Korea and China officially signed a free trade agreement (FTA) on Monday, opening a new era of cooperation.
Trade, Industry and Energy Minister Yoon Sang-jick and China’s Minister of Commerce Gao Hucheng signed the Korea-China FTA in Seoul, after three years of negotiations.
The deal will be effective after the National Assembly ratifies it.
“The Korea-China FTA will make a platform for multidirectional cooperation between the two countries seeking new growth momentum together, on top of expanding trade and investment,” Yoon said.
Under the agreement, 91 percent of Korea’s goods exported to China will become exempt of tariffs within 20 years.
Studies show the deal is expected to boost real GDP by 0.96 percent and increase consumer benefits by $14.6 billion, on top of creating 53,805 jobs over the next 10 years.
The ministry said that the positive effect on the economy would be even bigger when considering the qualitative aspects, such as opening up the service market, demolishing trade barriers and promoting investment.
Korea’s small and medium-sized companies have especially huge expectations for the FTA, with exports of consumer goods such as fashion, cosmetics, home electronic appliances and food expected to increase.
The FTA with the world’s second-largest economy is also raising hopes that Korea will become a global FTA hub.
With the signing of the Korea-China FTA, Korea became the only major economy to have signed FTAs with the world’s three biggest economies _ the United States, China and the EU. Korea has signed FTAs with 52 countries, representing 73.45 percent of the global economy.
China, whose GDP is seven times larger than that of Korea, has recorded over 7 percent economic growth each year.
The private sector committee on FTAs, comprised of 42 business lobby groups and research institutes, said in a statement on Monday that it expected the deal to open a new chapter.
“The Korea-China FTA will enable our businesses to get the upper hand on competitors in the Chinese market,” the committee said. “To maximize the economic effect of the deal, it should go into effect as early as possible.”
The committee also urged the government to minimize damage to SMEs that compete with Chinese companies in the labor-intensive manufacturing sector.