[News Terms] Korea-UAE 'CEPA' Agreement, What Are the Differences from FTA?

The Comprehensive Economic Partnership Agreement (CEPA) signed between South Korea and the United Arab Emirates (UAE) on the 29th is an agreement that encompasses not only the liberalization of trade in goods and services but also investment, economic cooperation, and overall economic relations. While a Free Trade Agreement (FTA) focuses primarily on market opening, CEPA differs in that it emphasizes comprehensive cooperation enhancement in addition to opening goods and services markets between the two countries. However, since CEPA also aims to promote trade liberalization, its actual content is not significantly different from that of an FTA.

Jung In-kyo, Director General of the Trade Negotiations Department at the Ministry of Trade, Industry and Energy, and Thani bin Ahmed Al Zeyoudi, Minister of State for Foreign Trade at the UAE Ministry of Economy, shake hands at the joint press conference for the formal signing of the Korea-UAE Comprehensive Economic Partnership Agreement (CEPA) held on the afternoon of the 29th at the Four Seasons Hotel in Jongno-gu, Seoul.
[Image source=Yonhap News]

South Korea concluded its first CEPA with India in September 2008. At that time, the two countries agreed on a free trade agreement under the name CEPA rather than FTA at the request of the Indian government. India prefers the term CEPA over FTA due to domestic sensitivities toward free trade.

The Korea-UAE CEPA signed on this day is the first free trade agreement South Korea has made with an individual Middle Eastern country. The Korea-UAE CEPA was actively pursued following President Yoon Suk-yeol’s state visit to the UAE in January last year and was finalized in October last year. Afterward, the necessary procedures for formal signing, including legal review of the agreement text, preparation of the Korean version, and review by the Ministry of Government Legislation, were completed, and the two countries officially signed the agreement on this day. The two countries will soon exchange written notifications certifying the completion of their respective domestic legal procedures for the ratification and enforcement of the Korea-UAE CEPA. The Korea-UAE CEPA will officially come into effect on the first day of the second month following the date of receipt of the written notification.

The CEPA agreed upon by the two countries aims to mutually open about 90% of their markets over the next 10 years. South Korea will sequentially open 92.5% of its market by the number of product items, and the UAE will open 91.2% of its market. The UAE will eliminate tariffs on South Korea’s major export items, including automobiles, automobile parts, home appliances, weapons, and agricultural, livestock, and fishery products such as beef, chicken, fruits, and ramen. Among these, automobiles will be the biggest beneficiaries. Last year, South Korea’s automobile exports to the UAE recorded $483 million, a 43% increase compared to the previous year.

Additionally, South Korea will gradually eliminate tariffs on the UAE’s key exports, including crude oil, petrochemical products, and dates. Once CEPA is enforced, the current 3% tariff on crude oil and other items will be eliminated over 10 years, and the import tariff on naphtha will be gradually reduced from the existing 0.5% to 0.25% over five years.