Continuity deal between UK and South Korea is signed - what next for trade?

Brexit | | MIC Customs Solutions |

The UK and South Korea have signed a continuity Free Trade Agreement. What does this mean, exactly?

The UK has succeeded in agreeing another continuity agreement for the post-Brexit period, this time with South Korea. However, under current circumstances, this development is perhaps as much a relief to South Korea as it is to Britain.

Let's take a look at the details of the agreement and what it will mean for importers and exporters in both nations.

The deal is done

British secretary of state for international trade Liz Truss and Korean minister of trade Yoo Myung-Hee met in London this month to sign a continuity Free Trade Agreement, which will allow businesses to carry on trading freely after October 31st 2019.

This is aimed at strengthening the trade relationship between the UK and South Korea, which has already been increasing by around 12 per cent per year since 2011.

As far as possible, the deal intends to replicate the EU-Korea Free Trade Agreement and should mean it will be 'business as usual' once the UK exits the EU in two months' time.

This is sure to be viewed positively by business owners in both Britain and South Korea. In 2017, around 6,900 companies were exporting to Korea, while the fourth largest economy in Asia exports largely cars and ships to Britain and imports oil and whisky, among other items.

Ms Truss commented: "I'm delighted to sign this trade deal with one of the biggest markets covered by existing EU trade agreements."

"Signing of the FTA will remove much Brexit uncertainty out of our long, valuable economic partnership. In this challenging time, we took a proactive step, and our Free Trade Agreement today sends a signal to the world of our strong, collective support for free, open, rules-based trade," added Ms Yoo.

The agreement will now go through the necessary internal procedures before being brought into force after Brexit. In the meantime, Britain will continue to be covered by the EU-Korea agreement.

This development brings the total number of trade continuity agreements signed by the UK to 13 with 38 countries and is sure to be a relief for British trade ministers as they seek to retain a sense of normality during this unsettled time.

A light in the dark for Korea, too?

However, as mentioned earlier, the agreement of the trade deal is also likely to be a relief for South Korea as it too attempts to negotiate a difficult period for trade.

For the first 20 days of August 2019, its exports declined 13 per cent year-on-year in what strongly indicated a ninth consecutive month of decline.

Sales of semiconductors dipped by 30 per cent, while exports to China fell 20 per cent, both of which were attributed to the global slowdown in the electronics sector and the US-China trade war, respectively.

Indeed, due to its reliance on both China and the technology industry, South Korea is being disproportionately affected by the tough time being had by both.

Added to this is the fact that South Korea has now become embroiled in a dispute with Japan, which has resulted in the latter now removing the former from its favoured trade partner status and imposing export controls on its electronics.

In July, Japan had already applied controls on materials used for memory chips and display screens, which had hit South Korea hard.

The spat arose when a court in South Korea last year ruled that Japanese companies should pay reparations to Koreans over forced labour during the Second World War.

Earlier than this, in the spring of 2017, there had even been suggestions that US president Donald Trump would scrap the US-Korea Free Trade Agreement, only for him to about-turn and sign it in September last year.

Against this volatile backdrop, South Korea may be glad to have a positive agreement in writing and to know that it is keeping one strong trade route open when several others are under strain.