Business Korea | 27 February 2017
Talks for South Korea-GCC FTA to be resumed soon
by Jung Suk-yee
It is expected that negotiations for a free trade agreement (FTA) between South Korea and the Gulf Cooperation Council (GCC), which were halted in 2009, will be resumed within this year.
The GCC has Saudi Arabia, Kuwait, the United Arab Emirates, Qatar, Oman and Bahrain as its members. Three rounds of negotiations for the South Korea-GCC FTA were underway in 2007 to 2009 but the talks came to a halt when the GCC withdrew from the negotiating table in the wake of the global financial crisis at that time.
After the crisis, the GCC implemented its FTA with Singapore in 2013 and with the European Free Trade Association (EFTA) in 2014. Late last year, talks for an FTA between the GCC and China were initiated. Under the circumstances, an increasing number of GCC member countries are advocating the necessity of an FTA between South Korea and themselves.
On the part of South Korea, its FTA with the GCC has a positive effect on manufacturing exports. In addition, price competitiveness can be enhanced in its oil refining, petroleum and chemical industries in that South Korea imports 66% of crude oil it uses from the GCC. According to some experts, the tariff reduction effect to result from the FTA is estimated at US$930 million, close to that of its FTA with the United States. Back in 2009, South Korea and the GCC discussed elimination of the 3% tariff on crude oil.
According to the Korea International Trade Association, South Korea’s imports from the GCC totaled US$105.8 billion in 2013 and fell to US$42.6 billion last year. The imports included crude oil (US$28.1 billion), natural gas (US$6 billion) and naphtha (US$5.1 billion). Last year, South Korea’s exports to the GCC added up to US$14.3 billion, including cars (US$3.2 billion), auto parts (US$0.4 billion), cigarettes (US$0.4 billion) and ships (US$0.2 billion).