A Detailed Guide On South Korean Trade Agreements

South Korea is easily one of the Asian countries that actively trade with the rest of the world. Despite having limited natural resources and a relatively small consumer market, South Korea has performed remarkably in foreign trade exchanges. It’s worth noting that foreign Trade Agreements were made to smoothen countries’ relationships as they exchange goods and services. These trade agreements impact the actions of businesses within a country. As a business owner in South Korea, you’re affected by its Foreign Trade Agreements. That’s why you need to find out everything about it. If you’re interested in learning about South Korea trade agreements, this piece is for you. Keep reading to know all the essential details that may affect your business.

What Are South Korean FTAs?

For many years, Korea has benefited from operating an open economy. Today, this jurisdiction has an elevated status among different global economies. Korea has managed to hold its head high by leveraging several bilateral Foreign Trade Agreements. Their trade agreements are built on a concept of mutual reciprocity. It’s worth noting that these actions have not gained worldwide support.

South Korea is a part of Asia-Pacific Economic Cooperation (APEC) Forum. This forum was interested in setting up FTAs between members before 2020. In February 2008, the South Korean government adopted a Foreign Trade Agreement (FTA) network as its main international trading policy. As a result, the country entered trade agreements with other world powers, such as Australia, the United States of America, the People’s Republic of China, India, New Zealand and Canada. It currently has a total of eighteen free trade agreements. But South Korea is still working to reach an agreement with Singapore, Israel, Indonesia, Philippines and Cambodia.

The Impact of Free Trade Agreements On Business

If you’re a local business in South Korea, you need to stay aware of free trade agreements and its impact on your operations. The effect of free trade agreements can be summarized into pros and cons.

Pros of Free Trade Agreements on South Korean Businesses

• The establishment of Foreign Trade Agreements in Korea has resulted in economic growth for local businesses: Now, local businesses can enjoy economies of scale from international entities. It also allows them to spread their reach across the world. They can also offer their services to customers in specific countries at a considerably lesser cost. By reducing cost and hassle of performing international transactions, local businesses can focus on other pertinent issues.
• FTAs constantly change Korea’s business climate: FTAs expose local Korean businesses to international entities and their way of doing this. Over time, some of these foreign business cultures have made their way into the country also. This exposure to foreign cultures will further bolster the ability of local businesses to adapt to changes.
• Local South Korean businesses will be exposed to industry expertise: The purpose of a free trade agreement is to ensure that local companies are open to the rest of the world. By doing so, they’ll be able to enjoy better resources, including manpower. Instead of a local pool of potential employees, companies will now be able to partner with other entities spread across the world. It may also make it easier to hire foreign nationals to work in foreign branches.
• FTAs will open up South Korea to faster technology transfers: Due to free trade agreements, local Korean companies will be able to receive faster aid from multinationals. They’ll also make business entities enjoy first-hand awareness on digital innovations in other regions.

Cons of Free Trade Agreements on South Korean Businesses

• South Korean businesses will suffer increased cases of stolen intellectual property: The free trade agreements with other countries means that South Korean businesses can expand worldwide, and vice versa. As a result, local businesses will need to be proactive to protect their patents and new ideas. If not, they may lose them to foreign companies in the same industry.
• Increased pressure on domestic industries: Opening the borders due to a free trade agreement will mean that more companies will be able to come into South Korea and expand their operations. This will increase the competition in the country. This means that there will be more companies in each industry struggling for limited resources. Domestic industries may suffer, especially those without the resources to compete with multinationals.

Here’s What You Should Know Before You Start A Business in South Korea

Free Trade Agreements mean many companies and entities will move to Korea. Do you wish to start a business in South Korea because of the free trade agreements? Here’s what you should know;

South Korea Offers Free Economic Zones (FEZ)

In South Korea, there are free economic zones. These zones are designed to help small and medium businesses improve their chances of success. Often, these zones are designed to help foreign-invested firms compete favorably against local enterprises.

There’s a total of 9 Free Economic Zones in South Korea. Foreign investors can choose from and operate in any of these zones. These economic zones are designed to offer exemptions, tax reductions on property acquisition and taxes, and tax waivers for 5-15 years on foreign companies. Companies found in the FEZ ensure collective growth and high scalability for their operations.

Unique Business Culture and Etiquette

Another important thing you need to note about running a business in South Korea is that the region has its own unique business culture and etiquette. In Korea, the locals place plenty of emphasis on age and social status. Also, the social and working hierarchy is respected.

When doing business in South Korea, it’s essential that you can maintain good business etiquette, such as shaking hands, bowing hands, exchanging business cards, and giving gifts to others. While setting up your business, you’ll need to pay attention to the culture around you and how your organization can fit into it.

How Can Premia TNC Help?

Whether you’re a new business owner or have been operating for many years, you must always stay updated with Korea’s FTAs. It cannot be easy to do this while running your business simultaneously. That’s why you need professional help.

At Premia TNC, you’ll enjoy top-rated business consultancy services. Our business aims to improve your operations through selective input. We have a team of professionals that know exactly what your business needs. All of our information will be based on professional insight and experience.

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