Korea-Chile FTA Set to Remove Tariffs on 96 Percent of Traded Items in 10 Years

The ratification of the Korea-Chile FTA was finally passed at the National Assembly on February 16 on its fourth attempt.

The endorsement, passed one year after the February 15, 2003 signing of the treaty, shows that Korea is now part of the general trend of international trade.

On February 16, the National Assembly session, attended by 234 out of a total of 271 members, passed the ratification in an open 162:71 vote with one abstention.

The treaty will take effect starting March after exchanging of letters of understanding between the two countries. Under the treaty, Korea and Chile will remove tariffs on 96 percent of their trade items within the next 10 years, excluding some sensitive ones including rice, beef, garlic, and pepper.

Once the treaty becomes effective, Korea will immediately lift tariffs on 9,740 out of the 11,170 items named in the treaty. Among them are 224 agrarian products such as animal feed, wool, and coffee and 9,101 industrial goods and 415 aquatic products. Chile also will immediately remove tariffs on 2,450 out of the 5,894 items covered in the FTA. Especially, all tariffs will be removed on TVs, automobiles, computers and cellular phones, the major Korean export goods.

The Korea-Chile FTA is Korea’s first and Asia’s first intercontinental free trade agreement.

Prime Minister Goh Kun said before the endorsement, “The government will take over three percent of the eight percent interest rate on agrarian loans for farmers who have paid 10 percent of the loans as long as it does not incur losses to the government.”

Agriculture and Forestry Minister Huh Sang-man said, “For the three percent takeover, about 203 billion won will be included in an additional government budget.”

The Federation of Korean Industries, the Korea Employers Federation and the Korea International Trade Association said in their statements, “The ratification of the FTS will not only greatly help improve Korea’s credit ratings, but also will help increase exports with a better competitive edge for the country’s industry goods in the Chilean market.”

Presidential spokesman Yoon Tai-young said, “The FTA ratification will offer a turning point for Korea to partake in the pitched international competition of the global era.”

“Ratification efforts set a bad example by causing divisions among politicians, the lack of political leadership, and resistance from some farmers’ organization,” said Prof. Kwok No-seong of the department of international trade at Dongguk University. “A system such as an international dispute resolution organization needs to be in place to coordinate different social interests.”

After ratifying the FTA, the National Assembly passed bills on a special amendment on the reduction of farmers’ and fishers’ debts, on special legislation for the promotion of the rural community, and on new FTA tariff regulations.

It also passed the endorsement for the appointment of Lee Sang-kyung as a new Constitutional Court judge.

The FTA is effectively a bilateral or multilateral treaty for market integration by breaking trade barriers between member countries and by allowing free flows of communities, services, and government supply contracts. The member countries can still have independent trade policies for non-member countries.