Foreign Policy Watch: India-South Korea

India seeks Tariff Elimination on key items in CEPA Talks with South Korea

Prelims Only | International Relations | Mains Paper 2: Bilateral, Regional and Global Groupings and agreements involving India
Note4Students

From UPSC perspective, the following things are important :

Prelims level: Comprehensive Economic Partnership Agreement (CEPA)

Mains level: India's trade deficit

Why in the News?

  • India wants, South Korea to eliminate tariffs on items such as varieties of meat, milk, fruits, fish, stones, yarn, and petroleum products.
    • These items were previously exempted or protected against steep cuts in the India-Korea Comprehensive Economic Partnership Agreement (CEPA).

What is CEPA?

Details
Definition A CEPA is a broad trade agreement that encompasses trade in goods and services, investments, intellectual property rights, and economic cooperation.
Key Components
  • Trade in Goods: Reduction/elimination of tariffs and non-tariff barriers.
  • Trade in Services: Liberalization of service sectors.
  • Investment: Protection and promotion of investments.
  • Intellectual Property Rights (IPR): Strengthening protection of IPR.
  • Economic Cooperation: Collaboration on economic and technical aspects.
  • Dispute Resolution: Mechanisms for resolving disputes.
Objectives
  • Enhance bilateral trade.
  • Promote investment.
  • Foster economic integration.
  • Encourage innovation and economic growth.
Examples
  • India-Japan CEPA: Signed in 2011, focuses on tariff reduction, service trade liberalization, and investment promotion.
  • India-Mauritius CECPA: Effective from April 2021, includes provisions on trade in goods, services, and investment.
  • India-UAE CEPA: Entered into force on May 1, 2022
Significance for India
  • Economic Growth: Provides new markets for Indian goods and services.
  • Job Creation: Increased trade and investment can create jobs.
  • Technological Advancements: Access to new technologies and best practices.
  • Strategic Partnerships: Strengthens economic and strategic ties.
Challenges
  • Implementation Issues: Requires robust legal and institutional frameworks.
  • Domestic Industry Impact: Concerns about increased competition.
  • Regulatory Harmonization: Differences in regulatory standards can pose challenges.

India-South Korea CEPA: A quick recap

  • The India-South Korea CEPA was signed in August 2009 and implemented in January 2010.
  • It covers trade in goods, investments, services, and bilateral cooperation.
  • Tariff Concessions:
    • India offered tariff elimination or concessions on 83.8% of tariff lines from South Korea.
    • While South Korea offered concessions on 93.2% of tariff lines.

Upcoming Negotiations

  • Trade Deficit Focus: Narrowing the trade deficit with South Korea is high on India’s agenda.
  • Stakeholder Involvement: Indian industry stakeholders have been provided with a draft request list and asked to suggest more items for tariff cuts or propose deletions if needed.
  • Standards and Technical Barriers: The Department of Commerce has requested the industry to share issues related to SPS (Sanitary and Phytosanitary) and TBT (Technical Barriers to Trade) standards faced while exporting to South Korea.

Back2Basics:

Sanitary and Phytosanitary (SPS) Measures:

  • SPS measures are protocols implemented by countries to protect human, animal, and plant life from diseases, pests, and contaminants. 
  • These measures are primarily focused on ensuring the safety of food products and preventing the spread of diseases and pests across borders.
  • SPS measures must be based on scientific evidence and risk assessments to ensure they are appropriate and effective.
  • Examples: quarantine requirements for imported plants and animals, limits on pesticide residues in food, and import bans from regions affected by specific diseases.

Technical Barriers to Trade (TBT):

  • TBT are regulations and standards related to product safety, quality, and environmental impact.
  • They aim to protect human health and safety, animal and plant life, the environment, and to prevent deceptive practices.
  • These measures should not create unnecessary obstacles to international trade and must be transparent and non-discriminatory.
  • Examples: Labeling requirements for food products, safety standards for electrical appliances, and environmental regulations for vehicle emissions.

Major Issue: Trade Deficit Concerns

  • Trade Deficit Focus: Reducing the trade deficit with South Korea is a key discussion point for India.
    • Before CEPA (2007-09), India’s average exports to South Korea were $3.4 billion, with imports at $7.3 billion, leading to an average trade deficit of $4 billion.
  • Trade Statistics: In 2023-24, India’s imports from South Korea were $21.13 billion, while exports were only $6.41 billion.
  • Post-CEPA Data: After CEPA (2022-24), average exports increased to $7.1 billion, and imports surged to $19.9 billion, resulting in an average trade deficit of $12.8 billion.
  • GTRI Analysis: The Global Trade and Research Initiative (GTRI) report indicates a 220% increase in the trade deficit from the pre-CEPA period to the post-CEPA period.

PYQ:

[2015] The terms ‘Agreement on Agriculture’, ‘Agreement on the Application of Sanitary and Phytosanitary Measures’ and Peace Clause’ appear in the news frequently in the context of the affairs of the:

(a) Food and Agriculture Organization

(b) United Nations Framework Conference on Climate Change

(c) World Trade Organization

(d) United Nations Environment Programme

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