India-Korea Comprehensive Economic Partnership Agreement

One of the most important bilateral trade agreements in recent history, India-Korea Comprehensive Economic Partnership Agreement (CEPA) has indeed done wonders for the two countries’ economies.
A watershed moment in the history of trade between these two burgeoning Asian economies certainly occurred with the signing of CEPA on August 7, 2009, and its implementation on January 1, 2010.
Comprehensive Economic Partnership Agreements (CEPAs) go well beyond traditional Free Trade Agreements (FTAs) to cover investment, IP rights, customs processes, and collaboration among many other things. Moreover, the outcome was an extensive and long-lasting economic partnership.

Objectives of the CEPA

The primary objective of the India-Korea Comprehensive Economic Partnership Agreement (CEPA) was to lower or do away with tariffs on a broad variety of items exchanged between South Korea and India. Over the years, this agreement has helped make commerce easier by slowly getting rid of taxes on some goods.

For example, under the initial agreement, India agreed to remove customs duties on over 85% of Korean imports. These include electronics, machinery, and steel. In return, South Korea pledged to reduce tariffs on many Indian exports. These include textiles, chemicals, and agricultural products. Together, these goods account for over 90% of total trade.
As a result, the volume of bilateral commerce increased dramatically, going from over $11.5 billion in 2009 to over $20 billion in 2018.
In 2018, India and South Korea decided to enhance the India-Korea Comprehensive Economic Partnership Agreement (CEPA). They recognized the need to strengthen economic ties. The revised agreement aimed to ease customs procedures, expand product coverage, and open more markets for both countries.
The improvement prioritized the removal of trade obstacles and the acceleration of dispute settlement procedures. Although with these changes, the CEPA is now more suitable for businesses and more in line with the way commerce is happening throughout the world.
Investment and services have huge untapped potential. The updated CEPA paved the way for deeper collaboration in these areas.

Expansion Due to CEPA

The CEPA has been instrumental in attracting investment from Korean industries to India. In this scenario, prominent Korean corporations like Kia Motors, Samsung, Hyundai, and LG have grown a lot in India during the past 10 years. South Korean FDI has also been flowing into India’s electronics, automotive, heavy industries, and chemical sectors, among others.
Also, Indian companies like Mahindra & Mahindra and Tata Motors have looked at possible business opportunities in Korea, although on a lesser scale.

Opportunities in Service Sector

Additionally, new prospects in the services sector have surfaced as a result of the agreement, which speaks well for their development in the future. As part of CEPA, both nations agreed to liberalize several service industries, including as banking, telecom, education, healthcare, and IT.
Korean financial companies and banks have improved their access to the Indian market, while Indian IT and engineering personnel have profited from less stringent entrance and visa requirements. This exchange of services has strengthened the cultural and personal ties between the two countries and boosted economic collaboration

CEPA Cooperative Efforts

The India-Korea Comprehensive Economic Partnership Agreement (CEPA) also encourages cooperation in intellectual property (IP), customs procedures, competition policy, and mutual recognition of standards. These laws help create a clear and predictable trade environment. This is especially important for businesses. For example, when customs agencies work together, shipments move faster. When both sides recognize standards, they avoid duplicate testing and certification.As a result, businesses reduce trade expenses significantly and conduct cross-border trade more efficiently.

CEPA Through a Political Lens

First, when seen through a geopolitical lens, the India-Korea Comprehensive Economic Partnership Agreement (CEPA) becomes more than just a trade agreement; it becomes a tool for strategic partnerships.
Second, both South Korea and India are democracies. They play key roles in the Indo-Pacific region. This gives them much in common.
Third, the India-Korea Comprehensive Economic Partnership Agreement (CEPA) offers strong, mutual benefits. Global supply chains are shifting. At the same time, economic nationalism is rising. In this context, CEPA provides a stable platform for cooperation.
Fourth, this helps both nations widen their economic relationships and minimize their reliance on long-standing trading partners.
Next, there is a common goal of regional prosperity and security in the New Southern Policy of South Korea and the Act East Policy of India.

Some Challenges to CEPA

However, despite its many benefits, CEPA still faces challenges. India imports more from South Korea than it exports. This creates a long-standing trade deficit. Indian exporters also face several issues in Korea. These include strict regulations and non-tariff barriers (NTBs). Similarly, Korean companies have concerns about doing business in India. They cite red tape and slow policy execution. As a result, both sides must address these hurdles to unlock CEPA’s full potential.
To address these concerns, the two governments are working together under the India-Korea Comprehensive Economic Partnership Agreement (CEPA). They collaborate through committees and working groups. The goal is to simplify processes, increase transparency, and ensure fair market access.
Major global events, like the COVID-19 pandemic and supply chain disruptions, impacted trade. As a result, South Korea and India began to rethink their commercial ties. In 2022, both sides agreed to speed up talks to upgrade CEPA.
These initiatives target several key areas. They address the trade imbalance and rising investments in green energy and digital technology. They also promote collaboration in critical supply chains, such as semiconductors and electric vehicle (EV) components.
On the other hand, the CEPA cooperation is always changing and adapting, and these proactive measures show that.

CEPA Resulting in Business Turnover

Moreover, industry groups in both countries support stronger business-to-business (B2B) engagement. They promote trade shows, expos, and joint ventures. Turning the India-Korea CEPA into real business results needs more than private sector efforts. Government-to-government (G2G) support is also essential. In addition, raising CEPA awareness among SMEs unlocks great potential. It helps shift the trade focus beyond large companies.

Strategic Partnerships

Finally, the India-Korea Comprehensive Economic Partnership Agreement (CEPA) has strengthened economic and strategic links between the two countries while simultaneously increasing trade quantities. As a result, it provides a versatile setting for working together on projects including products, services, investments, and more. As long as both parties are dedicated to improving and updating the agreement, CEPA will continue to be an important part of the post-pandemic economic order.

Conclusion

Thus, investors, lawmakers, and entrepreneurs must work together. They need to tap into the opportunities this partnership offers. At the same time, they must overcome the remaining challenges. India and South Korea are ready to play a key role in the Asian century. CEPA shows that economic diplomacy and cooperation can deliver powerful results.

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