Israel and Korea to sign free trade agreement
11 May 2021 - globes
Foreign Minister Gabi Ashkenazi and Economy Minister Amir Peretz will fly out to Seoul on Sunday to sign the free trade agreement.
After many delays, Israel and South Korea are scheduled to sign a free trade agreement (FTA) next week, sources close to the matter have informed "Globes." This will be Israel's first FTA with an East Asian country.
On Sunday, Israel's Minister of Foreign Affairs Gabi Ashkenazi and Minister of Economy and Industry Amir Peretz will begin a three day visit to South Korea during which they will attend the FTA signing ceremony in Seoul together with senior members of the Korean government. They will also meet with leading Korean businesspeople including top executives from Samsung and Hyundai.
The FTA will result in the cancellation of 7% customs duties on all Korean imports, thus lowering prices and the cost of living in the country.
The FTA will also boost Israeli exports to South Korea and further increase growth in the economy. Over 95% of Israeli exports to Korea will be exempt from customs duties, with the duties cut on machinery and electrical equipment, mechanical devices, fertilizers, medical equipment, cosmetics, plastic products, metals, fruit juice and wine.
In terms of imports from South Korea, customs duties will fall on vehicles and vehicle parts, refrigerators, medical equipment, electronic components, toys and games, plastic products and chemicals.
In 2020, Israel exported $890 million in goods and services to South Korea, while imports of goods and services exceeded $1.5 billion. A large part of these imports was cars, mainly from Hyundai and the other brand it owns Kia, which together have a 33% market share of cars sold in Israel.
This does not mean that all Hyundai and Kia cars will fall 7% in price, because a significant portion of them is manufactured in Europe and already tax-exempt. On the other hand, some European cars, such as VW's electric vehicles, use batteries made in Korea, so there will be an element of price reduction there.
The Ministry of Foreign Affairs and Ministry of Economy and Industry declined to comment on this report.
Israel is also in the midst of intensive negotiations with China in efforts to conclude a FTA before the end of 2021.