Korea announced that its future India strategy will have strong focus on development cooperation. Economic Development Cooperation Fund (EDCF) Framework Agreement worth 4 billion dollars is being discussed (as included in EDCF medium term strategy 22-24). A wise move! (1/x)
A significant move from Koreaโs strong emphasis on market opening through FTA (CEPA) upgrade. I argued at a recent @ORF event that while CEPA upgrade may be helpful, relying too much on it would have limitations. We need more tools for bilateral cooperation. Why? (2/x)
Korean businesses are arguing that upgrading CEPA would help them more actively seek opportunities in India. This desire to upgrade CEPA is nothing new. Back in 2015, a survey found that the demand for upgrading Korea-India CEPA was the highest. (3/x)
This result partly reflected the relatively low utilization rate of the Korea-India CEPA, which was at 56.3% by the end of 2014. (4/x)
What changes do Korean businesses want to see? First, they want relaxation of the rules of origin. Second, businesses are dissatisfied with the low level of market opening (especially because it is even lower than India-Japan CEPA that came into force in 2011). (5/x)
Korea and India have resumed their talks on CEPA upgrade in November 2022 after three years of gap caused by the COVID-19 pandemic. However, negotiations are unlikely to lead to a groundbreaking market-opening agreement for three reasons. (6/x)
First, size matters in negotiations. Back in the mid-2000s, the GDP size of Korea and India was similar. However, India now ranks 5th while Korea ranks 13th. India will soon rank 3rd. (7/x)
Second, India is in a geopolitical sweet spot so it is very busy. Moreover, India has begun to consider NEW FTAs as a way to invigorate its exports after a decade of ignoring this tool. Therefore, upgrade negotiation with Korea is likely to be a low priority for India. (8/x)
Finally, Indiaโs large trade deficits with Korea. Surplus countries often argue that large deficits are not necessarily economically harmful + are a natural outcome of econ dev. However, this argument wonโt take us very far because trade deficits are also political issues. (9/x)
Therefore, while CEPA upgrade may contribute positively to Korea-India relations, we need to diversify methods of bilateral economic cooperation. We need to work hard since we have little experience in development cooperation. We may be starting small, but let's dream big! (end)
May be of interest
@sandipmishra10 @jppjagannath1 @AVIRAL96 @DivaJain2 @nageshkum @Sachin_Chat @shreyas_k_reddy @PremeshaSaha
@sandipmishra10 @jppjagannath1 @AVIRAL96 @DivaJain2 @nageshkum @Sachin_Chat @shreyas_k_reddy @PremeshaSaha
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