[Asia Economy Reporter Kwon Haeyoung] The Korea-Central America Free Trade Agreement (FTA) will be fully implemented on the 1st of next month.
The Ministry of Trade, Industry and Energy announced on the 25th that Panama, the only country where the Korea-Central America FTA had not yet been implemented, recently completed its domestic implementation procedures, and thus the entire Korea-Central America FTA will be enforced starting from Panama's implementation on the 1st of next month.
The Korea-Central America FTA was signed in February 2018 between Korea and five Central American countries: El Salvador, Nicaragua, Costa Rica, Honduras, and Panama. Until now, it had been partially implemented with the four Central American countries excluding Panama.
With this full implementation, a vast FTA network integrating Central America as well as North and South America will be completed. Previously, Korea had signed FTAs with American countries including the United States, Canada, Chile, Peru, and Colombia.
Korea and the five Central American countries have opened their markets by more than 95% based on the total number of items.
In Panama's case, the government expects the largest tariff elimination effect through liberalization reaching 99.3% based on total import value. Trade is expected to become more active not only in Korea's key export items such as automobiles and steel but also in various small and medium items including pharmaceuticals, cosmetics, and medical devices. Aloe beverages, which account for more than 90% of Korea's exports to Panama, will have their tariffs (10%) immediately eliminated, and the market share, currently ranked second, is expected to increase further. In particular, Korea's tariffs on Panamanian coffee will be immediately eliminated, which is expected to help improve the price competitiveness of Korean companies exporting processed coffee.
Korea is the first Asian country to sign an FTA with Central America, allowing it to enjoy a market preemption effect compared to competitors such as China and Japan.
An official from the Ministry of Trade, Industry and Energy said, "Korea is the fifth largest user of the Panama Canal in the world, and logistics bases in Panama will serve as hubs for more active transshipment trade with neighboring countries."
Additionally, with the opening of government procurement markets in Central American countries, participation of Korean companies in major projects in the energy, infrastructure, and construction sectors is expected to increase. In particular, Panama has also opened up private investment projects, providing a foothold for Korean construction companies to participate in large-scale construction projects.
On the same day, Kim Jeonghoe, Director General of Trade Negotiations at the Ministry of Trade, Industry and Energy, held a meeting with the ambassadors of the five Central American countries in Korea to commemorate the full implementation of the Korea-Central America FTA. The five ambassadors agreed to fully activate implementation consultation channels such as the 1st FTA Joint Committee and its subordinate Implementation Committee within this year, and also agreed to further discuss the accession of neighboring Central American countries including Guatemala.
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