A new free trade agreement (FTA) between China and South Korea is set to come into effect later this month following years of negotiating.
Having agreed on the terms of the FTA back in October, the two countries will be putting its provisions into effect on December 20th, with the aim of encouraging and facilitating trade between businesses in the two regions.
An initial set of tariffs will be eliminated on the day the FTA goes into effect, with the second round of rate cuts following on January 1st 2016. Lowering tariffs twice within a short period of time is expected to have an immediate positive impact on export-driven Korean businesses, which have been struggling of late due to sluggish global trade performance.
Diplomatic letters were exchanged in Beijing earlier this week to finalise the implementation, following on shortly from the South Korean parliament's decision to ratify the bill despite prior political disagreement over the FTA between rival Korean parties, reports the Korea Herald.
Implementation of the FTA with China comes more than five months after the pact's June signing by leaders of the two countries, with more than 14 roundtables having taken place since negotiations began in May 2012.
A statement from the South Korean trade ministry said: "The two sides have consistently worked for a swift implementation of the deal based on the common goal of lifting barriers within this year."
As a result, Korean businesses are expected to secure a favourable position in the Chinese market over rivals from Japan and the US. Tariffs on Korean imports from China currently valued at $42 billion (£27.74 billion) will be eliminated, as will duties on exports to China worth $73 billion. It will also remove tariffs on more than 90 per cent of products, with automobiles and rice remaining protected.
Talks will continue between the two countries to potentially lift barriers on a wider range of industries, including legal services, engineering, green technology and entertainment.
Park Chong-hoon, head of Korea Economic Research at Standard Chartered Bank Korea, said in a recent report: "Major items such as semiconductors and mobile devices are already being exported without tariffs, but the gradual tariff reduction on other products over the next five to 20 years will produce more tangible, positive outcomes."