35% of Mid-sized Companies Say "Phase 2 of Korea-China FTA Negotiations Requires Expansion of Tariff Benefits"

Korea Federation of Mid-sized Enterprises Announces Results of Survey on Difficulties Faced by Mid-sized Companies Entering the Chinese Market

The mid-sized business sector has expressed the opinion that when resuming the second phase of the Korea-China FTA negotiations, the focus should be on increasing tariff benefits for Korean companies. The Korea Federation of Mid-sized Enterprises announced the results of the "Survey on Difficulties Faced by Mid-sized Enterprises Entering the Chinese Market," which included this opinion, on the 17th. This survey was conducted from January 14 to 22 of this year, targeting 102 mid-sized companies exporting to China.

According to the survey, 34.3% of mid-sized enterprises responded that additional tariff reductions and expanded exemptions under the Korea-China FTA are necessary for 15 items, including automobile parts, semiconductor wafers, and manufacturing equipment. A representative from the Federation stated, “Mid-sized enterprises in various fields such as automobiles, semiconductors, shipbuilding and marine parts, special gases, and chemical products pointed out the low effectiveness of the current Korea-China FTA tariff levels,” adding, “This is a point that must be thoroughly reconsidered to enhance the business viability of entering the Chinese market based on the Korea-China FTA and to strengthen mutual cooperation through balanced trade.”

Additionally, 29.4% of mid-sized enterprises reported experiencing China’s non-tariff barriers such as ‘technical regulations (40%)’ and ‘customs clearance delays (36.7%)’ in this survey. It was explained that difficulties faced by mid-sized enterprises due to China’s non-tariff barriers, which have been continuously raised even before the Korea-China FTA was signed, still persist. Regarding the utilization level of the Korea-China FTA, 64.7% responded that they ‘utilize it well,’ but 35.3% of mid-sized enterprises were found to not fully utilize it due to reasons such as ‘lack of FTA-related information (30.6%)’ and ‘minimal cost reduction effects (25%).’ The Federation said, “In the situation where the second phase of the Korea-China FTA negotiations, agreed to resume on May 27 last year, is delayed due to domestic and international circumstances, it is necessary to thoroughly prepare by broadly collecting specific difficulties from companies to enhance the negotiation outcomes, and to strengthen programs that promote the utilization of the Korea-China FTA such as information provision and consulting.”

Separately from the Korea-China FTA, the top task to support the active entry of mid-sized enterprises into the Chinese market was ‘additional tariff reductions and expansion of concession items (37.3%).’ This was followed by ‘accelerating the pace of existing tariff reductions (22.5%),’ ‘expanding market opening for services and investment (16.7%),’ and ‘strengthening investor protection and investment stability (13.7%).’

Lee Ho-jun, Executive Vice Chairman of the Federation, said, “Although 64.7% of mid-sized enterprises, which is more than half, responded that they actively utilize the Korea-China FTA, this is relatively low compared to the Korea Customs Service’s Q3 2024 report showing utilization rates of 82.8% for exports and 91.5% for imports among all companies,” adding, “Considering that mid-sized enterprises account for 17% of total exports, we will spare no support as an economic organization to enhance the product and technology competitiveness of mid-sized enterprises entering the Chinese market, alongside government negotiation efforts based on field demands such as additional tariff reductions by industry to improve the performance and global competitiveness of mid-sized enterprises.”