South Korea and Indonesia have reached a preliminary trade deal equivalent to a free trade agreement but also including broader economic cooperation. The agreement is expected to help boost trade between the two nations by nearly 50 percent by 2022.
The move is part of South Korea’s on-going efforts to expand exports in the region and comes after a five-year break from negotiations between the two nations. Under the deal, South Korea and Indonesia will eliminate tariffs on 95.5 percent and 93 percent of products, respectively. Tariffs on steel, cars, auto parts and synthetic resin will be eliminated, allowing South Korean exporters to boost supply into Indonesia, but many agricultural products will not be included to protect South Korean farmers.
Indonesia’s exports to South Korea include coal, copper, rubber and tin. The tariffs are expected to further facilitate export of Indonesia fish and beer.
The tariff cuts are greater than the 90.2 percent and 80.1 percent in existing free trade agreement between South Korea and ASEAN member countries. They are expected to be officiated in the first half of 2020.
Trade volume between South Korea and Indonesia stood at $20 billion in 2018, up from $17.9 billion in 2017, according to South Korean government data.
South Korea is also negotiating trade deals with Malaysia and the Philippines, in a move that is seen as a way of reducing reliance on the U.S. and China, although it has deals with these nations too. The nation is also developing a digital platform to facilitate export contracts, customs clearance and logistics.
South Korea’s exports fell 11.7 percent year-on-year to $44.7 billion in September, part of a decline that has been experienced this year due to weak prices of semiconductors and the trade war between the U.S. and China.