Israel, South Korea complete free trade agreement talks

Eli Cohen and Korean counterpart Yoo myung-Hee / Photo: Yossi Zamir
Eli Cohen and Korean counterpart Yoo myung-Hee / Photo: Yossi Zamir

The customs duties exemptions in the draft agreement do not apply to Judea, Samaria, the Golan Heights, or East Jerusalem.

Minister of Economy and Industry Eli Cohen today held the "completion of negotiations ceremony for a free trade agreement" with South Korea. The occasion was an odd one, because such a ceremony is usually conducted when countries sign agreements, not to mark the end of negotiations. In January 2019, for example, Cohen signed a trade agreement with Ukraine, but no end-of-negotiations ceremony was held on that occasion.

Negotiations between Israel and South Korea have been taking place for three years. The South Koreans insisted on excluding Judea and Samaria, the Golan Heights, and East Jerusalem from the agreement, so that the concessions on customs duties and rates would not apply to exports of goods and services from companies located in these regions.

Prime Minister Benjamin Netanyahu planned to make an official visit to South Korea early this summer and sign the agreement during his stay there, but this plan fell through. The visit to South Korea was to have been a stop in his visit to Japan, which eventually also fell through.

Today's announcement by the Ministry of the Economy and Industry said that the occasion was a historic one: "Israel and South Korea have declared the completion of their negotiations for a free trade agreement in the presence of South Korean Minister for Trade Yoo Myung-hee and Minister of Economy and Industry Eli Cohen."

According to the announcement by the Ministry of Economy and Industry, the agreement will give Israeli exporters a competitive edge in the South Korean market and facilitate their activity, thereby bolstering Israeli exports. "When the agreement between Israel and South Korea takes effect, there will be mutual reductions in customs duties on imported and exported products, together with improvement and streamlining of trade in a range of additional areas, such as services, investments, and standards," the Ministry of Economy and Industry said.

At the same time, goods and services of companies from the Golan Heights, Judea, Samaria, and East Jerusalem will not be included in the agreement. In order to allow fair competition, the Israel government will indemnify these companies for their loss from the state budget.

Trade between Israel and South Korea totaled $2.5 billion in 2018, over 15% more than in 2017.

Under the agreement, customs duties will fall from 6.5% to 0% on fertilizer exports from Israel, from 15% to 0% on wine exports, from 6.5% to 0% on certain personal care and makeup items, and from 8% to 0% on medical monitoring and imaging systems.

Customs duties will also fall from 7% to 0% on exports of vehicles from South Korea to Israel, from 12% to 0% on exports of refrigerators and freezers, and from 12% to 0% on exports of industrial machinery, game consoles, bathtubs, and sinks.

Cohen said, "The free trade agreement with South Korea is a historic agreement. For the first time, an agreement has been signed with an East Asian country that is one of the leading global economic powers."

Attorney General: This an end-of-negotiation ceremony, not an agreement. The next government can change the agreement

Attorney General Avichai Mandelbit said that while negotiations had been completed, there was no agreement binding on the next government. His remarks were in answer to a query by MK Zvi Hauser (Blue White), who complained that the agreement discriminated against Israeli companies operating in Judea and Samaria, the Golan Heights, and East Jerusalem and violated the Law for Prevention of Damage to State of Israel through Boycott.

"The Israeli government does not intend to sign a free trade agreement. The Ministry of Economy and Industry says that a ceremony will be held in the presence of the prime minister, the minister of economy and industry, and the South Korean minister for trade, in which a declaration about the completion of negotiations will be signed. This ceremony does not tie the hands of the next government, should it decide to alter the agreement," Mandelblit wrote.

Writing about the territorial application of the agreement, Mandelblit added, "The decision is political, not legal. It lies within the heart of the government's authority, and I found no legal grounds for intervening in it." Mandelbit also noted that the agreement does not call for a boycott in the sense of the anti-boycott law, despite excluding certain regions in the country.

Published by Globes, Israel business news - en.globes.co.il - on August 21, 2019

© Copyright of Globes Publisher Itonut (1983) Ltd. 2019

Eli Cohen and Korean counterpart Yoo myung-Hee / Photo: Yossi Zamir
Eli Cohen and Korean counterpart Yoo myung-Hee / Photo: Yossi Zamir
Twitter Facebook Linkedin RSS Newsletters גלובס Israel Business Conference 2018