KOR-ENG FTA Improvement Negotiations Launched... Promoting Introduction of New Trade Norms in Supply Chain, Energy, Digital, etc.

Plan to Hold First Official Negotiation in January Next Year
Separate Agreement to Extend Origin Exception Clause for 2 Years

The governments of South Korea and the United Kingdom have decided to begin negotiations to improve the Free Trade Agreement (FTA) in conjunction with President Yoon Suk-yeol's state visit to the UK.

According to the Ministry of Trade, Industry and Energy on the 21st, Minister Visitation Kyu will sign the declaration to commence the Korea-UK FTA improvement negotiations together with UK Secretary of State for Business and Trade Kemi Badenoch on the 22nd (local time).

The existing Korea-UK FTA was the first FTA signed with an Asian country as the UK pursued its withdrawal from the European Union (Brexit), signed in 2019 and effective from January 2021. It is evaluated to have early resolved uncertainties in the business environment between the two countries and driven the development of economic cooperation. However, since the existing agreement mainly focused on market opening for goods and services, there has been a need to reflect the latest global trade norms.

The first-generation FTAs (2000s) focused on market opening for goods and services, while the second-generation FTAs (2010s to present) introduced norms for fair competition environments such as labor, environment, and competition. The improvement negotiations currently underway are characterized by establishing a new third-generation FTA model that goes beyond the existing scope to reflect rapid changes in the global economic and trade environment, such as strengthening economic security and stabilizing supply chains.

To this end, the Korea-UK authorities agreed through preparatory meetings not to limit the updates to existing FTA agreement areas but to include new trade norms across various fields such as supply chains, energy, digital, and bioeconomy, thereby establishing a comprehensive and future-oriented strategic trade relationship.

An official from the Ministry of Trade, Industry and Energy stated, "If the new Korea-UK FTA is enacted, it is expected to promote supply chain cooperation between the industrial ecosystems of both countries through simplified customs procedures for key materials and components, and create new business opportunities by removing technical barriers and boosting investment in clean energy and bioeconomy sectors." They added, "It is also expected to lead global digital trade norms such as free cross-border data transfers and permanent zero tariffs on electronic transmissions, thereby creating new markets through mutual expansion of digital trade including the advancement of K-content." The ministry also anticipates a significant enhancement in trade facilitation between companies of both countries through improvements in rules of origin for tariff-free exports.

Furthermore, the two countries separately agreed to extend by two years (from the end of 2023 to the end of 2025) the special rules of origin that recognize products manufactured using parts and materials procured from the European Union (EU) as Korean-origin products. This is expected to expand exports by securing price competitiveness for Korean products such as automobiles.

Before the declaration to commence negotiations, both countries recently completed all necessary procedures, including domestic consultations. Preparatory consultations by sector will be conducted until the end of this year, and the first official round of negotiations is planned to be held in Korea in January next year.