opportunities: The Next Phase of the India-South Korea CEPA

India and Korea are to hold their next round of talks this week to review and upgrade the bilateral Comprehensive Economic Partnership Agreement (CEPA), according to a senior official. The review aims to enhance trade and market access between the two countries. Total trade reached US$ 27.6 billion in 2023, with India seeking greater market access and Korea aiming to increase its exports.

India and South Korea are to hold their 11th round of talks from July 17-19 in Seoul to review and upgrade the Comprehensive Economic Partnership Agreement (CEPA), which was initially signed in 2009 and became effective in 2010, was agreed upon in 2016. Since then, ten rounds of talks have been held, but the pace has picked up in recent months. Some Korean officials have stated that talks may finally be concluded in 2024.

According to the ITC Trade Map, the total trade between India and South Korea was US$ 27.7 billion in 2023. While India’s exports remained at US$ 6.28 billion (5 year CAGR of 5.59%), imports reached US$ 21.4 billion (5 year CAGR of 5.47%) during the same period.

In 2023, the top items of exports from India to South Korea were mineral fuels, aluminium and articles thereof, organic chemicals, nuclear reactors, iron and steel, and the top item of imports were electrical machinery, mineral fuels, iron and steel, plastics and articles thereof, and nuclear reactors.

Source: ITC, Trade Map

Both sides have exchanged a list of “requests” in which they seek further trade liberalisation. Korea has seen increased demand in sectors such as automobiles, textiles, chemicals, and petrochemicals, while India is looking for greater access to the steel, rice, prawns, and clothing markets.

According to experts, Korea’s attempt is to increase the level of openness in the Indian market, or at least bring it in line with the India-Japan Free Trade Agreement. South Korea has questioned the effectiveness of bilateral trade liberalisation, pointing to the exclusion of key export sectors like automobiles from concessions.

Even though India’s steel industry is competitive, Indian exporters have been dissatisfied with the Korean industry’s reluctance to purchase Indian steel. Manufacturers of clothing have voiced complaints that exporting is difficult due to the strict enforcement of safety regulations.

The agreement addresses bilateral cooperation in areas of shared interest as well as trade in goods, investments, and services. As per the terms of the CEPA, Korea was required to gradually remove or lower tariffs on 90% of Indian exports, and India was to do the same for 85% of Korean exports.