RoK free trade wins won’t happen overnight

14:00 | 27/05/2015 Trade

Vietnam’s newly-signed free trade agreement (FTA) with the Republic of Korea (RoK) is expected to provide significant economic benefits— but for rice and other agricultural exports the impact will not be felt in the short term.

RoK free trade wins won’t happen overnight

According to this latest free trade deal, the RoK will eliminate import tariffs on a total of 409 goods while Vietnam will lift tariffs on 272 goods, all phased in over the next 15 years.

Seoul currently imposes a 5% import duty on all foreign rice imports collectively up to 409,000 tonnes a year effective as of the beginning of 2015 and the FTA has no immediate effect on this quota.

In addition, the RoK imposes a 513% duty on all imports in excess of 409,000 tonnes in any one year as the RoK government looks to protect domestic farmers from foreign competition.

The top duty makes the sales price of imported Vietnamese grain more than six fold its original price and up to three times more expensive than that of rice produced domestically by RoK farmers.

The tariff is the highest level permitted pursuant to the East Asian nation’s agreement with the World Trade Organization (WTO), said an unidentified RoK agriculture ministry official.

The RoK is broadly self-sufficient with respect to rice production but, last year under the WTO agreement it was required to purchase 408,700 tonnes of foreign rice, which equated to 9% of the nation’s total demand.

Under the new scheme effective from 2015, Seoul is still legally bound to import at least 408,700 tonnes a year under its WTO agreement but is permitted to accelerate tariffs from five to a maximum of 513% once that threshold is reached.

However pursuant to the Vietnam and RoK newly signed agreement, the tariff levels on rice will be reduced to zero and quotas abolished after a period of ten years from the effective date of the FTA.

The Vietnam Chamber of Commerce and Industry (VCCI) recently organized a conference in Hanoi aimed at informing Vietnamese businesses about the FTA signed May 5.

Speakers at the conference said the situation for garlic imports, as well as other agriculture products, by the RoK, for which the import duty is 360%, is very similar by analogy to that for rice.

The VCCI said the current import duties levied by the RoK for agricultural products vary from 241% to 420%, but pursuant to the FTA, duties for these products will be suspended after a period of 10 years.

Vietnam will be able to export natural honey duty free 15 years after the agreement takes effect.

The tariff on rambutan will also be cut from the current 611.5% to no less than 20% from January 1, 2016. The import tax on tropical fruit like pineapple, guava, mango and mangosteen will also be dropped after ten years.

Meanwhile the RoK will eliminate tariffs for seven types of shrimp imported from Vietnam beginning in 2016. The quota for 2016 is 10,000 tonnes, which will be incrementally bumped up 10% annually.

By 2020, the Vietnam will be permitted to export 15,000 tonnes of shrimp annually without the imposition of import duties.

Currently, Vietnam can only ship 2,500 tonnes without import taxes under the ASEAN Korean FTA. Current tariffs are applied to imported shrimp from Vietnam are 10% to 15%.

According to the Vietnam Association of Seafood Exporters and Producers, the RoK market is the fifth largest consumer of Vietnamese shrimp, after the US, Japan, EU and China.

Vietnam also overtook China to become the largest shrimp supplier to the RoK in 2014. In 2014, the RoK imported 62,878 tonnes of shrimp, including 27,791 tonnes from Vietnam.

Source VOV News