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Upgrading the CEPA with South Korea

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September 26, 2017

Why in news?

  • India has decided to upgrade its existing trade pact with South Korea.
  • The domestic industry has flagged concerns over the agreement.

What is CEPA?

  • Comprehensive Economic Partnership Agreement - CEPA, was a trade deal signed between India & South Korea in 2009.
  • The CEPA has increased bilateral trade volumes by over 50%.
  • Many Korean companies have penetrated deep into the Indian consumer goods market and have directly benefitted from CEPA.
  • Recently in a review meeting, both countries have decided to upgrade the CEPA at the earliest – possibly by 2018.
  • This has angering domestic exporters, who claim the pact has disproportionately helped Korean exporters.

What are the concerns about CEPA?

  • Trade Deficit – India’s trade defict with South Korea is continuously worsening with time.
  • While India imported $12.58 billion worth of goods from South Korea in 2016-17, its exports totalled only $4.24 billion.
  • Misuse - The Duty free import facility for gold from South Korea was found to be misused by round tripping.
  • Recently, the Directorate General of Foreign Trade – DGFT, had to withdraw the zero-duty import facility to plug the same.

What is the way ahead?

  • A focus on enhancing market access and strengthening the rules of origin will be the key for India to improve its exports.
  • Underlined the importance of pushing trade in services as a prime mover of global growth will also benefit India’s cause.
  • Caution needs to be exercised for broadening the terms of the deal as most of our existing bilateral trade engagements have faultered. 

 

Source: Business Standard

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