Upgrading the CEPA with South Korea

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