S. Korea-C. America FTA to partially take effect

South Korea's trade ministry said Monday that the bilateral free trade agreement with a group of Central American countries will partially go into effect this week in the latest in a series of free trade deals that help Asia's No. 4 economy diversify its export portfolio in the face of growing protectionism and uncertainties in the trade environment.

South Korea's free trade pact with Honduras and Nicaragua will go into effect on Tuesday as the first step of the comprehensive FTA covering five Central American countries, also including Costa Rica, El Salvador and Panama, according to the Ministry of Trade, Industry and Energy.

The National Assembly ratified the FTA in August.

The FTA with the remaining three countries will be implemented in the near future as soon as they conclude domestic procedures, the ministry said.

Under the agreement, South Korea and the Central American countries will immediately or gradually lift tariffs on more than 95 percent of traded products.

Taking protests from local farmers into consideration, rice, the staple grain for Koreans, is not included in the deal. Tariffs on other sensitive agricultural products are also set to be maintained or reduced over a long period.

The FTA will help South Korea to expand shipments to the Central American market of not only major products such as automobiles and steel but also cosmetics and pharmaceutical goods, the ministry said.

Based on stronger economic ties, South Korean firms are anticipated to expand their participation in state projects such as the construction of infrastructure in Central America as well, it added.

Outbound shipments to the five countries reached US$2.5 billion in 2018, up 14.6 percent from a year earlier, according to the data compiled by the Korea International Trade Association.

In 2018, South Korea mainly exported ships, automobiles and steel to the region, while importing ships, coffee and medical instruments in return.

Following the implementation, South Korea has expanded the scope of its FTA deals in the Americas, which also cover the United States, Canada, Peru, Chile and Colombia.

South Korea has been making efforts to diversify its trade portfolio, especially with emerging countries, to ease its heavy dependence on China and the United States. The protracted Sino-U.S. trade dispute has been rising as one of the major hurdles for the country's exports.

The country's outbound shipments fell 21.8 percent in the first 20 days of September and are set to drop for the 10th consecutive month on-year amid growing protectionism and falling global prices of memory chips, the country's mainstay export product.

The latest FTA with Central America is also notable amid the growing trade tensions between South Korea and Japan, sparked by historical issues stemming from Tokyo's 1910-45 rule of the Korean Peninsula.

Source: Yonhap News