Israel, South Korea conclude talks on Free Trade Agreement
In a move that is expected to significantly reduce prices for cars, electronics and even soy sauce to Israeli consumers, Israel and South Korea announced the conclusion of negotiations for a Free Trade Agreement on Wednesday.
Economy and Industry Minister Eli Cohen and visiting South Korean Trade Minister Yoo Myung-hee made the declaration at a ceremony in Jerusalem.
The agreement does not extend to Israeli goods made beyond the Green Line, and - as is the case with Israeli trade agreements with others, such as the EU and the US - Cohen has said that the government will give “complete compensation” to Israeli manufacturers in Judea and Samaria.
This is Israel's first free trade agreement with an Asian country, and marks a dramatic change from years past when South Korea was hesitant to cultivate close commercial ties with Israel, out of concern that it would harm their trade relations with the far bigger market in the Arab and Muslim worlds.
One diplomatic official said that this attitude began to change when Israeli trade tides began flourishing over the last decade with China and Japan, and when it became an open secret that Persian Gulf countries were cooperating with Israel on a variety of levels under the radar screen.
Cohen heralded this as a “historic agreement” that reflects “the policy of the ministry to assist in diversifying exports and open new markets for Israeli industry. South Korea is an important trade partner for the State of Israel.”
South Korea is the world's 11th largest economy, and once the agreement is signed by both government and ratified by their parliaments – a process expected to take another year – it is anticipated that the agreement, by taking tariffs of Israeli exports, will make them much more competitive in the South Korean market.
In 2018, trade between Israel and South Korea amounted to approximately $2.5 billion, an almost 15% increase over 2017. It is expected that that the free trade agreement will increase bilateral trade by some $100 million in the near future. Bilateral trade has increased by some $800 million over the the last decade, but at a much slower rate than with other Asian economic giants such as China and Japan.
Upon the agreement's taking effect, customs duties will be lowered on South Korean goods imported into Israel such as automobiles and automobile parts, refrigerators, medical equipment, electronic components, toys and games, plastics and chemicals and soy sauce.
Likewise Israeli exports to South Korea will be exempt from customs duties, including on machinery and electrical equipment, mechanical devices, fertilizer, medical equipment, cosmetics, plastics, metals, fruit juices and wine.
South Korea currently has 15 free trade agreements with various countries and trading blocs, including the US, the EU, India and China.
Israel has a Free Trade Agreement with seven blocks or Individual countries: the EU, US, Canada, Mexico, the European Free Trade Association (Iceland, Lichtenstein, Norway and Switzerland), Mercosur (Brazil, Argentina, Paraguay and Uruguay) and Turkey. In addition, three other agreements have been signed, and are waiting for ratification: Colombia, Panama and Ukraine.
In 2018, Israeli exports were at a record high and passed the $110 billion threshold.