Israel and South Korea will sign a free trade agreement (FTA) next week, Israel's Ministry of Foreign Affairs has confirmed. The FTA will be signed by Zoom in the presence of the ambassadors to the two countries and senior government ministers.
The two countries have been discussing an FTA for the past decade but the Korean were concerned about an adverse reaction in the Arab world. The agreement was finally given the green light after the normalization deal was signed between Israel and the UAE in September.
One of the most major effects that the FTA will have will be the lowering of the price of car imports from Korea. In 2018, 44% of the value of imports from South Korea was in cars, with an overall value of $758 million before tax.
About 33% of the new cars on Israel's roads are made by South Korean companies Hyundai and Kia. Some of the models manufactured by Chevrolet and Renault are made in Korea but about half of the Hyundai and Kia cars imported into Israel are made in Europe and Turkey but some of the parts are made in Korea. It is unclear which cars will qualify for a 7% reduction in import duties because they arrive from Korea. There is also concern that the manufacturers and importers may raise prices and put some of the savings into their own pockets.
The FTA could also lower the prices of the wide range of electronic goods imported from Korea including such brands as Samsung and LG.
Finally signing the FTA with South Korea will also be an impetus for concluding the FTAs being negotiated between Israel and Japan and Israel and China.
Published by Globes, Israel business news - en.globes.co.il - on December 9, 2020
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